November 26, 2014 Admin | November 26, 2014 What should you consider when deciding between saving/investing your money vs. paying down debt?
2 thoughts on “November 26, 2014”
The interest rate is a major thing to consider. If your interest rate on your debt is higher then what you could ever hope to average on your investments put your extra money on your debt for a return of what the interest rate is. If your debt has a low interest rate that you could likely average on your investments, lets say 3% you are likely better off investing your extra money and paying the minimum on that debt because you could average better on investments. You may want to put extra in your debts if you need to get them all payed off to get a new loan soon also.
Well said, Garrett. Let’s review.
You must weigh the difference between a guaranteed return (paying off debt) vs. a projected return AFTER costs on your investments. For some people that number might be 3%, meaning if the interest rate is below that, they would take their extra money and invest it. If it was above that, they would take their extra money and pay down debt.
There is no perfect number here. You must identify what that number is based on your investment knowledge and abilities. Whether you choose 3% or maybe as high as 6%, ultimately you must consider all options before making this big decision.
P.S. I would ALWAYS invest in a retirement plan at work up to the matching money. That is FREE money. Do not let that opportunity pass you by.