By using the financial planner's advice, Penny and Ira were able to find ways to cut back on their spending and began to live more modestly. They began to have a few hundred dollars left over each month after handling their normal expenses. Which of the following is the first thing they should do with their extra money?
A) buy one nice household item that they will both enjoy as a reward for their thriftiness
B) pay off their debts, starting with the ones that have the highest finance costs
C) start a savings account at a local bank
D) buy bonds in a major corporation

Question

Quizplus · Accepted Answer

Saving and investing money is certainly a desirable goal, but before doing so Ira and Penny should pay off any debts, especially those with high interest rates, such as credit cards. Many credit cards charge interest rates in double digits. Paying off a credit card that charges 17 percent is essentially like earning a 17 percent tax-free return on an investment. In recent years few bonds, much less bank savings accounts, have come close to matching that sort of return.

By Using the Financial Planner's Advice, Penny and Ira Were