Question: Of all financial principles, is paying off debt weighted most heavily?
Answer: Paying off debt should always be considered a high priority in life. Most people have several financial obligations, but when money is owed – be it to a person or a company – the quicker it is paid back, the better.
Certainly, some debts are more easily paid off than others. Credit cards, for example, typically have lower balances than a mortgage or student loan.
"The only way not to think about money
is to have a great deal of it.”
- Edith Wharton |
However, just because a debt is small doesn’t mean you can easily eliminate it. Without paying close attention to where your money is going, you may find that you have overextended your finances.
The fact is that paying off debt is never easy so you must plan carefully to ensure it’s done in a thoughtful way. Moreover, you must seek to understand how you got into debt in the first place so as not to repeat your mistakes.
For instance, food is an essential. But keep in mind that many grocery purchases are impulse buys. Instead of allowing greedy marketing pros to tempt you, write up your list of needed items beforehand and stick to it when doing your weekly shopping.
This one practice alone will guarantee you’ll end up with more money in your pocket.
Utilities are also a necessity, but there are things you can do proactively to help reduce these costs as well. Ask your utility providers for a list of money saving ideas and you’ll be pleasantly surprised with what you learn.
If you don’t work at home, transportation is also a must. If you live near your workplace, during the more pleasant seasons you could save money by walking or biking. Buses are also an option if you find they are cheaper than a tank of gas.
Be sure to place enough money aside to pay for your housing, whether you rent or you’re working on paying off a mortgage.
Once you’ve taken care of all these basic and essential needs, you can focus on paying off debt, non-essential items, which you owe to other parties.
Naturally, mortgages are at the top of the list since you have to maintain a roof over your head. Defaulting on this item is not an option. If you do, all bets are off and it’s a whole new ballgame.
Budget carefully so you have enough money to get you through to the next pay period.
If you have student loans, talk to a professional about consolidation. In most cases, it will not only lower your payments overall, but it may offer a better repayment schedule if you have several loans with different lenders. You’ll have a set payment amount each month to a single lender should you choose to consolidate.
Bottom line, credit card debt should be avoided altogether, if at all possible. If you do use credit cards, it is ideal to pay in full each month. Paying off debt, especially when it comes to credit cards, will give you peace of mind, and it helps to show that you’re a responsible borrower.
Always remember that the less debt you have, the better life will be, brighter, healthier and happier.
No debt, no regret.
"The man who never has money enough to pay his debts
has too much of something else."
- James H. Aughey |
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Debt is NOT your friend. It's not a wonderful "tool" for building wealth. That's a myth.
