When we buy something, we will find a loan that does not have early pay-off penalties and then whenever we have extra cash in the bank, we pay off our loans as fast as we can and apply the money to the 'principal'.

I think that you want to pay off your high interest debt first (ie credit card) but we keep that paid off each month so you would then pay off your next highest interest-rate loan next and so on...

Do other people do this? Am I over-simplifying this and making a mistake? We just don't find that our investments are bringing in as much interest-wise as we owe right now...

Thoughts?!

For the most part yes... If it was a 0% interest loan I would not. Also, I would not take from my 'emergency fund' to pay a loan off early. But if I get some 'found cash' - rebates, a lower power bill than usual, etc. I would use that to pay down a loan. Usually the interest on loans, credit cards, etc. exceeds the interest I can make in a savings account.

Plus I hate owing money. Our goal is to be debt-free with the exception of a house payment in the next year. All of Christmas was paid in cash this year so no debt on that.

We do the same thing. We have a line of credit loan right now that is driving me crazy because I want it paid off! Our tax refund will take care of it, but my DH job never sends out the W-2's until the very end of January. (I hate waiting). We decided that if we could not pay our credit cards off every month, we put them in a drawer and do not use them. That has worked great! We have gotten ourselves in financial trouble in the past (thanks to credit cards), but our credit score is awesome now and we don't want to go back there.

My favorite joke is: My husband gave me plastic surgery for Christmas.........he cut up my credit cards!

I pay off everything as fast as I can sometimes if its at 0% I let it ride but I really do not like to owe anyone.

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mom of 3 greats girls

It depends on the item. Our financial advisor told us not to pay off our house or cars. I did pay off 1 car because I don't like 2 car payments. We have paid our 1 credit card off every month for probaby 15 years. We currently don't have any other debt.

A few years ago we bought some furniture and it was something like 14 months no interest. We did that because it was in October and we planned to buy the furniture with DH spring bonus. We paid the monthly payment until we got the bonus and then paid it off.

Lisa

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"It's not having what you want,
It's wanting what you've got"

It depends. We rarely have a balance on anything *high interest* (credit cards for example) so we just pay off our balance every month. We do pay extra on our mortgage to lower the principal. If we can get a higher interest rate in the bank, we'll keep it there and then pay in payments. For example, our motorcycle is 2% interest (or something really low like that) and our bank is almost 5%. So, we make more money banking it and paying the $150 in interest over the course of the loan in interest. We also have some electronics we bought for our new house last year on 0% for 3 years. We break the bill into 36 equal payments (to be sure it's paid off in time) and then bank the rest for interest. Then, if we need to pay it off for some reason, the money is there

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Proud to say I haven't shopped at a Wal-Mart since Sept 2003

I do not understand why financial advisers advise that about not paying off home...? I guess it is because there are investments that make more interest? My feeling is that our home is about the only 'concrete' investment that we have (cars are surely not an 'investment!!!... they depreciate so fast).

If something REALLY bad happened to the economy and our house was paid off, we'd at least have the house... Everything else is basically on paper.

You all are giving some excellent tips above... Thanks so much for sharing!

No. I have excellent credit. I charge almost everything to get reward points and pay the bill in full monthly. I'm always getting 0% credit card offers. When I get a good one, I call one of my existing card issuers and try to get them to match the terms. I still have my first 2 cards issued in 1988 and they usually agree to a 0% balance transfer of 6mos-1yr. I always ask for checks and I write it out to myself for the maximum amount allowed. My union has a supplemental pension savings plan that's currently paying 4.9% guaranteed. I let the bank's money sit there while I make minimum payments and I stop using that card.

When the balance transfer period is up, I just do the same with another card. This last time Chase Bank realized what I was doing and offered me 2.9% until the balance was totally paid off. They let me add to the balance up to my credit limit ,so I agreed and cut up that card so I can't make a mistake of using it.

Yes, that's exactly it. It took me a while to get out of the mindset of wanting to pay off our house. His philisophy is that instead of putting more money into your house you should invest it elsewhere (and you still have access to it). He's pointed us to other investments and our house has appreciated quite nicely, so it's an investment in itself.

Lisa

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"It's not having what you want,
It's wanting what you've got"

I like to pay off the lowest debt first regardless of the interest rate.


This is what I did about 12 years ago...We was living payday to payday.We had 4 credit cards totaling $5,000 plus a car loan....Instead of paying the card with the higest interst rate I pay off the card with lowest balance..This gave me the encouragment I need to keep on paying off the cards.

I paid $5,000 debt off in a 6 month time frame I was carry this balance for over 2 years and was never making a dent in the debt because I was always charging something on it

******************

Here is what I did.. We bought only the neccesities we needed..I went on a very tight food buget which really help alot.

I set up 3 jars for extra spending money to get us to the next payday:

Extra grocery shopping trips -was used for only needed food item..
Fast food- 1 meal every 2 weeks
Blockbuster Rentals.

My check rules was strictly in force only used for Grocery shopping day, Bills,School Lunches,Gas, & Haircuts.Whatever was left at end of the payday went on one CC.

*****************************

Once you see where your money is going it is a real eye opener..We was nickling and diming ourself to death for things we didn't need...We even had extra money left in the jars at the end of payday.

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Angels may not come when you call them, but they'll always be there when you need them.

While financial advisors surely want you to invest more, the real answer of not paying off a home is that you can deduct the interest on your taxes. This can be a huge savings year after year. If you pay it off, that deduction is gone.

Additionally, if you have a home loan at say, 8%.......and yet you can invest expecting returns of 15% (I know, not guaranteed, depends on many variables) then in effect, you are doubling your interest in making more money. Hope that makes sense.

Too, if "something" did happen, you'd have to live somewhere and pay something -rent- so you might as well keep paying on your own home. To me, my home isn't an investment since we plan to stay here and be carried out feet first. Only our beneficiaries will get something out of it ! lol

I thought that the reason that financial advisors say to pay off your house last is because if you itemize your taxes you can claim the interest of your homeowners loan as opposed to other loans such as credit cards or cars.

Thankfuly, there does come a point when even the interest on the home isn't enought $$$ to claim.

I paid my car loan off in less that 14 months and then it didnt show up as credit. the financial advisor told us that you have to actually pay on something for , I forgot how many months before it shows up as credit.

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