We all want to save money and reduce debt, and in today’s economy, it can often feel like an almost impossible task. After all, debt is in everybody’s lives. However, here are some instances where you might be better off to let debts accumulate than to start paying them off. While getting rid of debt is certainly a good thing, you don’t want to do so at the sake of your financial future.
For instance, if paying off your debt requires you to use money from your retirement plan, it is almost always a bad idea. Taking money from your retirement funds often costs you between a quarter and half of the amount that you withdraw, and most people don’t realize how much they will need these funds when they reach retirement age.
Simply put, you are better off filing for bankruptcy than using your retirement to pay off your debt. Taking out a new home loan on your house to pay off debt can be equally dangerous and is something that very few people should consider.
Of course, the biggest problem is when people start working to pay off debt that they simply cannot afford to repay. If your credit cards or medical bills are gaining interest faster than you can pay it off, then all you are doing is increasing the amount of time that the debt is on your credit report.
In the end, it is up to you to know if something can really be paid, and to determine if it is possible for you to eliminate your debt.