We’re sick of hearing about the tough times that we’re living in. It was a good few years ago since the market crashed, and as people continue to look for solutions the debt or savings question can be a frequent debate. But, which makes more sense – should I use savings to pay off debt? paying off debt or savings? And how do Canadians go about defining their long-term financial policy?
Really, this is a no-brainer if you’re thinking about it off the bat. Getting rid of any debts that you have ensures that your possessions are not at risk and you know that you can’t be hit with a big interest bill. While it may feel nicer to have a few thousand dollars saved up, you have to think that money will be saved long-term if your debts are paid off now. But, when times are tough, we like to save. Debt vs Savings is what that financial industry pays most concern, let’s see how it help an ordinary person in getting the right path towards a better financial future.
Saving in Canada
The Tax-Free Savings Account that was announced last year was applauded as a novel approach for helping the population to save. Receiving tax benefits, you are able to save up to $5,000 a year so long as you are aged 18 or older. What this meant to Canadians is that a substantial amount could be saved up – tax-free – and this was big news.
But, what it also meant was that people started to take a look at GIC Investments. With the market crashed and more unpredictable than ever before, the stock market wasn’t the answer and Guaranteed Investment Certificates with their guaranteed return seemed a solution. What this meant is that taking the time to save in this way was financially rewarding for citizens creating an emergency fund.
How does this help the credit card problem?
Whether you like to save or not, there’s going to come a time when your debts need paying off. By getting a guaranteed return on your money, you will have a fund to call on, but what tends to happen is that the debts will soon pile up. So, while you stockpile in one place be sure to keep an eye on what is going on elsewhere on an issue to get an efficient decision while comparing between paying off debt vs savings in Canada.
Interest rates are your worry here, but if you can find the lowest APR and BTR credit cards online you will be able to move all your debts to make them more manageable. By planning an attack on your debts you will always be better placed to beat them. While we all want to be debt-free, paying them off can seem a thankless task. Two options include:
- Change your outgoings – While this may sound obvious, it’s the easiest way to make a break towards being debt-free. Savings are important, but not when you have debts to pay. What you first need to do is use a service to enhance any saving accounts, lower what you need to pay on your credit cards and cut money from your mortgage rates. By cutting dollars off your monthly outgoings, you will have more to chip away at debts.
- GIC Investment Loan – A great way to kick-start your savings, get money to fight your debts and boost your credit rating is through using a service like Lend It Financial. What you can through this method is re-establish credit history by getting a loan that is insured and invested into a GIC. From here you build a profile and earn money off your investment for an interest rate of around 12% from the company.
It’s funny how much better we feel knowing that there’s an emergency fund in a savings account, but by paying off debts now you will spend less in the long-term. While the right answer changes depending on circumstances, there are many things we all can do to lower our credit card debts to enjoy savings to hold for our future or invest it where it better grow.