Bohemia, NY (PRWEB) April 09, 2013
On April 9, 2013, collections services agency Rapid Recovery Solution discusses whether it's better to prioritize the payback of debt before putting money away for savings.
According to a recent article in Daily Finance by Dan Caplinger, “Millions of Americans have outstanding debt, and limited savings. So when a rare bit of spare cash appears – say, for example, a tax refund – they face a tough question: Should they use it to pay down their debt, or save it in an emergency fund or for a long-term goal like retirement or buying a house?”
The best choice is a more complex decision than many would think, says Caplinger – the right decision for your situation depends on “the type of debt you have and what you plan to do with your savings.”
In 2013, many taxpayers got tax refunds that represented their “biggest fiscal windfall of the year,” and the article reports that many of these refunds will be used to pay off debts rather than for saving. A recent survey found that almost half of the taxpayers receiving a refund this year planned to use it to pay debts, as compared to the 34 percent planning to put their refunds into a savings account.
Caplinger says individuals should answer a few questions to get a handle on the factors that affect their individual financial situation and determine the best way to use any extra cash they might get. The first question: What interest rate are you paying on debt? “From a purely financial standpoint, the more you're paying in interest charges on your debt, the more you gain by paying it off,” he says. Similarly, he says people should calculate what return they can expect to earn on any savings they might accumulate.
John Monderine, CEO of the collection services agency Rapid Recovery Solution, responds to the question of prioritizing savings over debt. “The number of people using their refunds for paying back debts rather than for savings indicates that our economic troubles have launched us into a new era of financial responsibility. Less than a quarter of the survey's respondents said they'd actually be spending their refund money – that's a big shift, and in the right direction. Unfortunately, debts don't go anywhere, even if you de-prioritize them. One factor worth considering is that sometimes there is an extra incentive to pay off debts early – some lenders offer reduced rates in return for a quick turnaround time on a loan. Even more importantly, paying down debt is good for your credit score; and having a good credit score puts you in a better position to be able to save in the future. That said, if you have a little extra cashflow, the question of whether to save or spend never has to be an all-or-nothing decision.”
Founded in 2006, Rapid Recovery Solution, Inc. is headquartered at the highest point of beautiful Long Island. Rapid Recovery Collection Agency is committed to recovering your funds. We believe that every debtor has the ability to pay if motivated correctly. We DO NOT alienate the debtors; we attempt to align with them and offer a number of ways to resolve not only your debt but also all their debts.