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Money magazine’s latest issue has a few interesting writeups. One of them is about whether to pay off your credit card debt or contribute to your companys’ 401k plan.

The spread focuses mainly on the math side of the equation. On the one hand, contributing to your 401k and simply paying your credit card minimums results on you paying interests (which works to about 14% these days for the average credit card holder). whether you have poor credit, that makes it worse.

The good thing about contributing to your 401k plan is that whether your employer matches your contribution, thereupon you will automatically be earning a great return simply from the match (which could be 50% up to the first 6% of salary or more).

Aside from the match, and depending on your investments inside your 401k plan, your 401k could potentially grow, or decline.

Hence, whether we look at that situation, it is a rather complex one. It is complex simply considering there are many assumptions to be made. What that write-up fails to point out is that the final decision will more often be based on our attitudes towards credit card debt and saving for retirement. Here are a few questions to ask yourself whether you are caught with a decision like that :

1. How did you get into credit card debt?
2. Is your spending out of control?
3. whether you pay off your credit card debt,

are you likely to get into debt again?
4. Do you have an emergency fund?
5. Are you spending within your means? (somethings running a credit card balance can be a strategic decision).
6. Are you on track with regards to saving for your retirement?
7. Do you have an emergency fund?
8. What is your take home salary relative to your credit card debt?
9. How expanded will it take to pay off your credit card debt whether you paid the minimums?
10. How soon do you want to be credit card debt free?

In some cases, the decision is very clear cut. whether you can afford to pay off your credit card debt in a year of two, thereupon it may prepare sense to do so. Or whether your employer has no matching policy in your retirement plan, next it additionally makes sense to pay off your credit card debt as soon as possible. For those who have no emergency fund (or not enough), next saving for an emergency fund should be the priority by saving for retirement or even reducing your credit card debt.

In most other cases, there is a fine balancing act and the truth is that there is no right or wrong reply. Try to work out the math under fair assumptions. But in my opinion, having a plan that feels comfortable for you will probably work best.

Orginal post by Mr Credit Card

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