It's almost all interest rate dependent. If your debt is less than you can make in a savings account (somewhere 5 or below) then the easy answer is to save. If the debt is a higher rate, the answer is to pay off the debt.
High-interest debt can cost you significantly over time. By paying off your debt, you're eliminating the need to pay interest, which can often double the cost of your purchases. For example, credit card debt can have interest rates upwards of 20%, so paying it off quickly saves you money in the long term.
Building up your savings each month as you pay down debt ensures you'll have funds on hand to cover unplanned expenses that would otherwise put you deeper into debt. For many, the best solution is to strike a balance between saving money and paying off debt.
If your HELP debt is low, and your compulsory repayments are high - and like you say, you have one or two years left, it's worth paying off early. Even for the ``extra'' income that is not being withheld for HELP.
Being debt-free is a financial milestone we often hear about people striving for. Without debt, you can focus on building more savings, investing those extra funds and just simply having more peace of mind about your finances.
If you completely repaid your HELP debt after 2023 or 2024 indexation was applied, the credit would be via a refund to your bank account (assuming there are no outstanding tax debts).
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
They stay away from debt.
Car payments, student loans, same-as-cash financing plans—these just aren't part of their vocabulary. That's why they win with money. They don't owe anything to the bank, so every dollar they earn stays with them to spend, save and give! Debt is the biggest obstacle to building wealth.
High-interest loans -- which could include payday loans or unsecured personal loans -- can be considered bad debt, as the high interest payments can be difficult for the borrower to pay back, often putting them in a worse financial situation.
Paying off your debt as fast as possible may seem like the responsible thing to do, but not having an adequate emergency fund or saving for your future could leave your finances at a permanent disadvantage down the road.
Cons. Tax debt forgiveness may have implications for future tax filings, and forgiven debt may be considered taxable income.
If you can afford to pay of your debt quickly, do it! Not only will it improve your credit utilization score, but it will save you hundreds if not thousands in interest. When you carry a balance month after month, your credit card lender will be charging you interest for the amount kept on the card.
Key takeaways
Over time, paying down debt has the potential to significantly improve your health and overall quality of life.
Most negative items should automatically fall off your credit reports seven years from the date of your first missed payment, at which point your credit score may start rising. But if you are otherwise using credit responsibly, your score may rebound to its starting point within three months to six years.
Most consumer debts will “expire” after three to six years, meaning a creditor or debt collector can no longer sue you for them. You're still responsible for paying old debts, but waiting until the statute of limitations runs out might help you avoid future legal issues.
Others will object to taxing the wealthy unless they actually use their gains, but many of the wealthiest actually do use their gains through the borrowing loophole: They get rich, borrow against those gains, consume the borrowing, and do not pay any tax.
Debt is simply money that you bought, and the price of the money is the interest or whatever other fees you're paying to buy the money. That's all it is. And one of the things I say about debt is that paying off debt doesn't make you rich. Meaning that once you pay off the debt, you don't start making money from it.
The people who have all the money often go by unnoticed, dressing well, but without flash, driving used cars and living in the first house they bought in a modest neighbourhood. The authors called them the quiet millionaires. They often work in, or own, unglamourous businesses that spin off steady streams of cash.
While this figure can vary based on factors such as location, family size, and lifestyle preferences, a common range for a good monthly salary is between $6,000 and $8,333 for individuals.
Quick Take: The 75/15/10 Budgeting Rule
The 75/15/10 rule is a simple way to budget and allocate your paycheck. This is when you divert 75% of your income to needs such as everyday expenses, 15% to long-term investing and 10% for short-term savings. It's all about creating a balanced and practical plan for your money.
By age 30, you should have saved about $52,000, assuming you're earning a relatively average salary. This target number is based on the rule of thumb you should aim to have about one year's salary saved by the time you're entering your fourth decade.
While repaying your debts is important, sometimes circumstances make it difficult. But do debts ever really expire? The accurate answer is: no, they don't.
If you apply for an administration order, you may be able to have some of your debt written off. This is called a composition order. You can ask the judge for a composition order or the judge may decide to give you one after looking at your financial circumstances.