We have all heard how important it is to pay off our debt, especially our high interest debt. However, according to the money guru himself, Mr. Dave Ramsey, there may be times when it makes more sense to keep the debt and continue to pay it off gradually. For example, it is probably not a good idea to cash out a 401K or other retirement fund to pay off your debt. If you are cashing out your retirement fund early, you will be hit with early withdrawal penalties usually around 10% of the amount you have in the fund, plus you’ll have to pay taxes, as well. It is probably a better idea to continue to pay off your debt without using your retirement fund to help out. When it comes to mortgage debt, paying this off early, can be very beneficial. Some people make bi-weekly payments, which can really help pay your mortgage off early, and can save you in interest. However, if you have to pay a company to set this bi-weekly payment system up for you, then it is probably not a good idea. When paying off a debt to the IRS, among other debts you may be paying off, it is a great idea to pay off the IRS debt first, regardless of what interest rates or amount you have racked up in other forms of debt. The IRS debt can come along with some extremely high penalty and interest rates, so it’s probably best to get this debt out of the way first!
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