There are decisions to be made financially that can be difficult. However, taking them on time will ensure a quieter future with good financial health.
Of all the great decisions you must make are knowing if you will pay off your debts or if you will choose to save.
Among the main risks of not paying your debts are the loss of property and bankruptcy, among others, according to The Money Advice Service. The most common debts are credit card debts, medical and student loans. There are others, such as personal loans, cell phone bills, utility bills, bank overdraft fees, car loans, payday loans, says Protecting Consumer Rights.
What would you do? With this great concern in mind, we offer both scenarios for you to evaluate and consider what your best option will be:
When to decide on the debt balance?
How much you have high interest debts. This is the main reason for deciding to settle your debts and that is that over time that interest will be greater. If your average annual percentage rate reaches double digits, you must pay this debt urgently, as this may affect your credit score.
On the other hand, if you have car loans or for studies, we advise you to pay them as soon as you can and / or follow the deadline established rigorously. In this way, you will keep your credit, you will save the interest paid and you can use that money in other goals.
Finally, if you got out of control and spent more than expected with your cards without thinking about the money you had. Do not let having a balance established on a credit card makes you take the expense to the top. Nor do you spend “blindly” without knowing if you will have that money; Spend what you have, not what you think you have.
When to decide to save?
The savings option is essential if you do not have an emergency fund. Whether it is an unplanned arrangement of your car or house, some unforeseen or a medical emergency, all these situations are emergencies that can be sustained with a fund that you have saved for this purpose. Try to keep three months of common savings expenses in case something happens.
If you are thinking about how you will stay in the future, saving is the option. You should consider establishing a fund for your retirement account that allows you to save and contribute at the same time. It depends on the type of account you select, this money can grow so it would add to your financial mission in the future.
If your debts are under control and you have other dreams that involve a monetary sacrifice, the time has come to save. Be it your next vacation, a house or the establishment of your new business, saving that little money will help you achieve that long-awaited mission.
These are some ways in which you can answer the question: “settle debts or save?”. We encourage you to study your situation, evaluate your case and make a decision. What to do after making the decision? To take action. We recommend you take into account your monthly daily expenses, your debts and your main concerns in the financial future.
You are in time to build and maintain good financial health. Cheer up, organize yourself and achieve your dreams and your peace of mind, either by paying off debts or saving for the future.