Video Transcript
A common question we’re asked is, what should I do with extra money: pay down a debt or invest it?
Unfortunately, the answer is rarely crystal clear, but here are a few issues to consider.
The first is debt load – Consider the number and size of your outstanding loans. Also factor in the life of the loan and the interest rate.
Owing high interest rate debt is bad for your financial health, so generally the best medicine is to pay the debt with the higher interest rate first before investing.
Sometimes the rate is not too bad, so if you don’t need the extra money any time soon, you might want to invest it rather than pay down debt.
Also consider whether you’re getting a tax benefit for paying the interest, because if you are, then the not–so- friendly IRS is actually helping you pay the debt and using extra cash to pay the debt off is like giving money away.
Another issue is your emergency fund. If you don’t have liquid cash set aside for emergencies, then investing in the stock market or paying down debt may not good choices.
These and other factors need to be reviewed and sorted out, so contact us today and we can help chart a course.
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