Pay off highinterest debt first from "summary" of I Will Teach You to Be Rich: The Journal by Ramit Sethi
One of the key principles of managing your finances effectively is to prioritize paying off high-interest debt first. High-interest debt, such as credit card debt, can end up costing you a significant amount of money in the long run if you do not address it promptly. By focusing on paying off high-interest debt before other financial goals, you can save money on interest payments and improve your overall financial health. When you have high-interest debt, a portion of your monthly payments goes towards paying off the interest accrued on the balance. This means that you may end up paying much more than the original amount you borrowed if you only make the minimum payments each month. By focusing on paying off high-interest debt first, you can reduce the total amount you pay in interest over time. To pay off high-interest debt effectively, it is important to first assess the total amount you owe and the interest rates on each debt account. Once you have a clear understanding of your debt situation, you can create a repayment plan that prioritizes paying off the debts with the highest interest rates first. This may involve making larger payments towards these debts while continuing to make minimum payments on other debts. By focusing on paying off high-interest debt first, you can also improve your credit score over time. A lower credit utilization ratio, which is the amount of credit you are using compared to your total available credit, can have a positive impact on your credit score. By reducing your high-interest debt balances, you can lower your credit utilization ratio and potentially see an increase in your credit score.- Prioritizing paying off high-interest debt first is a smart financial strategy that can save you money in the long run and improve your overall financial well-being. By addressing high-interest debt promptly, you can move closer to achieving your financial goals and building a solid foundation for your future financial success.
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