Invest or pay off debt now?

Discussion in 'The Cocktail Lounge' started by Rosyrain, Mar 6, 2015.

  1. Rosyrain

    Rosyrain Senior Investor

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    I had a thought and wanted to see what everyone thinks of it. If you have bills to pay off, but don't have the money to do it at the moment, is it best to just pay what you can now, or take the money and invest it in the market so you can earn what you need to pay the bill off in full?
     
  2. missbishi

    missbishi Well-Known Member

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    It's probably wiser to pay off any outstanding debts, particularly if they are accruing interest. Plus, if you end up losing money on the market, it will be hard to pay these bills on time. This could damage your credit record, so it's not just money you are risking.
     
  3. ally79

    ally79 Guest

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    I would pay off my current debt before I made the decision to invest my money in something. That is just me personally though because I really, really hate being in debt.
     
  4. shilpa123

    shilpa123 Banned

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    I believe it is better to pay off debt now. Keeping a huge amount of debt is really not great and is definitely not helpful. I think it is best if we clear our debts as soon as possible.
     
  5. Flexin

    Flexin Member

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    Pay the debt. If you are being charged interest for the debt (which you would be in most cases), you would to earn more then the interest being charged or your just going father in the hole. And like missbishi said, you could damage your credit if you fall behind.

    Some say to pay the highest interest debt first (pay your monthly payments but pay what extra you can afford on the high interest one) to get yourself out of the hole faster. Make a plan to work on getting that down.

    Do the math on it. You might save more money by paying it down then you could ever hope to get in the market.

    James
     
  6. queenbellevue

    queenbellevue Well-Known Member

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    I think one of the biggest rules when it comes to investing is NOT to invest more than you can afford to lose. Pay off your debts and THEN think about investing. I mean just imagine if you invest now and LOSE that money...
     
  7. JR Ewing

    JR Ewing Super Moderator Staff Member

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    I think it is dangerous to view investing as a way to try to make a relatively large short term profit in order to pay off current debt.

    I don't know your particulars, but it would be wise to have at least a little cash savings set aside for emergencies, and to also set aside a certain amount of earnings each week or month to go towards paying off the debt. And you also ideally want to be able to set aside a certain amount each paycheck to actually invest for the longterm and hopefully not take any out until retirement.

    If your current cash flow does not enable these things, perhaps you can consider a second job until the debt is paid off. Or a career change either now or in the near future. Of course a career change may require additional education, which may in turn increase debt and further reduce cash flow and current income. It can be a dilemma for sure.

    I'd take a long, hard look at things and make an informed decision. Are there things you can do without for a while? Assets you can sell off such as extra vehicles, expensive "toys", real estate, etc? Can you temporarily change your living arrangements so that you're not spending so much on bills?
     
  8. crimsonghost747

    crimsonghost747 Senior Investor

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    In general, it's a good idea to have a little bit debt as the average expected profits of investments will be larger than the interest paid in debt. This is especially true in today's low interest environment. But in the end it's all about your personal situation and personal preferences. For example a lot of people prefer to pay off the mortgage slowly while investing at the same time rather than paying of the mortgage as fast as possible.

    You need to take a look at what you want and more importantly, what you can do financially and then make a decision that fits your risk profile.
     
  9. shilpa123

    shilpa123 Banned

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    It is always advisable to pay off the debt now. I do not think it is best to invest when you have reign loan on yourself. It can be sad.
     
  10. owesem75

    owesem75 Well-Known Member

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    I personally think paying off the debt should be a priority. There are risks involved in investing and you might lose all your money in the investment and still unable to payoff your debt.

    I can tell it is the majority view here.
     

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