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Columns: The Debt Adviser
Steve Bucci   Expert: Steve Bucci
The Debt Adviser
Proper plan crucial to reaching goals
The Debt Adviser

Time is money when wedding bells ring
 

Dear Debt Adviser,
What is the best way to pay off credit card debt and save money for a wedding? I have heard different ways but get so frustrated trying to figure out the best one.

Do I pay off as many cards as I can immediately, while paying the minimum on the rest and saving whatever money I have left over? Or, do I just pay the minimums on every card, leaving more money to put into savings?

I have also heard that it would be a good idea to transfer the balance on my store cards (which I have closed) to a card with no interest.

What do I do?

-- Lindsey

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Dear Lindsey,
Ah, the holiday season -- a time when dewy-eyed couples planning to make the jump from "friends" to "fiances" peer into the bottoms of champagne glasses and Cracker Jack boxes to see if there is a shiny foreign object lurking within.

In a more serious vein, it sounds like you are doing your best to ensure the marriage gets off to a good start by paying off credit card debt and saving for the wedding. Many people just add wedding costs to an existing deficit and enter married life with a mountain of debt hanging over their heads.

Personal preference determines the best way to save for the wedding and pay down debt. It is less about the "right" way and more about the way that works best for you.

Having said that, I suggest you start with a timeline: When would you like to get married? Working backward from there will give you an idea of how to plan things.

For example, let's say you are facing three realities.

3 factors in planning your wedding:
1. You want to save $15,000 for your wedding.
2. You need to pay off $15,000 in credit card debt at 12 percent interest.
3. You want to get married in two years.

To pay down your debt before the wedding, you'll have to make a payment of $710 per month to your creditors and save $602 a month while earning 3 percent. To run your own numbers, check out the "What will it take to pay off my credit card?" and "What will it take to save for a goal?" calculators.

If those dollar figures are too steep, you'll need additional time to save money and pay down debt. Take three years to get married and your monthly totals go down to $500 to pay off the debt and $400 to save for the wedding. Or, you could shorten your time frame by agreeing to spend less on the wedding.

It's best to pay down debt in whatever way motivates you most. Some people like to see immediate results, so paying off the smaller-balance debt first makes sense for them.

Others like to know they are saving the most in interest payments. These folks should pay off balances with the highest interest rate, or the largest balances, first.

Whatever approach you use, eventually you reach the same goal -- no more credit card debt.

I also can't resist giving some advice to you and other readers shopping for an engagement ring this holiday season. I've seen engagement guidelines saying you should spend from 6 percent to 16 percent of your annual salary on the ring.

My experience is that the cost of the ring does not influence the happiness it brings. If it does, it's probably best to know that before you say "I do."

Besides, there will many more holiday or anniversary opportunities to give gifts that express how you feel, so don't feel the need to overspend on a ring. Then again, if you have the cash to spare, what the heck -- life is short!

Bankrate.com's corrections policy -- Posted: Nov. 30, 2007
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