Deciding Whether To Invest Or Pay Off Your Debt
Majority of people find themselves in the dilemma of either investing or clearing their debts. There are advantages and disadvantages of taking decision in either way. This article is geared towards placing useful tips in your hand that will guide in making the suitable decision in this matter.
When you take the route of investing you are intending to build a reserve that will offer protection you and your family. Additionally, you create an extra stream of income. You are also certain that you have accumulated sufficient funds that will support you during your retirement.
There are two main factors that you need to look into if you are making the choice between investing and paying off your debts. The interest that you are paying on your debt after tax and how much you will earn from the investment after tax are the issues that you need to look closely into. You will be better off going for investment if its return are higher that the interest that you are required to pay on your liabilities.
It is advisable to fund a retirement package that has been made available for you at your job. You should only put the free matching money that you have obtained into the plan. Majority of firms place this money to between 50% and 150%.
it will not be possible to make an objective as regards the choice between investing and paying off your debts if you do not know your present financial status. Performing an assessment of your financial status is the ideal place to begin your journey. You will have to note the amount of debts that you have and the assets that you own in carrying out the process.
As you are making the decision whether to settle for investment or paying your debt, you need to ensure that you have financially cushioned yourself through setting up of an emergency savings account. You need to have at least expenses that cater for at least one month into the account. This gives you the guarantee that you will not accumulate additional debt in case there is an emergency.
You need to have a comprehension inspection of your debt so that you can make an objective decision whether paying it off or investing is the best way to go. If you have double digit credit card debt, the best bet for you is to consider giving top priority to clearing.
You need to get into the habit of investing the earliest possible if that is the direction you have taken as opposed to paying off your debt. As much as this desirable, ensure that your financial issues are correctly prioritized. If you lack peace of mind when you have outstanding debts, then you should consider focusing on clearing it.