Paying Down DebtThe holiday season is over and all of the credit card bills have arrived to give us that holiday hangover we get every year. If you do not pay the balance in full, these credit cards will trigger interest charges to the level of 17% or even higher for store credit cards. These interest rates are high and generate a lot of extra cost to those bargains that you might have got when you made your purchases. Anyone who only pays the minimum payment is paying almost all interest and very little principle. As a result your charges next month for interest will be about the same or higher if you charge more to your credit card.

Paying Down Debt – Credit Cards

Always pay down your credit card debt or do not spend the money if you cannot pay this debt off immediately. Another approach if you really must make these purchases is to use some of your savings which is only generating may be 2% income compared to the 17% that the credit card companies are charging.

Pay Down Line of Credit Debt

Some consumers like to use a line of credit that is secured with the equity in their home. When you secure a loan with a home, the interest rate can be very competitive. It is a very good idea to use this line of credit to pay off your credit cards with this line of credit. When you are paying something in the order of 4% on a line of credit it only makes sense to pay down your debt on your credit cards using the line of credit funding.

The danger of course is if you run your line of credit and your credit cards up to the maximum, you are really in trouble, since now you have nowhere to turn. Using a line of credit really requires a lot of discipline to make sure that you pay down this debt on a regular basis and do not allow it to build up beyond what you can afford.

Pay Down Your Car Loan Debt

Many people will purchase a car and take out a car loan when they do. As we write this, car companies are offering zero interest rate loans for up to seven years. In situations like this if you have any other loans that have an interest rate above zero pay down these loans first, before you pay down your car loan.  Otherwise always pay down debt that has the highest interest rate first.

Paying Down Debt is a High Priority With Retirement Planning a Close Second

Consumers know they should pay down debt and they also know that they should save for retirement. Both are incredibly important, the more so as you get older and your earning power goes down or at least enters the fixed income area. I hear lots of seniors complaining that they are now on a fixed income. This is no surprise, they should have known that they were going to be on a fixed income and planned for it. We think that paying down debt is important; with retirement saving being even more important.

Develop a financial plan that tells you how much you need to save to get you were you need to be financially. Then implement that plan to ensure that you are financially stable when it comes to be retired and live the life style that you would like. Your financial plan should also include paying down debt that you may have whether it is a mortgage, car loan, personal loan or credit card debt. Include any credit line that you may also have.

Consumers should get a handle on their financial plan that leads to retirement early in life. If you do the easier it will be and the better off they will be when they retire. Start early in life and you will not need to save as much each month compared to someone starting in their 40’s. Begin saving for retirement in your early 20’s, in fact as soon as you start working with the rest of your surplus money going towards paying down debt.

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