Why saving money isn't a good idea for everyone.

As kids, we're taught to save. As teens, we're taught to spend. As young adults, we're taught to use credit. And if you're like me, by your 30's you've got interest bearing debts and no savings.

If you're like me, and wanting to get out of that situation, your first thought might be to start saving money. If you had no interest bearing debts, this would be a FANTASTIC idea! But, if you're like me, you've got two maxed out credit cards and a car payment. With all of those lines of credit, someone like me would be commiting a slow financial death if they started putting money away in savings!

Let me explain!

Let's just say for example purposes that my credit cards are both maxed out at $700 each. We'll give them an interest rate of 17%. The minimum payment we'll say is $17.50. It would take you 77 months to pay off just one of these cards, and you'd pay approximately $475 in interest. That's over 2/3 of the balance you borrowed, JUST IN INTEREST!

We can apply the same logic to the car payment, which is also an interest bearing loan. When you look at it this way, you begin to see that keeping these debts around is just like throwing money away. So why would you put money into a savings account that earns less than 1% for you when you're paying 17% on several loans?

The ultimate goal is to start saving. But before you can get out of a hole, you have to stop digging. It makes more sense for someone like me to pay off the high interest debts first, that way over time I'm paying less in interest and can put back even more in savings!

Stop wasting money by saving money! Pay down interest bearing debts as soon as possible. Figure out what loan is costing you the most money in interest. Put as much of your available resources to that as you can until it's paid off. Then, take the amount you were paying on the debt you just paid off, and pay it on the next one in line! This is called Snowballing, and by snowballing your debts you can knock them out quickly, once and for all!

Once your interest bearing debts are paid, now it's time to start saving! Take the whole amount that you were spending each paycheck on debts and put it into a savings of some sort! For me, that would equal $200-each month! After a full year, I've saved $2400!

Knowing that in a year I can save $2400 tells me that I can pay off $2400 of debt in that same year. Make it happen, and build a better life! Pay yourself, not the bank!