Should You Invest or Pay Off Debt? (VERY Important)

Should You Invest or Pay Off Debt? (VERY Important)

Should you invest or pay off debt? This is a question many of us are faced with at one time or another. Finance influencers like Dave Ramsey insist that paying down debt is the best way to wealth while others believe that it’s a bad move. Why would you pay off debt when you could put that money to work to earn more money than the debt is costing? Is it better to use extra money to eliminate or at least pay down debt you’ve accumulated or is it better to invest that money so it grows and provides exponential returns for your future? The fact is, either can make sense but you might be surprised at the difference this simple decision will make. In some cases, these decisions could mean the difference of hundreds of thousands or even millions of dollars in the future. Let’s take a look at the advantages and disadvantages of both options so you can make the right choice that could mean the difference of being completely broke or financially free.

[kortyEdna]

I was advised to diversify my portfolio among several assets such as stocks and bonds since this can protect my inherited portfolio of about $2.5m. I’m used to just buying and holding assets which doesn’t seem applicable to the current rollercoaster market plus inflation is catching up with my portfolio. I’m really worried about survival after retirement.

[Fatihu-nq]

Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got to talking about investment and money. I started investing with $150k and in the first 2 months, my portfolio was reading $274, 800. Crazy right!, I decided to reinvest my profit and get more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.

[c.t.u.o]

I follow and love your videos. sadly, it's been a while since i visited it has been a very rough year... i am experiencing one of the most challenging phases of my life... Lost a fortune lnvesting in emerging companies. Hopeful, for a turnaround.

[mathixvw]

With my mortgage at 1.9%, I earn money with that 10% inflation
Nevertheless, a point that should be highlighted in this video is the financial freedom. As long as you have debt, you are accountable towards banks and might loose everything if things turned out badly. In the meantime, if you pay your debt earlier, you may earn less money than if you didn't, but you'd acquire financial freedom and you'd whatever you'd like with your income afterwards.
Also, investing first only works out if your debt has a lower interest rate than your investments.

[mohitnikumbh]

The math is unquestionable but the math only works from a practical stand point if you invest the remaining amount. If you are going to spend that amount on consumer goods, better pay off the debt and stay out of debt.

[SokemRokemRobot]

There's nothing like having no debt... a lot less stress, and a lot more money in my pocket.

[E.E.F.]

I paid off my house 20 years ago, have no debt and ample cash. I can sleep easy and retire early whenever I want to. I still have a sizeable retirement account.

[Riggsnic_co]

Concerns about a potential recession and the Fed's talk of interest rate hikes have left me uneasy. I'm unsure about my $440K portfolio strategy, considering the uncertainty of a recession and the possibility that interest rates may not rise significantly

[danicegewiss]

I'm doing both... investing $25 weekly and paying an additional $100 monthly on our mortgage. We're also building our emergency fund by $25 weekly. We have well over $1, 000 in the fund.

[ryanwilliams]

Scholars who study the stock market’s historical performance estimate that over time, the payment (and reinvestment, and compounding) of dividends have contributed anywhere from 30% to 90% of the S&P 500’s total returns. I want to spread across $400k into profit yielding dividend equities but unsure of which to get into.

[ExplorationRandomDestination]

I am about 3-4 years into my investing journey if you asked me in my first 3 years I would have chosen to invest. Now I am 100% sure i would pay off debt.

[DadsCigaretteRun]

Great video but I will say…nothing made me feel more in control of my finances then paying off all my debt. I make good money but having no debt makes me feel like I have doubled my income which means I can invest much more

[getinthespace]

Depends on your risk tolerance.
Debt is a guaranteed liability.
Investment is only the possibility of a return.
If interest is significantly less than inflation it makes it more tempting to service it minimally and try to make money in the market.

[PatrickButterly]

I know this is aimed at a US facing audience and I believe there is some significant differences across the world, but depending how you invest (and where) there are also tax implications where nowhere do you get taxed on paying off debt.

[rodgerpudwill]

I found a mixed strategy worked best for me. When the mortgage was “new” the additional $$$ paid on the mortgage reduced the term significantly with each additional payment, typically several months. However, after executing this strategy for quite some time, the reduction in the mortgage term with an additional principal payment was not much (determined by your actual circumstances). I then switched to investing the additional money, which enabled me to fully pay off the mortgage balance on retirement, allowing me to enter retirement debt free (which was a major financial goal). This strategy was made more complex by the fact that at the start of the mortgage term, my disposable income (and thus the amount available to use to execute the strategy) was much less than at the end of my career, which is typical (I assume). However, the mixed strategy paid off significantly for me.

[thehunter]

An advisor in the 80s once told i and my colleagues at work that the only way never to go broke was to buy good companies. Miss Anita, of blessed memory then asked him how can one know good companies? This question is still lingering on mind. Great Video BTW!

[duneme]

Compounding is a key too!
If you only invest once, that’s just not enough to do the trick!

[luislara]

It all depends on the interest rates. When interest rates are high like now, is better if you pay off your debt. If you had credit cards sitting in 20-30% interest, better to pay those off.

[Tom-grlh]

If you want to maximize your wealth, you have to take risks. There are people who are more on the more conservative frugal side who would overpay the mortgage, conversely those with a higher risk appetite will gamble more on higher returns leveragung mortgage debt in the stock market. The latter mindset is similar to that of entrepeneurs where we can see the rewards are very high for success.

[brucestiles]

Excellent video -- it fairly explains the pros and cons of each option, but does not choose one. There are many, many factors that affect the outcome, and different investors can have different values.