I often get asked the question, "I have some extra money should I pay off my debts or do you think I should put the money into an investment?" I always look mystified as I calmly answer them, "Isn't paying off your debt a smart investment?" Needless to say most people don't get it.
Isn't it logical to think if you save yourself from paying interest on debt, in a way, you are making money? Now of course the money you are saving from paying off debt is a future savings, therefore, an investment.
Many people who make investments like to see a "smart" return on the life of that investment. Let us assume an average return on a moderately risky mutual fund over a period of 20 years has a return of 10%. The average unsecured debt rate is 12.99%. Paying off the debt makes sense.
The main difference between paying off debt and making an investment is risk. The investment is not guaranteed to produce (Hence your risk) The debt, however, is guaranteed to keep charging interest.
The problem is most people don't know anything about investing, and most people don't know how to speed up paying off their debt. For isn't paying off a principle balance faster, much like having a stock skyrocket?
So now we are coming to a highly important point. Having an investment make huge gains is much like paying off debt quickly. The question remains, how do we as people in debt, pay off our debts at an accelerated pace?
There are only a few ways. One is to decrease the rate of interest. Another is to decrease the term, which will of course increase our payments, or the final way increase the payment activity and payment amounts.
If you learn how to leverage your lines of credit against one another you will be on your way to paying off your debt at an accelerated rate. We have determined this is a fantastic way for you to invest your money until you are debt free.
Isn't it logical to think if you save yourself from paying interest on debt, in a way, you are making money? Now of course the money you are saving from paying off debt is a future savings, therefore, an investment.
Many people who make investments like to see a "smart" return on the life of that investment. Let us assume an average return on a moderately risky mutual fund over a period of 20 years has a return of 10%. The average unsecured debt rate is 12.99%. Paying off the debt makes sense.
The main difference between paying off debt and making an investment is risk. The investment is not guaranteed to produce (Hence your risk) The debt, however, is guaranteed to keep charging interest.
The problem is most people don't know anything about investing, and most people don't know how to speed up paying off their debt. For isn't paying off a principle balance faster, much like having a stock skyrocket?
So now we are coming to a highly important point. Having an investment make huge gains is much like paying off debt quickly. The question remains, how do we as people in debt, pay off our debts at an accelerated pace?
There are only a few ways. One is to decrease the rate of interest. Another is to decrease the term, which will of course increase our payments, or the final way increase the payment activity and payment amounts.
If you learn how to leverage your lines of credit against one another you will be on your way to paying off your debt at an accelerated rate. We have determined this is a fantastic way for you to invest your money until you are debt free.
About the Author:
author Micahel Klein will help you get out of debt. Please visit Uwin Financial and get your complimentary financial report and start living your life again debt free.
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