Saturday, January 19, 2008

savings vs eliminating debt

a friend of mine jokingly said to me the other day that he wished he had some high interest credit card debt because that would be an easy way to 'make' 10-20% on his money with no risk. it's funny, but if you get down to brass tacks, it's entirely true. a lot of people ask should i be saving money or paying down debt? well, to me it comes down to the rates on each -- if you can make more in interest in your investments / savings (factoring in your risk) than the interest demands on your debt, you should save, otherwise you should pay down your debt.

the interest you avoid paying by paying down your debt is identical to money that you actually sock away in your savings account.

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