I was looking at my debt balances the other day, and thinking about how much I pay on them in interest every month. My credit card balance currently costs me about $55 a month in interest charges, while my line of credit costs me about $85 a month in interest charges. For a little while there I was thinking "maybe I should pay down the line of credit first, it's costing me more in interest." For a couple days now that's what I'd been thinking I'd do *shakes head*, but I sat down and gave it some thought in terms of investments this morning. The money I put towards paying off the credit card is like investing money and getting a 12.9% return, while putting money towards the line of credit is like getting an 8.52% return. Sure, I'll feel better watching the total interest I'm paying decrease every month, but it will decrease at a much slower rate than if I keep paying off my credit card first, and I'll end up paying more interest overall. If I had applied my slightly confused money sense to all of my debts I would have had myself paying off my mortgage before I paid off my credit card. Doesn't exactly make sense, does it?
Some days I wonder how I got myself into this mess. Then I have moments like these. Then I remember.