After reading various financial books and researching about money matters, my answer to this question would be … YES!
Last year, I paid and closed 4 of my credit card accounts (I have more than 5) hoping to be able to save after that but because I didn’t have the mindset to save back then, I found myself using my remaining credit cards again and went back to spending. Now, I decided again to close my credit card but this time I asked for an installment plan so that I can still save while paying.
Getting out of debt may take longer to finish but it would be better if you could keep some in your savings account than to pay the debt faster and don’t have any money left to save.
Here is my sample computation:
I have an existing payable at my credit card worth P25,000. I wrote the bank to cancel my card and I asked for an amnesty program (this was to avoid 3.5% finance charges and annual fees since I don’t want to use the card anymore). The bank agreed but they will still charge me a monthly interest of 1.5% (it’s better than 3.5% isn’t it?).
Since I am a stay at home mom and my source of income is not fixed and the only amount I am confident to offer is around P2,000 then I agreed to pay for it for 24months (just like my previous cards that I have not even noticed that I have finished paying for them ).
SAMPLE1: Pay Debt first, Save Later
If you will start saving on the 15th month you will get 20,500 after 10 more months. That is, if that time comes, you still have the motivation and mind set to finally save. Also you need to pray that you will not encounter any problems while still paying for the existing debt so that you will not borrow and start a new debt again (just like what happened to me LOL)
SAMPLE 2: Pay Debt and Save
Here, you will see that you can pay the debt for 18 months and yet you have saved a total of 19,5oo after 24months. It is lower than the previous sample but since you already have the habit of saving, it will not be hard for you to keep the habit and even have enough money to invest in the future.
You would have hit two birds with one stone in this sample, you have paid your debt and at the same time have managed to save a little. If on the 10th month that you are paying your debt and you suddenly encounter a problem, let’s say you became sick and can’t work for a while then you already have P2,500 to cover for the next months payment and even have money to buy for a medicine. You don’t need to borrow for that emergency expenses.
There are mutual funds that accept P5,000 as the minimum investments. If you want your money to grow, then put it in money making investments.
Last Year, I did sample1 minus the savings. Now I will do Sample2 and I hope that by the end of my 24 months, I can show you how much I got from doing this plan plus an update on an investment venture hopefully.
My goal this year is not just to be debt free but also to have some savings even how small it is, so if you have the same goal as me, come join me in this financial freedom journey.
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