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- Avalanche method : A general strategy to pay down debt is to start with debt that has the highest interest rate. This is known as the Avalanche Method. With this method, once the debt with the highest interest rate is paid off, the focus is then on paying down the debt with the second highest interest rate, and so on.
- Debt consolidation : Debt consolidation means taking all of your existing debts like credit card bills and any loan payments – and consolidating them into one loan with a single monthly payment. This is a way to help simplify payments and possibly lower the overall interest rate that applies to your existing debt.
Try the TD Debt Consolidation Calculator to quickly calculate.
Consider saving for unexpected expenses
Another possibility for your extra cash is to consider opening an account, separate from your other savings account, as an emergency fund for unexpected expenses.
Having money set aside specifically for unexpected expenses could help carry you through difficult financial times.
In terms of how much to put into your emergency fund, a general guideline is to set aside three to six months’ worth of expenses.
Everyone’s financial situation is different
At the end of the day, everyone’s financial situation and their personal feelings toward saving and debt management are different. So, whether you’re looking to pay down debt or save for the future — or both — the choice you make should be based on your specific financial situation.
If you’d like some advice about whether to pay down debt or save for the future, book an appointment with a TD advisor who can help you review your options.