Can You Invest When You’re in Debt?

office-620822_640Who doesn’t have debt? If you don’t, then consider yourself extremely lucky. You are a rare breed in today’s world, because so many of us are struggling with debts; some of us more than others.

Yet a big question that a lot of people have is whether or not they can invest when they’re still in debt. So, is that even a possibility? We may be able to help you find out as we provide some insight into how some people choose to use their money in the investment versus debt payment battle.

So Many Choices, So Little Funds

If you’re like most people, you have lots of things you want to do with money, but you have very limited funds. When you are faced with debt, but you still want to do some investing, then you need to decide a few key things. Weigh your options and determine whether you are more interested in maintaining a good credit score, or whether you would like to benefit from compound interest. By categorizing your indebted accounts in order of highest to lowest interest rates, you can see which ones are most pressing and which are lower priority. That may help you determine whether you would like to work on paying off the debts, or whether you would prefer to make minimal payments while making some investments.

Don’t Forget Your 401(k)

Sometimes, people get so caught up with their debt accounts and investment options, that they totally disregard their 401(k) plan. In many cases, individuals can pull out a certain amount of money that their employer will have to match. That can actually end up saving you time in the long run, even though you may not be able to pay off all of your debt in as little time as you first thought. In fact, speaking of paying off that debt, you should sit down (with a financial planner if necessary) and calculate an expected time frame for getting that debt cleared away. It all depends on the amount of debt you have, how big your monthly payments are, as well as interest rates and type of debt. It’s always best to have as clear a picture as you can before you jump into any financial decision.

Analyze Your Actual Situation

It’s sometimes very easy for people to turn a blind eye and just pretend that the debt’s not that bad, or worse – not even there at all. Yet it is imperative that you get real with yourself and determine just how bad the debt is. Lay out all of the information in front of you and check out the individual interest rates, how much you need to pay each month just to maintain that debt amount, as well as how long you can foresee the debt being in existence. You should also take a look at your monthly expenses (car, rent, food, etc.) and see if there are any areas where you can cut costs.

Save More Money in 2018

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Comments

  1. You give excellent advice! Debt is easy to accumulate, but much harder to pay off. You definitely have to be mindful of your financial situation in order to bounce back from debt. These are good tips for doing so! Thanks so much for sharing!

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  1. […] simplest way to begin to invest wisely is to invest in your company’s 401(k). This is especially true if your company offers to match. […]

  2. […] simplest way to begin to invest wisely is to invest in your company’s 401(k). This is especially true if your company offers to match. […]

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