3 ms·
It is better mathematically to pay off debt than to save (since debt is usually costing you more than the opportunity cost of not saving). Still, from a practi
by dkokelley 16y ago
It is better mathematically to pay off debt than to save (since debt is usually costing you more than the opportunity cost of not saving).
Still, from a practical standpoint, you shouldn't put ALL of your disposable income towards debt, as you will want some sort of emergency fund to keep you afloat when your car breaks down. Otherwise, you go rely on more debt. Spending saved money is cheaper than spending borrowed money.
- sudont 16y agoAbsolutely, I try and keep about a 2k float, but aim on building that higher. And my car did just break down hard enough for it to be junked.
- xenophanes 16y agoAssuming you have a credit card, you should pay off all debts worse than credit card debt, and all credit card debt, saving no money. If your car breaks down, charge it. It's only if you have a source of debt that's more pleasant than credit card debt, and which you can't easily get back in case of a car-breakdown-forcing-credit-card-use that you'd want to save some debt to keep cash around for emergencies. And even then you'd want to look at the extra interest you're paying compared with the risk of emergency and the difference between the interest rates of that debt and your credit card, and a lot of the time it'll be like (IF i have a car breakdown, which is 5% likely, then I'll end up paying 5% higher interest on the repair money for a few months ... this is NOT worth failing to repay some debt immediately which will cost in interest a lot more than the expected loss of that incident)