Comments on: Should You Invest or Pay Down Debt?

By: J. Money

J. Money — Tue, 10 Aug 2010 20:54:24 +0000

Haha… YOU? Hate debt? no way!

By: Brad Chaffee

Brad Chaffee — Tue, 10 Aug 2010 18:45:47 +0000

I believe in paying off any and all debt before venturing into investing. If someone struggles with debt, how could they possibly believe they would be ready to invest? Then of course there are the ones that believe in leveraging debt to invest but I believe only a select few can benefit from that rabbit hole.

Pay off debt!

By: Laura Adams

Laura Adams — Tue, 10 Aug 2010 11:30:21 +0000

@StackingCash As I mention in the article, investing is risky and provides no guaranteed return. However, historical returns in the stock market exceed 8% for long-term investors. If mutual funds make you uncomfortable, index funds may be a better choice.

By: StackingCash

StackingCash — Tue, 10 Aug 2010 07:17:55 +0000

Here we go again. Average rate of return of 8%. I love how those in the finance industry pick numbers like that and make you think it’s conservative yet never tell you that that rate of return can be 0% depending on what you invest in. You better pray that the mutual fund you pick is a good one because there are hundreds of bad ones out there. Picking mutual funds these days is as bad as picking stocks IMHO.

By: ajc @ 7million7years

ajc @ 7million7years — Tue, 10 Aug 2010 00:28:19 +0000

“The answer to the dilemma is simple: Determine which option is more profitable for you. To do that, you have to figure out your after-tax return for each choice.”

Agree completely; people have the erroneous idea that there’s a concept such as Good Debt and Bad Debt. That’s all well and good when deciding whether or not to take on the debt.

But, once you’re in debt, there’s only Cheap Debt and Expensive Debt: cheap debt helps you fund other investments (kind of a proxy investment loan) … and, expensive debt is, well, expensive and should be paid off asap.

By: J. Money

J. Money — Mon, 09 Aug 2010 19:01:41 +0000

Yeah, personality def. comes into play. Although I’ll admit I happen to saver from “don’t mind having debt as long as I’m saving lots of money!” to “I hate debt! Want zero of it even if that means zero emergency fund!” haha… I think going with what feels right for you at any given point in time is the way to go. You might change your mind here and there, but as long as it makes you COMFORTABLE you’re a-okay :)

By: Debt Vigilante

Debt Vigilante — Mon, 09 Aug 2010 16:48:00 +0000

To me it would all depend on the how much you owed as well as the type of debt. All of my current debt are student loans – for me, the best return on investment is to pay those off as soon as possible. Every situation is different and personality of the person will come into play as well.

By: SAFTM

SAFTM — Mon, 09 Aug 2010 14:07:30 +0000

I agree that the best choice for you depends on your tolerance for risk and your long-term financial goals. But if debt really is a “problem” for you, I would think changing your behavior is “of value” too. So if I had a problem with debt – especially credit card debt – I would focus on paying down debt at first. I wouldn’t worry about the math.

And even with tax-deductible debt, once you factor in risk and tax treatment of gains, you may find that – for the short period of time it will take to pay down your debt if you’re really focused – the potential gain is not worth the risk. Finally, there is some value to being debt free. It simplifies things.

But I don’t mind the “do both” suggestion. In the end it’s “personal” finance. So do what works for you. But I doubt you could “save” or “invest” your way out of debt if you have debt problems (maxed out HELOC, credit cards, car loans, etc.). I think that’ a behavior problem and the “interest rates” are not the issue. I would stop trying to do the math and focus on changing my thinking.