You understand the importance of paying off credit card debt, but you also know you need to save for retirement. While you should focus on both, paying off debt is critical to your financial independence. There are several strategies you can use to begin paying off your debt as you also begin to pay yourself in the form of retirement savings.
Debt Snowball Method: Pay off your credit cards from the smallest to the largest amounts owed. To get ahead of the interest you owe, you will need to pay more than the minimum owed balance. Continue to pay the minimum balance every month on any other credit cards as well. Once you pay off the smallest credit card, put all the funds you were using to pay off that card toward paying off the next smallest card balance. Continue until you have all your credit cards paid off.
Debt Avalanche Method: Pay off your credit cards, starting with the card that has the largest interest rate. Again, this will mean paying more than the minimum balance. Once you pay off that card, move those funds to pay off the card with the next highest interest rate. Attacking the cards that have the higher interest rates first will save you from paying as much in interest.
Debt Consolidation: Pay off your credit cards using a new loan or credit card with a lower interest rate. By securing new financing with a lower interest rate, you can pay off your debts and save on what you would have been paying in interest.
No matter what plan you decide is best for you, don't fall back into old habits as you have the previous balances paid off. Pay the full balance of all your credit card bills to keep up your good habits and help stay out of debt.
Remember that we are here to help. Don't hesitate to contact the office to talk about ways to manage debt while saving for retirement.
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.