I came across $9,000.
I have a total debt of $11,250.
Should I pay off most of the debt, part of the debt & invest the rest, or just invest it all & continue to make payments as I normally would?
Pay off some debts or invest?
byu/SuramiElGato inpersonalfinance
Posted by SuramiElGato
16 Comments
Identify that interest rate on that debt.
Then follow the Prime Directive.
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Sounds like you are asking about a framework for what to do with money.
Start with reviewing the Prime Directive in the PF Wiki. It will answer your question and many other questions you didn’t realize you should be asking.
* https://www.reddit.com//r/personalfinance/wiki/commontopics
What is the interest rate of the debt?
Is any of it past due?
What is your income?
What assets do you have?
Do you own your home or do you rent?
Pay off all high interest rate debt.
Yr int. rates are prob. in the high twenties. It`s tough (almost impossible) to find any investment that`ll return the same.
Make sure you have an Emergency Fund before you do anything.
I would say to pay off your debt. Obviously, if your interest rate is very low, then you want to just keep making payments. I’m becoming aware that some people who are bad with money will look at low debt and then start to build it up again.
In any case, I would pay down the debt. I find the psychological value of not having debt makes all of life more enjoyable.
High interest consumer debt like credit card debt should be a priority. Mortgage, car loan, student loans etc will depend on interest rates.
Depends on the interest rate of the debt. My personal rule is 4% or less, let it ride. 5-7%, personal decision and subjective. 8% or more, pay off debt. Emergency fund is next after debt.
If you had asked me any time over the last 30 years, I’d have told you to pay off the debt. Compound interest is a killer.
But, with inflation being what it is, and with the declining purchasing power of the dollar, we are at a point now where investing it all might be better. Check the interest rate of your debt versus inflation – pay off the bigger one.
I’m predicting massive inflation and then hyperinflation on the horizon. I could be wrong about this. If I am right, then owing debts becomes more and more manageable over time.
What’s the interest on the debt?
I’m just gonna say pay off your debt, man. It sounds like this money isn’t a recurring thing for you.
Investments are not overnight successes or cashouts.
Why would you renovate the house’s kitchen when the foundation is crumbling?
Stop chasing tomorrow’s bag when you’re hungry today. Unpromised money won’t feed you.
Put away $1k in a starter emergency fund. Use the rest to pay off all non-mortgage debt in order of smallest to largest. For the rest of the plan, look up Dave Ramsey.
If its high interest debt 100% get rid of what you can. You’re taking probably around a 20% loss on that every year if its even that low. You’re not going to find a guaranteed 20% return anywhere else.
If you have $9k in the bank and $11k in debt, you dont have $9k, you have a net worth of negative $2k. That money is already spent, you’re just paying interest to pretend it isnt. Investing would be pointless until you pay off your debt.
Unless you can make more in interest than the debt is costing, pay off the debt.
Is this an emotional or math question? Math you can answer yourself. Emotional you can also answer yourself.