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 around the world 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 newsletter at: Just Double Click Here>>
Editors Note: Each month I carry out lots of research for Talk Money Blog into all the various subjects that I write about and recently while researching ‘How to get out of Debt!’ I came across a great ebook called “You can pay off all your debts including your mortgage in less than 10 years” written by Leo Quinn, Jr. This book is not just for those people who need to clear their debts, but it is also a book for anyone who has a mortgage and would like to be mortgage free quickly. I found his book encouraging, full of great content; with proven methods that were tried & tested. Leo offers his email address for you to contact him if you need to (unusual these days) and above all his book is well written and he has loads of testimonial to prove that his teachings actually work. You do of course have to work at being debt free. Please read on and see what you think! Just Double Click Here>>