Unless you have a stash of savings, you are probably going to put it on your credit card. Although you now know enough to put it on your lowest rate credit card, that purchase is going to set you back. It's going to impede your progress and it's going to make you feel rotten. That's why you need savings.
Turn Protection into Profit
- As you start to pay down your debts, siphon off a chunk of money each month—3–5% is a good start but aim for 10%—and put it into savings.
- Stash your savings in a safe place, such as the highest paying money market account you can find (go to www.bankrate.com to find the best rates today)—until you've got a substantial emergency cushion equivalent to 3 to 6 months salary. That's your protection. If you get laid off, if the dog gets ill, if your transmission dies, you'll be able to live and pay your bills without sliding back.
- Once you've got your emergency cushion, you can start investing that money in a portfolio of stocks and mutual funds that can help you build a real foundation of wealth for your future.
More Debt Resources:
Everything you need to know about Oprah's Debt Diet
Credit scoring 101
Debt collection and your rights
Debt Diet success stories
Baby steps to get out of debt
Train your brain to behave financially