Our Debt Free Family

Commit. Plan. Take action.

  • ABOUT
  • CONTACT
  • FREE FB GROUP
  • FREE DEBT REDUCTION TOOLS
  • GET OUT OF DEBT
  • Privacy Policy

Should You Invest To Pay Off Debt?

October 25, 2019 | Leave a Comment

Invest to pay off debt

Investing while you still have a debt to pay off is a controversial topic amongst debt-free communities. However, many people still find it difficult to climb out of the debt holes they’ve dug. Many have to search for side jobs, part-time gigs, and other ways to pay off what they owe. In some cases, individuals have started to invest to pay off debt. Is this a good way to reach financial freedom?

Investing When You Have Debt

If you follow the teachings of Dave Ramsey or any other debt-freedom-focused financial advice, you know that most don’t recommend you invest at all until all your debts have been paid. This is typically because the quicker you pay off your debt, the sooner you’ll be able to put all of your extra resources into investments, retirement planning, and other financial goals.

In fact, paying off your debts early may be one of the best investments you can make. Paying off your mortgage early, for instance, has a guaranteed return on investment. You’ll save money on interest. However, the same guaranteed return isn’t there when you are investing. In some cases, you may even lose money that you couldn’t really afford to (especially if you are holding debt).

Should You Invest to Pay Off Debt?

I frequent the debt-free subreddit looking for good advice and interesting topics. One Reddit user took to the forum to ask others about their thoughts on using investments to pay off debt. Essentially, they were wondering if they could invest to pay off debt, meaning they wanted to make minimum payments on their debts while using any other money to invest in the stock market. Then, eventually, they’d cash out and pay their debts in full.

Most, if not all, Redditors advised against doing this. Here’s why…

  1. Your investments won’t outpace the interest on your debts. You’ll wind up paying way more interest over time if you are waiting for investments to grow.
  2. Holding debts while you try to invest is counterproductive. Investments can provide good passive income and even help you prep for retirement. Unless you pay your debts though, you’ll still be in the red.

So, all in all, it isn’t advisable to invest to pay off debt. Instead, use all of the “extra” money you have to snowball your debts. Once you’re finally debt-free, then look into investing your money.

Read More

  • Realizing We Need to Refocus on Different Things
  • October 2019 Update: Searching For Relief
  • When Can You Be Taken To Court Over Debt?
  • What is the Best Debt Advice?
Amanda Blankenship
Amanda Blankenship

Amanda is an editor and writer. She has a passion for sharing information that helps people and communities to better themselves in some way. In addition to writing online, she also freelances for local newspapers in her hometown of Charlotte, NC.

www.savingadvice.com

Filed Under: Get Out of Debt Tagged With: debt payoff, invest, invest to pay off debt, investing, paying off debt

  • Facebook
  • Pinterest
  • RSS
  • Twitter

About The Author

Amanda Blankenship is a 24-year-old full-time website manager and blogger. She is currently hacking her debt by saving money and investing, all while managing her family and enjoying her adult life.

 


Five Steps To Debt Freedom

Here are five simple guidlines that will help you pay off debt.  

1) Get an emergency fund so you don’t take on debt when something comes up.

2) List your debts. This way you know where you stand.

3) Use the debt snowball. Pay your debts from smallest to largest, or most expensive to least expensive.

4) Avoid new debt. No new credit cards or loans. Period.

5) Go all cash. After everything is paid off, switch to all cash.

Helpful Resources

The Free Checklist for a Strong Financial Plan

U of Tennesse Debt Repayment Plan Basics

Vertex 42's Debt Payoff Calculator

Savingadvice's Helpful Debt Forums

Jackie Becks Debt Blog

Our Most Popular Articles

How Alice and Scott Paid off $200,000 in Student Loans

Learn How Christine Paid off $500,000

Use the Debt Snowball to Create a Payoff Plan

Do Nothing and Save Money with the Paribus App

Thanks To Our Advertisers

Get the tools to start living debt free! Learn more…

Need a title loan in Jacksonville, Florida? Go to 1-800 Loan Mart. Fast and easy applications.

Copyright © 2022 Runway Pro Theme by Viva la Violette