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MAXIMIZING MONEY

  • Writer: Treavor Dodsworth CFP®, CPA, CKA®
    Treavor Dodsworth CFP®, CPA, CKA®
  • Dec 13, 2024
  • 2 min read

Many financial professionals think in terms of percentages. They are able to look at an investment, debt, tax situation, etc. and convert it to a percentage. That percentage isn't the only factor but is a predominant factor in determining where you are getting the maximum impact for your money.

Maximizing Money

Today, I want to give you what is admittedly a gross oversimplification but it is an oversimplification that I think will be helpful to many.


The percentage benefit of paying down a debt is oftentimes very similar to the interest rate of the debt. For example, if you have a debt with a 20% interest rate, the "return" you are getting by paying down that debt is close to 20%.


Therefore when looking at debt specifically knowing what the interest rates are is of utmost importance. You should start by listing out in a spreadsheet the type of debt, total principal owed, monthly payment, interest rate, and whether the interest is fixed or variable. If you sort the debt with the highest interest rate at the top and lowest at the bottom it may show you which debt to prioritize to get the maximum impact.


There may be reasons you choose not to pursue the debt with the highest interest rate. For example, maybe a debt with a lower interest rate has a substantially lower balance and will free up cash flow more quickly. Maybe one debt you also get a tax deduction for. There are a number of variances that would impact why you wouldn't only look at the interest rate but at the very least the interest rate should be a major factor considered.


If you need help knowing how to maximize your money when paying off debt, please don't hesitate to reach out.



 
 

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