This is a guest post from J.B. of ConsumerBoomer.com
A new jobs report is set to be issued here in the United States and it will show whether or not we’ve added jobs. More importantly, it will show whether or not we’ve added enough jobs to make a difference within the current economic crisis.
Our celebration of America’s independence will give way to a work day for some and the June report on unemployment and where we stand now.
The last report that came out reaffirmed that our unemployment rate is still around 7.6%, which is lower than the 8.2% at the beginning of the year, however for many Americans the report may not offer as much hope as we or the government and financial experts are looking for.
While you may read reports on how this might affect Wall Street and the markets, the bigger affect will be on us, the consumers. When it comes to debt, we’re all still paying off what we bought way back in 2006 or earlier! We’re paying stuff off, but we might not be out of the woods by the end of the year.
Newly graduated college students will learn what it’s like to have crushing debt, as student loan debt has eclipsed credit card debt for the first time. Household debt did decline, but we still still owe well over one trillion dollars!
Struggles of Paying Off Debt
If you’re one of the millions of Americans in debt you would probably like to just pay off and be rid of. But it’s hard to do that when you haven’t found a job with your newly minted degree, or if your job has experienced layoffs and your paycheck is hurting. So how do you manage to get back on the bus if it’s picking up speed and leaving you behind?
Savings accounts are one way in which you can save for a rainy day, but so many people have depleted their savings in order to get by. Financial experts have of course noted that you should always have money for a rainy day, but if you’re surrounded in storm clouds, how are you supposed to do that? Well, one suggestion is getting the highest CD rates you can find and take advantage of the CD rates from Discover Bank.
Can a CD really help you get out of debt? As Steve from GetOutofDebt.org answered here, it can definitely help, especially if you have a matured or maturing CD already established. Before I get into the ins and outs of how having a mature CD can help you get out of debt, let’s look at the types of CDs that are usually offered.
Types of CD’s
Firstly, if you don’t know, a CD stands for certificate of deposit and it’s typically a low risk investment account that individuals can look in to and often consider as a good way to putting money away and watching it actually grow. Unlike stocks, which have a high risk of making, then losing money, the only disadvantages of of having a CD is a penalty that occurs when you take out money before it reaches the set upon maturity date.
So what’s a maturity date? Typically when you set up a CD, you have the option of how much money you want to put away and for how long; the how long is the mature date. It can be for a few months or a few years and the long you leave it in, the more interest grows on it. This is actually a great alternate savings account, as you can put money away and literally save it for a rainy day. In many cases, people use CDs for saving up for their retirement, but you can use it for whatever you need it for.
Maybe you want to save up for your child’s college tuition in a few years or maybe you’re looking to buy a house down the road. If you can get a CD in your early teens or as a young adult, you’d have the money to perhaps follow that dream of heading to Hollywood or Broadway or even for a trip abroad.
Whatever goal you have or want for your CD, you have options. For instance, a 24-month CD if perfect for someone looking to go on vacation or buying a car in the next two years and they want to have that money ready; a 5 year CD is perfect for someone who is looking to buy a house or for the high school freshmen looking towards college in four years.
So now you know a little bit about CDs and what they offer in terms of types; so here’s the real reason you’re here – can a CD help you get out of debt?
CD’s to The Rescue?
The short answer is yes, the long answer is maybe or no.
Let’s look at the longer answer first – a CD could theoretically pull you out of debt, depending on how much you have in the CD and how much debt you have. When I answered this question, I told the reader that her $4,000 CD wasn’t going to pay off her debts, but it would certainly help her move in the right direction. But I also cautioned her to not spend all of it on her debt; one of the most important facets the American people don’t have are savings.
Many people who did have savings accounts ended up dipping in to them when they lost their jobs or were trying to save their homes, etc which of course depleted all the hard work and effort that went into saving the money in the first place. A CD isn’t meant to replace your savings account, but it can act as a savings investment for an upcoming expense or an emergency.
If you have a mature CD, let’s say of $10,000 and you have debts that total $7,000. You could pay off your debts and still have $3,000 left, which is great.
My advice would then be put $2,000 or the entire thing into a savings account or back into a CD if you’d like. This not only pays off your debts, but gets you started back where you had been. Let’s say you still have $10,000 but you have $15,000 in debts; again, don’t pay all of it.
Take care of the smaller amounts if you can and then get started on the higher bills paying off portions of them. And still put at least $2,000 in a savings account.