Pay Off Debt or Invest

Should you pay off debt or invest first? When I ask this question normally I am stressed about how much debt I have and now little savings I have to cover that debt.

Plus all the advertisers tell you to get another credit card and call Merrill Lynch or some other advertising firm.

Your best first investment is to pay off debt first. If you have a credit card at 15%, paying off that card will give you a guaranteed 15% rate of return. By paying that debt off you will not pay that 15% in interest annually. You will have that 15% in your pocket. If you can find me an investment that will give me 15% guaranteed I would be happy to invest. Once you pay off debt all that money you were paying toward debt can now go toward investing in your future.

Since you have paid off your debt you have more to invest with than you would have before. Which means compound interest will be a fantastic asset for you.

Albert Einstien once said “The most powerful force in the universe is compound interest”

Now that it is not working against you it can work for you. I am not a financial advisor. But I have found some great tips, from credible sources for you to consider.

So most people wonder "when I pay off debt what should I invest in?” Reading the Millionaire mind I came across a couple of great tips.

  • 1. Stock brockers are great sales people. If they are spending all their time selling it doesn’t leave them a lot of time to research stocks. In short, get advice from the experts. People who invest in a lot of things, have made a lot of money and are financially independent. They have done it, are willing to share advice, often for free. And will not gain a percentage of your gains.
  • 2. Diversify. Diversify means more than different types of stocks, although that applies to, it may mean adding private stock, real estate, marketing your own products, etc. The options are huge.
  • 3. Do what you love. My daughter loves animals in general and spefically dogs. I think since this has been going since birth it is officially not a phase. So we were talking to her the other day about doing what you love. We asked her how she could make money with dogs? She suggested a few things like playing with them, taking care of them, breeding them. I think as she gets older the list can be expanded to veterinary services, dog care web site, etc. She gave me things that she could do on her own. But those things can become investing when she starts her own company, advertises, or employs others. Eventually she can manage from the sidelines, and watch her income come in. I personally like stocks and real estate which is pretty common. The point is if you love something, and see a lack in the services provided for that something you have found an opportunity to invest.
  • 4. Don’t gamble. Millionaires will tell you they worked hard for their money and they are not about to throw it away. This applies to Vegas as well as investments. Most investments will require a certain amount of risk. That’s OK. You simply need to decide how much risk you can afford. If you need a guaranteed return, look for an investment that gives it. If you have a whim and have some extra money that you are willing to lose because the potential is so good, go for it. Just educate yourself to the risk before jumping into a decision that you may regret later because it was too risky or too safe.
  • 5. Invest in things you know. Or take advice from people who are knowledgeable. Just because your brother-in-law has a great idea, doesn’t mean you should go along because he’s family. When someone is looking for an investor ask yourself some questions. If this person wasn’t a family member or friend would I even be considering this? Does he/she have experience in this area? Do they have contacts that will allow them to have some sort of advantage? What are the laws or guidelines you need to know for this business venture?

Investing is important for your financial future. Because it is so important is you need to do a little research and be open minded to what investments will work for you

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"A man in debt is so far a slave,"
Ralph Waldo Emerson.


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Suggested Reading

  • Millionaire Mind
  • Millionaire Next Door
  • Total Money Makeover
  • First Things First
  • Think and Grow Rich
  • Rich Dad Poor Dad
  • Cash Flow Quadrant
  • Maigc of Thinking Big
  • The Richest Man in Babylon
  • 6 Thinking Hats
  • How to Win friends and Influence People

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