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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/

$2 Dollars

August 30th, 2009 Joe No comments

Step three of Average Joe Millionaires getting rich 101 is best explained with a story.

When I was a kid I went to my uncles Paul’s house.  We were in his kitchen having a bit of orange juice and when he opened his cabinet I saw a small stack of cash sitting on the top shelf.  As a 13 year old kid a stack of $20 dollar bills an inch high was a lifetime worth of allowance.  I thought that was SOOO much money.  Uncle Paul took the money down and we counted it.  He had about $400 dollars.  He said that every time money came into his hands he took 10% and put it there until he had around $500 dollars and then he put it into a savings account.  He said he started when he was 21 years old.

When he was 21 he met a girl he wanted to marry.  He had talked to her and she told him that he had to buy a ring.  So the next paycheck he got he took $2 dollars and put it in the cabinet.  My Uncle was 21, he was broke, and he was only making $200 dollars every two weeks.   Most people would not even bother saving $2 dollars.  Uncle Paul may have not bothered either but he needed to buy a ring.  Paul ended up saving up around $500 by picking up extra shifts and putting all his extra money in that cabinet.  He bought his ring and married my aunt.  Uncle Paul stuck with the savings routine and from that day forward he started saving between 10% and 20% from every check.  Uncle Paul saved all that money and  put it into a special savings account last year Uncle Paul and I were talking about money and I asked him how it $2 dollar savings account is doing.  Paul said “that account now has about $2.5 million dollars in it.”  $2.5 million dollars and it all started with $2 dollars.