crkrjx
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First is there a penalty for taking the money out of the mutual fund? Other than that, of couse if you pay off your higher interest debt you'll certainly be ahead... but will you leave yourself so short of cash? will you begin to use your credit cards again? This something to consider. Be sure that you have enough of an allowance to get from paycheck to paycheck without using your credit cards. If you buy online you can start a free paypal account and make payments that was straight from your bank account to keep tempation low.
The key is you don't want debt - especially in today's economy. Americans in general are now saving at close to 0% and many of us are two paychecks away from losing everything so I would suggest you pay down $3000 of your debt with the mutual fund. And continue to pay down the last $1000 at the highest level you can without leaving yourself so short that you need to use your card to make up the difference each month. And KEEP the $1000 in your savings in case you have a catastrophe and grow it if you can.
Good Luck. |
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Self-Taught Finance
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That depends on what kind of debt you have. If your debt falls under the good debt category (student loans, etc), then you should keep the mututal fund as is and work to pay down your debt over time. Remember, the interest you pay on these good debts are tax deductible. However, if your debt falls under the bad debt category (credit cards, etc), then it is wiser to pay off your debt now with your mutual fund. Here is why: mutual funds, like all non-FDIC insured funds, are not guaranteed to grow with time. Unlike your savings account (which is FDIC-insured), you may lose money in your mutual fund over time. Since you are guaranteed to owe more money over time with your credit card debt but not guaranteed to earn more money over time with your mutual fund, it is better to pay off your debt ($4000) now with the money from the mutual fund ($4000). This way, you start off on zero instead of possibly being in the negative.
Here is another reason you will want to pay off your bad debt as soon as possible: it will affect your credit - which means it will affect the amount of money you can borrow in the future to buy a car, house, etc. |
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Amazing
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Always pay off your debts first before anything else.
Paying interest rates when you don't have to is foolish.
Never run your credit cards up so high that you will have to pay interest. Unless it's for something medical or dental, just save up and wait until you can afford to pay cash for the item. |
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Beach Gal
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Absolutely. If that debt is not paid, it will eventually grow to much more with interest. Pay it now while you have the funds to do it with, then start saving and try not to slip into debt again. I recently got myself out of debt and it is wonderful. Not only is it a nice feeling, but your credit rating goes up and you no longer have monthly payments. When your credit score goes up, you have a better chance of owning a nice home, being approved for that car you want to buy and so many other things. |
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pandupr2
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If you are able to repay the debt in instalments, you should search other avenues of investments, where you can find more monthly returns than what your lending bank charges you monthly.
The possible source of getting more returns is only through real estate, but $4000 is a small amount to invest in real estate in USA.
It is better to repay your debt first and become debt free than investing in Mutual funds, and Start keeping some amont ( same as that you aught to pay towards the debt,) aside every month and invest to buy small number of equity shares of promising good companies of USA and some other ADRs other countries, listed at NYSE. |
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cwesley2003
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Pay. It will get rid of you're inerest rates and you will be able to saveas soon as its payed off. Trust me on this one. |
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goodlionvic
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get a citibank credit card
with a zero percent interest rate the first year
and just pay it off and the interest you can
save, put in the bank |
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mopargrl73
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pay off your debt 1st if you have credit cards call and negotiate sometimes the will settle for less saving is a lot easier when you don't have any debt |
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sexyshell06
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I would put about 1/2 to 3/4 on the debt and the rest in a mutual fund that is tax deductible at the end of the year. |
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allyson71377
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Yes, debt-free is always better for you. |
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Cody
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I would pay off at least $3500 of the debt, but use the other $500.00 to invest in a risk free investment(bonds) or something similar. This gets you started in investing. |
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illinidog
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let your fund make money, hopefully it will overtake the other. pay down the debt with extra $'s each month. |
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K L
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yes, definitely. pay down the highest interest first and so one. but be sure the mutual fund you rec'd doesn't have penalties for cashing out - it might be better to keep it or roll it into an IRA and receive the benefits for tax purpose. But pay down that debt too. |
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nunya b
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you're not saving if you have debt...unless you're the government. :-j |
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Duffy
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Of course you should pay off the debt first!
A good rule of thumb whenever you are managing your money is that you should pay off your higher-interest debts first, and then work your way down. the higher the interest, the more you are getting charged per dollar each month, meaning that a small debt at a high interest rate should actually be paid off first, as compared to a larger debt with a smaller interest rate.
Saving while you are in debt is out of the question. Unless your income from your savings' interest is more than you would lose by holding onto your debt, you shouldn't even consider saving the money.
Pay off the debt, and sleep easier at night. |
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Frank Castle
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Yes. |
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txhypnotist
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Pay all debts off, because they will double in a small amount of time. |
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Tina
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pay the debt first otherwise it will get more due to interest. |
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blondie
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Yes, pay off your debt. That is a no brainer, then you can start saving money for yourself, not someone else!! |
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G-man
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Pay half or the ones with high interest rates that way you will have some money you never know you might need the money for something and since you will half at least half your money when you buy something pay cash. |
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Doug
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NO keep the gift alive and take care of it. Work away your debt. |
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JoHanna
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ALWAYS ALWAYS ALWAYS pay off your debts FIRST! The longer you wait to pay off your debts the more intrest your having to pay. I would pay off the debt, if i were you, then save money that you can use. It's always good to be debt free. |
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snomeow
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Depends on your interest rate. It may be beneficial to you to get a credit card with 0% interest for six months, transfer your balance, make your payments on time for six months and then pay off the balance. Meanwhile you will have your money in the bank -- don't spend it!! It will be earning interest over that period of time. That way you're helping both your credit score as well as your bills situation. :) Best of luck. |
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b_switek
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Debt is usually best to get out of the way first, but that is a pretty large sum of money you've got there, so you might want to pay of 3/4 of the debt and put 1,000 into high yield savings... I'm not sure exactly what they're called but something you can't get at right away that'll earn interest in the bank for quite a bit. Even when you're in debt, it's important to save because you never know when you're going to get money again, so I'd say pay most of it off but stash some away for safekeeping. |
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Zenza
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In general, yes, pay off the debt. BUT depending on your circumstances, you may choose a different way to do it.
First, do you have enough cash flow (e.g. from salary) to live on? And do you have any expenses coming up that your cash flow?
If so, I would pay off $3,000 right away and keep $500 in the mutual fund. Then, I suggest you put away 10% of your earnings into the mutual fund - ideally by having an automatic deposit into the mutual fund. Then *forget* about the mutual fund and let it grow for some long-term use. Use the rest of your income to pay down the remaining $1000 debt on a regular basis, for example, like $100/month.
At the same time, open an IRA with the remaining $500, preferably a Roth IRA (withdrawals from a Roth are not taxed when you retire). Set up an automatic deposit there too. Vanguard is a good place to do this. Pick an IRA for your estimated retirement age - they will adjust the risk level for you.
I won't explain why this is a good idea. Read about it on the link below. But I PROMISE you that you'll be really glad you did it. |
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Rob H
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pay off the debt. The interest rate you are paying on the debt outwieghs the rate you are earning. Since you will now be debt free, you can apply the payments that you would have made to your debts to a savings acccount. |
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Stewiesgal
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Pay off your debt. It does you no good to save when you are paying interest. |
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mjc
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pay off your debt unless you can get a higher interest rate then your creditors charge, but don't use your credit cards anymore |
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bubu
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Definitely its a Yes! After you pay your debt you will be free from paying your interest and you can save without worrying a bit! Start to save when you are clean from debts, that way it won't be too stressful for you to earn and worry about paying the interests monthly..... good luck girl! |
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paj
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yes
then you can use the $$ you would normally make payments with and put that in savings |
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aajstephen
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It would make the best financial sense to pay off the debt. And take the advice your mum would give you save 10% of your paycheck. |
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