(WTNH) — As you work to pay off debt, it can be daunting when you look at all the money you owe.
Most of us are carrying a debt of some kind. It’s figuring out how to start paying them off that’s the scary part.
“There’s two major categories; there’s good debt and there’s bad debt,” explained Chartered Financial consultant John Caserta.
He said it’s the “bad” debt you want to get rid of first.
“Bad debts are things like credit cards, payday loans, car loans. They typically have high-interest rates. You’re buying something that’s depreciating in value.”
So, get rid those credit cards first.
The good debt? Things like your mortgage. He said don’t be in such a rush to pay off.
Rather than “over” paying on those balances, it may be more beneficial to put your money somewhere else.
“You have to think to yourself, ‘Can I take that money and maybe do something else with it and maybe outpace the amount that I’m paying for the debt?’ In some cases, you may even be taking away a tax deduction.”
Instead, consider contributing more to a savings or retirement account, where it may grow faster, having a bigger impact on your bottom line.