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How to Save Money with a Commitment to Debt Reduction

By Edited Nov 13, 2013 0 0

It seems as though the topic of the day lately is debt. Whether it is our federal deficit, or our own personal debt, it is something that has become a big part of our lives. Here are some tips on how to save money with a commitment to your own debt reduction.

You are probably asking how it is possible to save money when we pay off our debt. But we actually are doing ourselves a great service as we chip away at our credit card debt, mortgage debt, student loan debt, and automobile loan debts.

There are a lot of theories in the personal finance arena that actually say that you should not pay off debt such as mortgage debt, but to invest all of that money in the stock market.

From the mid-nineties until about 2007 many people were advised to do this. People would take out these horrible interest-only, negative amortization loans or their home and invest the rest in the stock market. Some people were actually told to go on vacation with the money that they were saving on their mortgage payment! Ouch!!

When the stock market had a massive correction, the real-estate bubble burst, and people's wealth decreased exponentially, things really changed.

The public began to rethink how to spend, invest, and allocate their money. Fixed mortgages became the only way to go, and other fancy hybrid mortgages became a thing of the past.

When you spend, spend, spend, and do not save money, while investing in risky securities, your financial health can go right down the toilet bowl.

Save money and debt reduction in 2009 are very popular now and considered to be the buzzwords of our time.

When we reduce our debt and focus on debt reduction, this is truly a great way to save money. You are probably asking how debt reduction relates to how to save money.

How to save money with debt reduction means that you are actually saving yourself the money on the interest rate you are paying for your debts. If you have a credit card with an interest rate of 25 percent (not uncommon), you will be saving that 25 percent of interest when you pay off that card.

It is of this writer's opinion that you should pay off debt (except student loan debt), before you begin an aggressive savings program.

Having a large stash of cash in the bank as an emergency fund and paying off debt seem to be a good logical financial plan to follow.

Remember also, that the interest rate on your debt is a know interest rate, when the interest rate on your savings is sometimes unknown, or very small if it is a fixed rate.

How to save money by reducing debt is wise because it gives you the clean slate required to build wealth. When we are in debt, we do not have wealth. We are indebted to our creditors with a big ball and chain.

You are wished the best of luck in your saving money and debt reduction efforts. This author is wishing you prosperity and a life of health and financial abundance free of debt.



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