Friday, February 9, 2007
For What It's Worth: Saving vs. Debt
Paying bills -- we have to do it every month. But a lot of us struggle with paying bills versus saving money. Seven's Craig Stevens says -- For What Its Worth -- no matter how much you owe, saving needs to come first.
WSVN -- Brian Aaron always loved cooking for his family and friends, so he decided to make a career of it.
Brian Aaron: "The beginning was a big struggle because I had all these bills to pay."
He now owns Aaron's Catering, planning weddings and any other special events.
But owning his own business means owing a lot of money.
Brian Aaron: "You always have the stress because you owe someone else that kind of money, so you always have that on the back of your head."
So, like a lot of us, he is focusing on paying the bills first.
Brian Aaron: "I would like to pay off the loan first and then eventually start saving."
7 News' financial expert Allie Jablon says that's the wrong way to go.
Allie Jablon: "The best piece of advice that I can give anyone is to pay yourself first."
That means just like you set aside money for the power bill or your mortgage, you set aside money for savings.
To get into that habit, you should start small.
Allie Jablon: "Make a goal of 10 percent of your salary."
And don't stress about the bills -- not all loans are bad.
Allie Jablon: "Good debt is the mortgage on your home, your car loan, student loans. These are all forms of debt that can wait. The bad debt really is that credit card debt because people struggle with these high interest rates of say 15 to 20 percent."
If you have a lot of high interest credit card debt, Jablon says try to lower the rate.
Allie Jablon: "The first step that you want to take is to call your credit card. Try to negotiate a lower rate."
If you've always paid your bills on time, it shouldn't be a problem.
If you can't lower the rate, consider creative financing.
Allie Jablon: "I would suggest opening up another credit card that offers a lower rate."
Or a home equity loan.
Either way, you'll be able to save more.
Allie Jablon: "If you start small, you're going to be happy you did because there's nothing worse than retiring to an empty nest egg."
And that is something Brian is starting to realize.
Brian Aaron: "Financial freedom is my key goal, not ever have to worry about money, just provide a better future for my future family."
Craig Stevens: "And if you're still not convinced, keep this in mind, if you save just ten percent of your salary every month, you'll save a month's salary by the end of the year."
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