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Paying off high interest debt with savings, Still a good idea?

September 5th, 2009 Joe No comments

This morning I am reading a few different blogs and I found Five Cent Nickel.  A recent article posted brings up a good question.

If I have money in the bank and high interest (10%+) debt should I use my savings to pay it off?

The short answer, YES pay it off.

The question gets complicated from person to person.  In this economy people are keeping more cash in the bank incase they get fired, or generally need it.  This advice has bee pushed by Suze Orman and many other financial advisors.  I am in agreement with them.  Everyone should have some money in the bank.  Personally I would be willing to take a little more risk if I were carrying high interest credit card debt.   I would push everything to the credit card until I was down to exactly 4-5 months emergency fund.  For some the extra 2-5 thousand dollars paid on the credit card might pay it off.  There is no reason to carry debt if you can pay it off and still leave yourself a good emergency fund.

If you thing you are going to get laid off or feel your company is doing poorly in this economy keep saving your cash.

Check out the Five Cent Nickel original post here

http://www.fivecentnickel.com/2009/09/04/debt-reduction-penny-wise-and-pound-foolish/