Is it better to pay off debt first, or save money?

| Oct 15, 2019 | Uncategorized | 0 comments

While considering whether you should file for bankruptcy in Kentucky, you may also attempt to start renovating your financial house. Should you begin by saving up money first, or paying off your debts? 

Money Crashers may help you reach a satisfying answer to this enigma. Find out how to best proceed without worrying about hitting a dead end. 

Deciding to save first  

Maybe the total interest amount on your debts is lower than the interest rate of the savings account you want to open. If so, you may find it financially easier and more efficient to prioritize saving money. Another reason to focus on saving money first is so you do not have to worry about combining debt with a financial emergency. Putting money back in an emergency fund gives you peace of mind that you can handle a medical emergency, sudden job loss or car breakdown while still managing your debt. 

Deciding to pay down debt first 

Unlike the scenario above, maybe your debt’s interest rate is more than you can handle. If it is, it makes more sense to focus on using extra income to tackle high-interest debt rather than put that extra money into a savings account. Your debt could also cause you no end of stress, anxiety, shame and depression. For the betterment of your mental and physical health, you may have no choice but to focus on eliminating your debt ASAP. Doing so could keep you from having to pay avoidable medical bills, which only adds to your financial struggles. 

This information is only intended to educate and should not be interpreted as legal advice.