Should You Pay Debt Off Quickly Or Slow And Steady?
Intervals or consistency? Fat burning zone or high intensity? There is a lot about dieting that is similar to saving money and, in particular, to debt repayment.
Does slow and steady win the race, or would a little dose of high octane repaying do they trick?
Are you better off paying down your debt consistently over the year? Or starving yourself for a couple of months and paying it off in one fell swoop. Here are some tips.
Financially Savvy
Financially, it makes sense to pay it all off as quickly as possible. Of course it does. The quicker you pay off the debt, the less money you spend on interest. Also, your savings (set aside once your debt is nullified) will have a longer time to mature, allowing you more beneficial interest when you need to access them.
And now for the downside. Paying off your debt that fast does not come without sacrifice. Unless you boss offers you an enormous bonus, the likelihood is that you’ll have to take on another job, or send a partner back to work.
You’re unlikely to have any spare cash, so that’s no fun for you until the debt is managed. It may well be worth it- maybe you’re the kind of person who needs to rid yourself of debt as quickly as humanely possible. But you’ll have to be aware that you’ll be sacrificing a lot to get there, and losing some prime savings years into the bargain.
Financially Steady
If you’re not willing to put yourself in that situation, then paying it of slowly may be for you. This is where a part of your income goes into paying off your debt every single week. It involves less sacrifice- you can still afford to have a bit of fun, and put money aside for saving as well. Maybe at this time in life, paying slowly is the saner option.
That said, you end paying a lot more money this way. The interest will end up costing you a lot of money, and you’ll be living with the debt repayments for a much longer period of time, which can be intolerable for some people. If you’re likely to be a bit lax as well, this method can mean you skip repayments or add a bit of debt because the whole thing doesn’t feel all that urgent.
So What Works?
Paying off quickly has a lot of enticements, despite the sacrifices it will demand. Psychologically, you can probably ensure deprivation for a brief amount of time much more easily than you could endure protracted worry over your debt. That said, sometimes it’s not an option. The best thing to do would be to sit down and work out what kind of money personality you are.
If you are disciplined, then the long-term approach may work best. If you’re agonizing over the debt, maybe it’s time to rip it off like a band-aid. It will also depend on your savings situation. If you have no emergency fund, then that has to be your first priority, else neither strategy will work and you’ll end up in further debt.
Whether steady or speedy, debt repayment needs to be a top priority. Only by doing nothing could you end up in disaster.
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