Guest Post: Personal Finance Advice
Not too long ago, Yielding Wealth ran a contest in which readers submitted questions to Linda Leitz. Leitz is the author of the book We Need to Talk: Money & Kids After Divorce. Throughout the rest of the month, I will be posting her answers to the four best (and most common) questions I received.
Today’s Question: I only have a limited amount of extra money each month. Should I concentrate on paying down debt first, or putting money aside for savings?
Linda’s answer:
It depends some on how big your debts are. If you owe a substantial amount - let’s say a third of your annual income - in credit cards, put 75% of what you can pay toward your credit cards and put 25% in savings. If you owe less than a third of your annual income on cards, divide what you can pay pretty equally between debt and savings.
With your credit cards, pay the ones with high interest rates first, paying the minimum on the lower interest rates until the high rate cards are paid off. You can do some balance transfers for low rates, but not too often. Opening too many cards too often can lower your credit score. When you get the cards paid off, put all of the money you can into savings. Keep that habit up and you’ll be less likely to end up with credit card balances in the future.
And don’t worry about paying off your mortgage aggressively. If you have a good, long term, fixed rate mortgage, it can be a good use of your funds to pay the payments as agreed, but not worry about paying it off.
Tags: Linda Leitz, money divorce, pay off credit cards, pay off debt first, personal finance blog, personal-finance-advice, yielding wealthRelated Stories
POSTED IN: Credit, Debt Management, Family finances, Money advice, Personal Finance
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