A Quote by Dan Ariely
Imagine you owe on five credit cards, you owe five debts. So which debt should you pay first? And the answer is very simple: You should pay the one with the highest interest rate first. But that's not what people do.
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First, pay off your high-interest-rate debt. If you have student loan debt - that's low interest rate; that has a tax benefit - you can leave that out. A mortgage can be an OK one. Credit card debt is poison. That needs to be paid off right away.
If you have credit card debt and credit card companies continue to close down the cards, what are you going to do? What are you going to do if they raise your interest rates to 32 percent? That's five times higher than what your kid is going to pay in interest on a student loan. Get rid of your credit card debt.
There are two definitions of deflation. Most people think of it simply as prices going down. But debt deflation is what happens when people have to spend more and more of their income to carry the debts that they've run up - to pay their mortgage debt, to pay the credit card debt, to pay student loans.
If you fail to pay your minimums for any debt on time, your credit score will take a major hit and you run the risk of seeing the interest rate on all of your cards go up. An easy way to remind yourself to pay, is to sign up to receive your statements via e-mail.
If you have to pay about forty to forty-three percent of your income for housing, you also have to pay fifteen percent of your paycheck for the FICA for Social Security wage withholding. You have to pay medical care, you have to pay the banks for your credit card debt, student loans. Then you only have about twenty-five or thirty-five percent, maybe one-third of your salary to buy goods and services. That's all.
I would say you have an ethical obligation to pay the taxes that you owe, but you don't have an ethical obligation to pay taxes that you don't owe. In fact, you should be seeking ways to legally minimise your taxes.
But credit card debt is unsecured debt, which means if you get in trouble and cannot pay off your credit card, you can discharge it in bankruptcy. What are they going do to you? If you're in a financial position to just methodically pay off both credit card and student loans, pay them all.
When I had dinner with a friend or a loved one and one of you pays for the check and the other says, "I owe you next time." I like to think that we're eternally even - that they don't owe me anything or I don't owe them anything if you have a connection with somebody or a love with somebody. I like to think that there's no debt to pay. You love each other and you're happy to pay for dinner every time.
If you have loans, the first thing you want to do is say, "Okay, look I have a credit card, if I really need to borrow, I have this emergency money that I can get, but for now there is no reason for me to keep cash at zero percent interest rate and at the same time, pay all of this money out. So, I think people need to figure out quickly how to pay loans and how much cash they should really keep.
The debts we owe ourselves are the hardest to pay.
Imagine you have six loans, small to huge. People want to close loans and because of that, they try to pay off the small loans, but that's not the right strategy. The right strategy, of course, is to pay the loan with the highest interest rate. People make this mistake and it costs them lots and lots of money, it's a very expensive mistake because interest rates accumulate and become very, very expensive very quickly.
You don’t owe prettiness to anyone. Not to your boyfriend/spouse/partner, not to your co-workers, especially not to random men on the street. You don’t owe it to your mother, you don’t owe it to your children, you don’t owe it to civilization in general. Prettiness is not a rent you pay for occupying a space marked ‘female’.
There are lots of families who - who make irresponsible purchases. There are also a lot of families who have debt on credit cards because they use those credit cards to pay for medical bills.
Ironically, many people can't afford to give precisely because they're not giving. If we pay our debt to God first, then we will incur His blessing to help us pay our debts to men. But when we rob God to pay men, we rob ourselves of God's blessing.
Absolutely pay off credit card debt. If you're not getting a match in your 401(k) and you've got credit card debt, you've got to get yourself out of credit card debt. When you get out of credit card debt, your credit score goes up and interest starts to go down.
Karma is an energy debt which you owe or an energy credit which is owed you. Both involve compound interest that is added to the equation making it either a burden or a blessing.
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