In an ideal world, everyone would be able to save part of their income. Unfortunately, most people have to be more focused on paying down their debts and making ends meet.
With gas prices falling almost a dollar over the last year, many consumers are taking advantage of the extra money in their pockets to pay bills instead of spending the extra money. About 42% of consumers are using the money they are saving to pay bills while 24% are spending that money and 28% are saving it.
The question is: are the consumers making the right choice?
Do You Have an Emergency Fund?
When deciding whether you should pay off debt or save your money, there are some important factors to keep in mind. You should first determine whether or not you have an emergency savings account established. By having emergency funds available, you will have money when you need it and will not have to rely on loans or credit cards.
What’s the ROI on Your Savings?
You should also calculate how much your debt is costing you each year in interest and how much savings you earn. If your money is being kept in an account where it is earning a 1% return or less, it may be best to slowly pay off you debt.
You should also calculate your future earnings to decide whether or not it would be best to hold off on paying your debt. Don’t forget to factor in your financial goals when you’re making these decisions.
Have You Prioritized Your Debts?
The number one tip when it comes to saving and paying off debt is to prioritize your debts. If you have enough money to cover an unexpected emergency, it is suggested that you begin to pay off your debts. The key is to find a balance between what you’re paying and what you’re saving. .
Don’t become overwhelmed by saving and spending. Pay what you can and be sure to have enough money left over for whatever the future may bring.