Is Paying Off Debt Better Than Investing?
As a former financial planner I know that not all finance is just about the math. The truth is that earning money, spending money, and saving money is a highly emotional thing. While it is fine to suggest that people eliminate emotion when dealing with money, that’s a little bit like telling people to eliminate hunger when dealing with dieting, it just won’t work in the long run. Is It Better to Save Money or Pay Off Debt? One of the things that gets thrown around like a solid, no-exceptions, rocket science idea from time to time is the concept of paying off debt as a high, guaranteed return. The theory goes a little something like this: If you pay off a credit card with an 18 percent interest rate, then that is like getting a guaranteed 18% return on your investment. Obviously, a sure thing 18 percent return is probably the best possible investment in the world from a risk/return perspective. But, is it really that simple? Mathematically, paying off higher interest debt is always the right move. However, that isn’t necessarily always the best move for real life, particularly if your finances are not in very good shape …