Investing vs Paying Off Your Debt?
Donald M. Fink has over 40 years’ experience in helping clients with investments and increasing their retirement portfolio. Sometimes you get a nice surprise in life and you’ll receive an extra $5,000 to $10,000 from maybe an inheritance, a tax refund or your rich uncle sees you struggling and wants to help out a bit. When you see that money, you want to buy all the things you’ve missed out on in the last few years, but you won’t because you’re smarter than that. So what do you do? You either pay off a chunk of your debt or you invest it into something that will provide you with a decent return. If you don’t already have a small emergency fund for those thunderstorm days, you should take about 15%-20% of that sum of money and create an emergency fund.
Should I pay my debt off first?
This is a no brainer, paying off debt should be the number one priority for everyone that has debt that is affecting their life. If you put a large sum of money into your debt at once, it significantly reduces your monthly payment and the interest that you are accumulating on it. However, there are always certain exceptions as to when you shouldn’t worry too much about paying off the debt. If you have always been in good standing with your debt you can try and negotiate with your lender on a much lower interest rate, this will really help in the long term as you will not be “wasting” money on interest payments. Another thing you can try to do is ask your lender to turn off the interest for a few months, keep making the same payments and watch your principal go down.
Should I invest this money instead?
Once again, depending on the debt amount there’s nothing wrong with taking that money and investing it instead if you know that you will be fine in the long term. There are a lot of investment options that do not involve a large initial investment and can help you get started on your way to investing and building your wealth. One of the things you want to calculate is if you will be paying more on your debt than you will be making by investing in the long run, this will really help you decide what you want to do with the money. Another thing you can do is, you can invest this money into yourself either by starting a business, blog, taking a course that compliments your schooling or even taking courses that will help you get a higher position at your job.
At the Advisory Co, we have an impeccable record of providing sound financial advice to our clients. Call us today at 702-869-1919 and let us get you setup with a retirement expert.
Donald M Fink has been advising and helping high income individuals and business owners with strategies for over 40 years. He continues to consult with private clients in the areas of estate planning, wealth management and asset preservation and to this day maintains Life & Qualifying membership and Honor Roll status in the Million Dollar Round Table (MDRT).