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WHATEVER
YOU DO...DON'T SAVE ANY MONEY!
by
Leo
Quinn
No, that's not a misprint. Even though falling interest
rates are good when you want to get a loan, they are bad for
people with savings accounts.
In this economy your best investment, the best place to put
your money is into paying off debts. Think of it as
investing in your debt because that is exactly what you are
doing.
If you put $1,000 into a bank savings account earning 2%, at
the end of a year you will have $1,020.
If you carry a $1,000 balance on a credit card with a 19%
interest rate, and you pay the minimum monthly payments, at
the end of one year you will have paid $190 in interest.
If you get $1,000 in a tax refund, small inheritance or from
somewhere else you now have a choice to make. You can earn
20 bucks in a savings account or save $190 by paying off
that credit card. Keep in mind that your 20 bucks is taxable
income so you'll be left with $15 or so after taxes.
Do you need a savings account for emergencies? That savings
account may be causing those emergencies! Think about it
this way...
If you are earning money in a savings account at 2% and
paying anything over 2% on your debts you are sliding
backwards financially and you'll never get ahead. It's basic
mathematics.
If you earn 20 bucks for five years in your savings account
you'll have $100. If you pay $190 in interest on your $1,000
credit card after five years you will have paid $950 in
interest charges.
In other words you have wasted, lost, burned or flushed $850
by having a savings account. ($950 - $100 = $850) OUCH!
What can you do? Pay off that credit card and use that as
your emergency fund. It's not the best way to do it but it's
better than earning 2% and paying anything over 2%.
So, while the stock market is on it's roller coaster and the
economy is challenged your best investment, bar none, is
your debts! Get them paid off!
Leo J. Quinn, Jr.
is a financial educator from the Albany,
NY area. For the last eight years he has been stunning
audiences by showing them that paying off their highest
interest rates debts first and/or paying extra on more than
one debt is often the SLOWEST way to get rid of those debts.
He has a special offer for readers of this site at:
Leo
Quinn
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