It’s All About the Interest
Not all debt is created equal, according to a recent post on Yahoo Finance. The article explains that your biggest debts aren’t necessarily the ones you want to pay off first. As an example, the author cites a story from a certified financial planner (CFP). A young woman came in to her office, distraught over her debt. She owed $250,000 in student loans and $25,000 in credit card debt. The woman was focused on paying off her student loans first. The CFP explained that she should concentrate on paying off the credit card debt first, because it had higher interest rates. It make sense if you think about it, federal student loans have interest rates of four to six percent while most credit cards charge around 16 percent. Since higher interest debt grows at a faster rate, you’ll want to pay that off first. But there are other factors involved when managing one’s money. For instance, it may not be wise to pay off all your debt before investing in your retirement. You need to take advantage of the tax breaks you get for retirement savings and the matching funds you get with 401(k) plans. This type of knowledge is why you should regularly consult a financial expert. Unfortunately, many Americans don’t take a hard look at their finances until it’s too late. If you find yourself in debt trouble, you may be in need of an experienced debt reduction attorney. The legal team at the San Fernando Valley offices of Nader, Naraghi & Woodcock, APLC has been helping people get out of debt for 20 years. Call them at (800) 568-0707 for a free consultation.