Should I pay down my student loans first or my credit cards?
Bottom Line: Pay off the debt with the highest interest rate = cost to you first. This assumes you are not in collections on either debt. If start by considering the interest rate on each debt and the amount of the debt. In general, with a fixed sum of money to be allocated to debt repayment each month paying down more on the debt with the higher interest rate will be beneficial. For example, if your student loan debt accrues interest at 7% and your credit card debt has a rate of 20% on an equal balance you would be paying much higher interest charges on the credit card than the loan. It is extremely important to also consider the provisions of your student loan debt - consoidation, refinancing and the option to defer may permit you to retire high interest credit card debt - then cut up the cards! and then to devote all available funds to your student loans. Balancing debt repayment with current expenses and the need for future savings is what the process of financial planning is designed for. It is important for you to speak with an advisor so you do not create an even more disadvantageous position for yourself in the futureyou do not put a legal agreement in place setting forth your wishes, state law will dictate your financial fate in a divorce.
Concerned the government does not represent your values?
Before you say "yes to the dress" say "yes" to a pre-nuptial agreement.
Most couples are unaware that by default their marriage and divorce is governed by state law, and those state laws may not reflect your personal values or intentions with respect to your financial obligations, needs and goals.
1. Open a bottle of wine, beer or vodka and write down your financial obligations, needs and goals on a sheet of paper.
2. Switch sheets with your partner. Drink.
3. A few questions to help put things into perspective:
- I expect to put my entire paycheck into our joint account. Yes / No
- I expect to take 6 months, 2 years, life off from work when we have a child.
- I expect to share equally both the financial success and failure of my start-up.
- I want to have 1/3 of my paycheck for my own needs.
- If I won a million dollars tomorrow I would ....
- I think we should have joint bank accounts, separate accounts, a few of each.