Wealth-Coaching

When you think of debt, you most likely think of paying debt off.  Although it should be your goal to be debt free, there are some instances when paying a debt off is not the best option.

Choosing to pay the WRONG debt is a common mistake that one makes when trying to unload the debt to wealth.  Many people will pay extra on a mortgage payment and even double up to get the mortgage down and the equity up. 

First of all, your mortgage is usually the lowest interest rate on all of your debts.  Secondly, you lose great tax benefits that can sometimes give you the interest back in your pocket under certain circumstances.

Reducing your mortgage is never smart when you have any other debt that carries a higher interest rate.  Choose the debt that is costing you the most.

Choosing to pay off debts in place of retirement savings or worse, from your retirement savings is a severe mistake.  Although debt is costly, dipping into your retirement is more than costly.  The interest savings is very rarely if ever more than the gain of the retirement account for the balance lost over the long term of the account.  You cannot make up missed retirement payments.

Using retirement to pay debt is also going to cost you tax shelters on the funds.  Be sure to contact an investment or retirement specialist to assist you before making any decisions in this area.

Debt retirement is good, but not good enough.  Be sure to consider these options when reducing debt and building wealth.