PAY OFF DEBT FIRST OR SAVING?

If you have excess money at the end of the month and you are faced with two questions, PAY OFF DEBT FIRST OR SAVING. I believe, this two questions are hard to answer, like answering the question, dad or mom? Why is so difficult to answer?

Pay off debt first or saving? both of this things are very important and become priorities in our financial goals. Now, let us discuss one by one the good and the bad thing of paying debt first or saving.

In simple mathematics, it is better to pay off debt first than to save, for something that is not yet known when it is needed.

If you choose to pay off debt first and delay saving, the bad thing is you won't have anything.Especially when you are in an emergency situation such as termination of employment or your business is bankrupt. Okay, you have credit card, but the thing to note is using credit card for emergencies will only make your life more difficult to pay off debt.

Then, if you prefer to saving first and pay off debt later, you will pay more interest. Especially credit card with high interest rates, because credit card interest rates are often higher than savings interest rates and in the end you spend more money than you get from your savings interest. Another problem is the risk of living during retirement with debt.

Then, which one should choose between paying debt first or saving first?

Well, when you have to choose between paying debt and saving, you must pay attention to the interest factor here. For those of you who have credit card debt with high interest, you may pay off the credit card debt first. Thus you can save more because you are not burdened with high interest. And for long time debt such as property, make extra payments when you have more money. However, if you have a debt with very low interest, you may saving first from the remaining money at the end of the month (debt paid according to bill), at least until saving/emergency funds are reached that can cover 6 months of household expenses. However, if this seems difficult to pursue in short term, focus on saving/emergency funds with enough money but can cover many small but urgent expenses such as house/car repairs.

Note: do not do saving without paying debts at all, vice versa do not pay debts without saving at all. do both balanced.