Time & Money

Is It Better To Pay Off Debt Or Invest?

DEBT OR INVESTMENT

There’s no clear answer to the question of what’s more important – paying off debt or investing. But there are several things you should consider if you’re wrestling with this dilemma.

First, compare your debt’s interest rate to the returns on your investments. Pay off high-interest loans first. If you have low-interest debt, it may be a better idea to make minimum payments and put more money into your investments. But remember – paying off debt provides a guaranteed return; investing does not.

Consider the type of debt. Quickly pay off high-interest loans that are not tax deductible, like credit cards. Tax-deductible debt like a mortgage can save you money.

You may want to find a balance, which means investing and saving for retirement while paying down costly debt at the same time. Popular methods include the 50/30/20 budget that devotes 20% of your income to savings and debt payments. There’s also Oprah’s Debt Diet, which allots 15% of income to debt and 10% to savings.

Your personal financial intentions should guide your decisions, so determine your goals. For some, being debt free offers endless relief, while others can’t sleep at night without an emergency fund. It’s important to study your situation and determine where your money will have the most impact.

Share your comments and ideas

source Investopedia

Tags

Anthony Ansong

Ceo - Ansong Holdings LLC Co-Founder & Editor Light Magazine Africa Author of Children Book Entrepreneur

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Check Also

Close
Close
%d bloggers like this: