While sure, knowing the difference between ira vs 401k and putting your hard-earned money away for retirement is extremely important if you’re looking to continue your lifestyle after walking away from work and still enjoy life’s experiences, but in order to do that, paying off debts will free up extra money so that you no longer have to pay back interest and you can be financially independent without being in a debt hole and the financial burden on your shoulders. If you can accomplish paying off four of the major debts, that would be a huge win in your corner and be ahead of most of the debt-ridden population.
Mortgage
Probably your largest monthly bill and no doubt the highest debt balance that you owe that is scary to look at when you think about how much money that actually is, paying back over the next thirty years. While sure they may be an end in sight when you will be sixty years old, but anything you can do to pay off the mortgage sooner, whether that is refinancing to a 15-year term, scheduling bi-weekly payments, or throwing any extra money you have towards the balance principal balance will help.
Credit Cards
Probably the most common and easiest to fall into is credit card debt. It’s great that you can charge throughout the month and then not have to pay back until next month, but if you are unable to pay the full statement balance by the due date and carryover a balance, the interest tacks on, and depending on the APR on the card and the debt balance, could be adding a significant monthly payment, with the minimum payment not doing anything towards the balance. If you can make the largest payments you can afford until the debt is gone you can go back to paying the statement balance and not waste any money on interest.
Student Loan
Sure we all have student loans if we want to go to college, unless we get a scholarship or have parents pay, but fortunately the interest rates are pretty low when it comes to student debt, but the problem that the minimum monthly payments are so low that it could take a decade to pay off if you’re only making the minimum, so much like credit card debt, make larger payments in order to pay off quickly, but prioritize paying off after credit cards, because of the lower interest rates on student loans.
Auto Loan
With the prices of cars these days you really can’t afford to buy anything new, not to mention if you do buy a used car you run the risk of having something break down during the six or seven years you have to pay it off, it really doesn’t make sense buy anymore when you can lease for a few hundred a month for a brand-new car and turn it in, in two or three years. Auto loans can have high interest rates, so may be priority after credit cards and before student loans.
