We only have a small amount of debt - we can pay it off within the year... But we also need to start saving (RRSPs, etc). Would we be better off the pay off the debts asap, and THEN start saving? Or should we allocate some money to both, and pay off the debt slower?
2007-02-20 10:34:38 · 8 answers · asked by carolynnnna 3 in Business & Finance ➔ Personal Finance
you have to look at the interest rates on the things you need to pay off and compare them with the rate of return you will see from your investments. If you can see a greater return from investing while holding a little debt and slowly paying it off, then invest but if your debt is high interest credit cards pay them off. A mortgage or student loans are examples of things that really don't need to be paid off early.
2007-02-20 10:41:59 · answer #1 · answered by Drew S 2 · 3⤊ 1⤋
My argument is only invest while you have debt if you are GUARENTEED to earn more on the investment than the interest on the debt. So if you have a 5% loan and can invest and earn 6% GUARANTEED then do it. Otherwise pay off the debt first.
An exception would be where you get matching money (like in a 401(k).
Also take tax advantage into account on deductible interest (if you pay 6% and are in 25% tax bracket treat that like 4.5%).
2007-02-20 13:56:02 · answer #2 · answered by Anonymous · 1⤊ 0⤋
Put your money toward whichever one will give you the best return. Credit cards usually have a much higher interest rate than most investments, so you will usually want to pay those off first. Car loans may be lower interest than you may be able to get as a return from investments, so it's not such an easy call there. If the investment is an employer matched 401K, consider the matching amount part of your return on investment.
2007-02-20 10:44:37 · answer #3 · answered by Brian G 6 · 2⤊ 1⤋
Paying off debt first is a good idea. Remember that most payments have interest, so paying it off as quickly as possible will save you money in the long run, which you can use to start your savings. :)
Additionally, being debt free will give you piece of mind, and that's something you can't buy.
2007-02-20 10:43:37 · answer #4 · answered by eileezy2002 4 · 0⤊ 0⤋
on the exterior I ought to trust the different responders. pay off the credit card debt then tear them up. yet incredibly the right answer could be extra complicated than that. in case you pay off the credit card debt and then turn around and rack up extra debt on the credit enjoying cards, you haven't any longer something to tutor on your problems. regrettably, many human beings fall into that capture. will no longer be able to help spending the money they have not got. Now in case you place the money right into a Roth IRA account, that funds is going to be quite confusing to get to sooner or later and is extra generally secure from being spent. In different words this is an investment on your destiny. the drawback is which you will nevertheless have that miserably credit card debt racking up pastime at a fee this is lots greater than you are able to assume to obtain on any investment you will possibly make on your IRA account.
2016-10-16 03:13:53 · answer #5 · answered by ? 4 · 0⤊ 0⤋
PAY OFF DEBT. STAY DEBT FREE.
Then you'll have more to invest.
2007-02-20 10:38:34 · answer #6 · answered by Sh*t For Brains Liberal 1 · 0⤊ 0⤋
What kind of debt ... CC? Pay that off before you even consider ramping up your savings and investment program. Like my grandpappy used to say, "You gotta wash the walls before you can put paint on them."
2007-02-20 10:53:33 · answer #7 · answered by Tom T. Hall 2 · 0⤊ 0⤋
Pay off the debt first. Once you've paid the debt off, you'll be free to invest your money.
2007-02-20 11:28:56 · answer #8 · answered by Jen G 5 · 0⤊ 0⤋
If it was me I paid off my debts first so I woun,t have to worry and then start to save from each paycheck and good luck
2007-02-20 19:09:29 · answer #9 · answered by pattibcacl 6 · 0⤊ 0⤋
Try https://tr.im/22Bes
2016-07-21 06:35:21 · answer #10 · answered by Anonymous · 0⤊ 0⤋