I thought I would provide more of an explanation into a post I did earlier this week on Instagram. Whether if paying off debt or investing is ideal for you. Everyone has a different take on this topic; you may be dealing with debt, saving, and/or investing.
Here are some options I mentioned you can do:
Pay your debt off FIRST!
Are you drowning in debt? Let us say 5 figures or more? Negative net worth? Have your “Ah shit” fund of $1000 or so? Then yes! This should be your priority. There are three options that you can attempt. I’ll provide a visual for the first two and an explanation for the bonus option in my eyes.
1. The Debt Avalanche method
2. The Debt Snowball method
3. Balance Transfers *BONUS*
Source: ConsumerCredit.com
Now a Balance Transfer is considered a bonus option because this is only for EXTREMELY discipline folks!! Basically, you are moving your existing debt from one credit card to another credit card (normally new or even a line of credit). The objective is to get a lower interest rate, reduce finance charges and pay off what you owe much faster. THIS OPTION IS TO REDUCE DEBT AND INTEREST ACCUMULATED. If you are going to max both credit cards and/or line of credit, this isn’t for you boo!
My advice: Pay off your debt first if you have unmanageable debt, once you have control then you can start considering investing.
Put that Money into the Stocks!
Then we have individuals that are either obsessed with the stock market, cryptocurrency (no, I’m not advising to do this…lol), or different types of investing.!!
I understand why you would want to get into the stock market, the feeling of FOMO, seeing others get a lot of growth (I have seen certain stocks have 100% + gains). You want in too!! Wait a minute this method will not be advisable if your debt is in the “Paying off your Debt” section. Your risk tolerance may conservative, but you want your portfolio to be aggressive. IF ANYTHING WAS TO HAPPEN TO YOUR PORTFOLIO and you NEEDED that money for rent or bills. You will be setting yourself up for failure. Money that is going into the stock market could potentially be gone. That is why you need to set aside an amount that you are willing to lose.
My advice: Do not jump aggressively into stocks if you have unmanageable debt and will absolutely go nuts if the outcome isn’t positive.
Why not Both?!
I think this is for the individual that has a manageable amount of debt. I REPEAT! If you have an unmanageable amount of debt, focus on paying your debt off to an amount that you can manage! I would not want you to be drowning yourself in debt more. However, if you have a budget and your debt amount is manageable (like mine) then do both! If you can make wise investment plays/choices. You will not only increase your net worth. But you will always be able to use some of those profits to tackle your debt. I’ve seen stocks that have gone up 50% or more which can cover your interest rate of approximately 20%.
My advice: If you have a manageable amount of debt (that you can within a month or so) WITH your debt repayment plan AND savings/investing contributions is fine.
I know there will be family and friends that you are watching securing that bag. Well, I will be able to help you figure out which method works for you. Feel free to email me at info@fitnanceiq.com to get things cracking.