Comments on: Paying Off Debt vs. Investing in this Economic Environment

By: Debt investing | Gzff

Debt investing | Gzff — Sat, 04 Jun 2011 15:21:30 +0000

[...] Paying Off Debt vs. Investing in this Economic Environment | No DebtI’ve been pondering this debate for a few weeks. If you have debt, should you be paying it off or investing for the future? The markets have tanked roughly 37% … Naturally, you should expect my answer to be pay off debt. My No Debt Plan is designed to get you out of debt before you start investing heavily. Step 4 is Pay… [...]

By: Finance

Finance — Mon, 08 Feb 2010 10:01:41 +0000

I really wanted to be out of debt, but with the way the market is tanking I am thinking it might be better to hang on to this one until the market is stable. But I could also look at it as getting back in when the price is lowâ€¦and that is why I hardly get out of debt.

By: Finance

Finance — Mon, 08 Feb 2010 09:58:13 +0000

I personally think it is a great time to invest. Yes, the market could drop even more, but the stock prices are severely depressed already. I donâ€™t consider investing money at depressed prices market timing, as long as what Iâ€™m investing is for the long term.

By: Beth

Beth — Thu, 14 Jan 2010 23:25:16 +0000

I have a 401K that I rolled into some IRA’s when I left my previous employer. Currently am not contributing to any retirement accounts, mainly because I have not had sufficient income. I’d like to get rid of my debt, about $30,000. Would it be worthwhile to do that and then use the money I was otherwise using to pay debt to build back up my retirement savings?

By: dan

dan — Fri, 24 Apr 2009 18:03:16 +0000

Good post Cathy

By: dan

dan — Fri, 24 Apr 2009 18:01:28 +0000

The question is not should I pay off debt or invest? The question is better put, should I pay off this particular debt or invest?
And the answer to that question depends on the interest rate of the debt. If its a credit card at 15% like in the example, by all means pay off the debt.
But if its a mortgage at 5% with a tax deduction, by all means invest.
Even if you suck at investing, you should be able to do better than 5%.

By: Kevin

Kevin — Sun, 22 Feb 2009 05:30:38 +0000

@Personal Finance Firewall: Thanks for stopping by. I think everyone needs an emergency fund first, then knock out the debt. It really helps to have something to show you how much interest you are saving with each dollar added to the principle. I’m trying to come up with something like this that will show how much you’re saving. Really inspiring.

@Cathy: Excellent point about the dieting. See my point above — perhaps having something to show your “equity” growing in the debt (less interest paid than without paying off early) would help?

Congrats on the DCA. Hopefully it pays off for all of us soon…

By: Cathy

Cathy — Sun, 22 Feb 2009 01:22:41 +0000

In some cases, just budgeting for both seems like the wisest way to go. The only CC debt I have is at 1.9% interest/yr for the life of the loan and is budgeted to be paid off in 12 months. This allows me a budgeted allotment for savings which I’m investing.

By contributing the max to my 403B, the tax savings easilly justifies the 1.9% cost of the CC debt. In that account I my goal is to dollar cost average in to the same funds that went down 40% last year. In doing so, I’ve managed to work myself up to being only 20% down in half the funds. This means I should recoup that 40% faster when the market rebounds.

Hopefully, I am also taking advantage of decent gains by buying “Best of Breed” stocks at a huge discount in my Roth IRA. These are stocks I could not afford to buy a year ago and will hpefully pay off in the future.

I don’t necessarily agree with theories of just paying down debt first. What really helped me reach my goals and move closer to being debt free is when I started saving. Psychologically it really does something for you. When I was just paying down debt, it was like being on a diet, constant deprivation and little to show for it, resulting in binges. When I started saving, it was really gratifying to see my savings grow at the same time my debt was shrinking and now all I can focus on in how much more I’ll be able to “save” once my debt is paid, so it becomes self-reinforcing.

By: Personal Finance Firewall

Personal Finance Firewall — Tue, 17 Feb 2009 22:25:20 +0000

This is something that I have struggled to decide over. My wife and I have been talking about whether we snowball our money at investments or snowball it at debt. I think we will hit the debt as hard as we can then once its gone, get into some low risk investments.
Nice post, very informative.

By: Interview With No Debt Plan | Remodeling This Life

Interview With No Debt Plan | Remodeling This Life — Sat, 24 Jan 2009 13:01:15 +0000

[...] budgets, life would be so much better. I really wish I could convince everyone of this tactic. Paying Off Debt vs. Investing in this Economic Environment – This post was written late last year, but I still think it applies to [...]