Hello all,
Most people here have some sort of debt (student loans, credit card, etc.) that we owe. We want to pay off debt, but that would take money that we could use for other things (such as saving for a rainy day/down payment on something fund, investing in stocks or bonds, or for enjoyment/doing stuff now that we have income coming in), thus creating competing priorities for our money.
The challenge - planning out how and when you will repay debts you owe. Will you pay the minimum on your debts and stretch out payments, or is paying off all of your debts your highest priority? Some factors to consider:
With respect to debts
1. What is the interest rate (cost) on your debt?
2. What, if any, are the tax advantages of your debt? (student loan interest is tax deductible for the most part).
3. What is the psychological burden of carrying the debt, if any? What relief would you feel, if any, if your debt were to be paid off?
With respect to other uses?
1. What is the return on investment of the other uses of your money?
2. How much more comfortable would you feel if you had a larger rainy day or downpayment fund?
3. What are the tax advantages of other investments or locations for your money?
4. Is there something that you want to do now that you have money coming in? Do these uses (and the benefit/enjoyment to you) outweigh paying down debts or using the money for other investments?
All of these are just thoughts to consider.
For your convenience, there are online calculators to use to figure out how long your debt repayment would take.
http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp is one of these calculators. There are numerous others, both for debts and investments.
Please post a reply if you accept this challenge.
Good luck!
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