I suspended my 401(k) deductions in the Spring when I started tackling my debt so I had more money available to pay down my debt, trouble was I did not stop using credit cards during this process (pre-Dave). I recently read the following article that discusses this very topic.
Paying off credit card debt vs. funding your 401(k)
Source: CreditCards.com -- Jeremy Simon
When we are presented with two options that both seem good, it can be tough to make a decision. This is true in the case of the choice between using extra money to pay off credit card debt or to invest in a 401(k) retirement program -- both of which are recommended by financial advisers.
In an ideal situation, it would be possible to both pay off credit card debt and contribute the maximum amount to an employer's 401(k) retirement fund. But for most of us, we have to make the most of a limited amount of money. So for Americans faced with the decision between paying off credit card debt and funding their 401(k) plan, how should we best put our money to work?
First, consider your credit card debt. The average interest rate on credit card accounts is about 15 percent. That is very costly, especially since credit card interest payments are not tax-deductible. So with most credit cards charging 15 percent interest on whatever balance is owed, paying off credit card debt is equal to earning a guaranteed 15 percent return on your money.
More...
Paying off credit card debt vs. funding your 401(k)
Source: CreditCards.com -- Jeremy Simon
When we are presented with two options that both seem good, it can be tough to make a decision. This is true in the case of the choice between using extra money to pay off credit card debt or to invest in a 401(k) retirement program -- both of which are recommended by financial advisers.
In an ideal situation, it would be possible to both pay off credit card debt and contribute the maximum amount to an employer's 401(k) retirement fund. But for most of us, we have to make the most of a limited amount of money. So for Americans faced with the decision between paying off credit card debt and funding their 401(k) plan, how should we best put our money to work?
First, consider your credit card debt. The average interest rate on credit card accounts is about 15 percent. That is very costly, especially since credit card interest payments are not tax-deductible. So with most credit cards charging 15 percent interest on whatever balance is owed, paying off credit card debt is equal to earning a guaranteed 15 percent return on your money.
More...
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