Making Extra Payments

Making Extra Payments

 

The concept of debt reduction and making extra payments have been around for quite some time.  Several financial planners and gurus teach this method.  Debt "rolldown" is the idea of using your extra money to paydown your smallest debt first, and then using the money you were spending on that debt to paydown your next biggest debt, etc.

 

Many disagree with this concept for several reasons.  First, when you begin making extra payments, you never have access to those funds again.  You can’t call the credit card company and say “I need the extra payment back because the transmission just went out on my car!”

 

Secondly, these plans usually recommend not to use any credit cards.  Credit cards can actually be a tremeandous tool if used correctly.  The problem of course is most poeple use credit cards the wrong way and carry a balance and incur interest charges month after month.  It takes alot of discipline and hard work to follow an extra payment plan.  It’s very important to have an emergency fund!  With extra payment plans you're trying to use every spare penny you have to pay-down your debts.  This doesn't allow any flexibility in case something unexpected comes up. 

 

When you stop and think about how you manage your money you'll find you're helping the bank but may be hurting yourself.

 

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