Paying off high-interest credit cards is equivalent to earning whatever rate is charged (e.g., 19%), which is much higher than what savings accounts are earning (e.g., 2% to 4%). However, you also need to have some reserves so that, if an emergency occurs, you have some money and do not need to add to your credit card debt. One possible strategy to consider is that for every dollar you have to save and/or reduce debt (in your case, $600), you spend three-quarters of it (75%, or $450) toward debt reduction and one-quarter (25%, or $150) toward building emergency savings. In addition, you might want to do a PowerPay debt reduction analysis to accelerate your debt repayment. When you pay off a creditor, that monthly payment is reallocated, and remaining creditors receive more until every debt is repaid. Visit www.powerpay.org for additional information.

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