Paying Off a Debt Versus Investing

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Image credit: LendingMemo

In this day and age, a family’s needs are a far cry from what it was two or three decades ago. The Internet has indeed changed every one’s way of life, and this resulted to people working twice as much just to make ends meet. Nowadays, almost every person has a mortgage or a credit card bill to pay off, which can make one think, is making an investment a good move at this point?

The answer is pretty straightforward: No. This is because of the simple fact that mortgages or credit card bills acquire interest rates if not paid on time, not to mention late payment fees. While it is a great idea to invest, timing is also crucial when coming at a decision. First off, all investments have a risk—if an investment you’re eyeing promises to be risk-free, there is a good possibility that it is not a legitimate investment. If you are looking at a good investment, but still need to pay off some debt, make sure to prioritize the latter. Why? The safest investments require some time to gain profit; this means you might need a year or more to finally see the fruits of your labor. Proper allocation of funds is imperative to ensure that you do not lose money or at least minimize the risk of losing.

Getting stuck with debt is probably the worst financial move a novice investor can make. An article on Forbes.com shared a short story about a man who borrowed money to invest in the stock market. He invested rather aggressively and ended up losing thirty percent in just three months. Not only was he $150,000 under, he also owed ten percent from the bank. He had to sell his business and declare himself bankrupt. All because of one wrong move – he invested beyond his means. The same goes for investing in any market, whether you have the funds for it or not, a thorough research on the commodity (such as gold and silver, or the stock market) is imperative.

Knowing about the market that you would like to invest in is the first step. For instance, people get excited when the word “gold” comes up in a conversation, but many are not aware that as an investment, gold comes in many forms. Useful information on buying gold as well as the different types, can be easily found online these days. Research is important to undertake in order to help novice investors make a smart and informed decision when investing in the precious metal.

Debt is oppressive, it can and will limit a person from doing or buying what he actually needs or wants. After a debt is paid off, whether a credit card or a mortgage, it’s the start of financial freedom. Knowing you don’t have to pay something at the end of the month gives you room to invest on something profitable.

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