Sunday, April 6, 2014

Which debt to pay first?

Knowing my interest in personal finance, a young man recently told me that he had a few debts that he is committed to get rid of. He had been checking some PF sites and got confused as to which one he should focus on first.
I told him that if I were him, I would get rid of the most expensive debt first. Paying a high interest is like shoveling money out the door. Some finance gurus tell you to get rid of the smallest debt regardless of the interest rate but I personally do not agree with them.

I am a debt hater. If and when I have debt I feel like someone is choking me. I keep checking my numbers constantly and worry about lots of unlikely scenarios that would keep from paying it down.

To this day, I only borrowed money to buy apartments; my current residence and my rental property. I never took out a loan to buy a car. I was lucky to drive a company car for over 10 years but that is no longer an option being half-retired. My car is a 2010 Nissan Note at 94,000 Km. I hope to be able to drive this car until the end of 2018 if not more.

I must start a car fund as soon as my rental property debt is gone next month. When it is time to get a new car, I would like to have the cash available.

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