Most people would love to live without any debt. We dream about the day we can burn or mortgages, drive a loan free car, and not owe a cent to credit card companies. Since that seems to be a distant goal, some of us dream about winning the lottery, or chucking everything to live in a shack in the mountains.

I really think that those end of the world books became popular as an escape. Even if something awful happens, like a zombie invasion, it would still wipe out all of our creditors too.

But are we better off without debt, or should we had onto cash? I think the answer is complex, and like most things in life, it depends.

Move Credit Around
Instead of paying it off today, is there a way to pay less interest for it? You may be able to find a lower interest rate on your loans. Credit cards could be moved to a friendlier company, and homes or cars could be refinanced. You may be shocked at how much lower your bills will be if you can reduce your interest rates.

Try to pay off high interest credit cards if you can. Some credit rates are just crazy these days. People are getting notices that their rates are rising to 25 percent or more! Even a fairly low balance of $4,000 can cost $1,000 a year just to service!

Make Sure You Save Too
In your efforts to pay down your credit cards and loans, try not to neglect your savings or investment accounts. Emergencies happen, and you do not want to have to depend upon even more credit. If you do need to deal with a health emergency or make a sudden trip, you want to be able to have some cash.

Try to Stay The Course
The way people have managed to pay off debt is to make a plan and stick to it. Even if you can only set aside $100 a month toward paying off debt, plus another $100 a month toward your savings account, you can still help yourself out.

If you set goals you will never meet, you will never do yourself any good either. A thousand dollars toward debt, that never actually gets paid, will do you no good.

Consider Returns on Credit and Savings
Do you have a fairly good home loan with a lower interest rate? Do you also have a way to save your money that pays high returns? Then you do have to consider that you may be able to deduct the home loan interest, but have to pay taxes on your savings. In this case, you will probably do well to leave things alone.

Think about the impact of taxes too. Most of us can deduct our home loan interest, but we have to pay taxes on the gains we make.

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Article Submitted By: Melinda Torbay
This Article Has Been Read 253 Times

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