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Can You Save With Debt?

Posted by admin | Mortgage | Sunday 19 April 2009 10:51 pm

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Is it possible?

There are some who would consider this question ridiculous falling firmly on one side or the other. But then, there are those who would look at such a question pragmatically. What is debt to start with? Do they include such things as property taxes?

Debt is something that you have used in either a loan form or any other form such as a mortgage. The item or experience was purchased, is currently being used and now you are on the hook to pay back the amount of money.

In addition, there are different kinds of debt. There is a fixed amount of debt and a rotating amount of debt.

A good example of a fixed rate of date would be that you wanted new windows and installed them in your house. You now owe on a monthly basis with the money most likely being taken directly out of your account. These loans can range in value.

Another good example is a mortgage because again you have taken out that much money and now pay fixed amounts of money to it. The only time rates change is on mortgage renewal dates. These can be shocking days, especially if the interest rate is going up.

Then, there is rotating debt. This could be with a credit card or an acutal person or loan store. You have to pay this debt every month but often you are remitting around 3 percent of the actual balance. The amount you owe fluctuates based on the month. Interest is added monthly. There is really nothing wrong with a credit card so long as you are paying it and paying it, never missing a deadline and have no more than the credit you feel with confidence you could pay back in a month or two. Ie. If you cannot imagine paying the balance off say within two months, then you would be best to reduce the card in terms of borrowing amounts. Another thought is that you don’t want more than one credit card because again, if it exceeds what you feel you could successfully pay off in two months (while still eating), it just isn’t a good idea to have two barrels or credit cards to pay back.

Debt can also be from a person. Often, people will borrow off the same person or a series of people. This is also a rotating amount of debt.

So let’s say that you now have 500 dollars in the bank, your rainy day money but you owe for five to ten debts. Is it possible to maintain those savings and call them savings? Is it possible to add to those savings?

The answer to this is no. These are not considered savings. This money is considered money you have pretty much already spent on debt.

To see this, you can get out a piece of paper. On one side, write down what your total debt is and on the other side, write down what your savings are. You will see that as the debt is much bigger than the savings, you technically don’t have any savings. They are artificial.

If you find yourself in a situation where your debt is excessive, where it exceeds your confidence to pay, then you may hurt yourself in the future by not being able to borrow from banks or credit card companies. Essentially, you may find yourself hitting the brick wall.

It’s important to have a grasp on how much you owe. It is also important to target the smallest pieces of debt and get rid of them. This will encourage piece of mind. If for example, you owe ten dollars to a local organization and 2,000 to a credit card. It just makes good sense to walk over your next ten dollars and get rid of the debt. You then have less barrels of debt to hurl your money into and I would advise the same with all debts. If you really do want to minimize the impact of money spent, versus money earned then it is time to look at the balance sheet and stratergize.

We need to be consistent and continuously take stock of our debt situations in order to prosper as people and to get a good night’s sleep.


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