Invest or Pay Debt?
People who’re struggling with financial issues and remaining unpaid debts can be puzzled when having some money in hand. Choosing the right thing between investing and paying off the debt can be very difficult for some of you. Deciding what to do between investing and paying the loan can be very challenging sometimes. You might be thinking should you pay your debt or should you invest to earn more which can be slightly treacherous. Everyone’s situation can be distinguishable, but if you question me, I’ll simply describe to you the given portions of my understanding.
Investment vs Debts: Differences
To understand where you should spend your money in debts or investments, for that you’ll have to understand the difference between investment and debt.
Investment is the money you fund to a company or business to secure your future such as stocks, bonds, mutual funds, and buying shares, which grow in value over time.
Debt is the sum of money someone has taken from another person to satisfy his necessities on the agreement to repay the cash on the assigned time including interest. If the person didn’t pay the amount of money, the interest charges will be added to that person’s balance with time.
The case if you Invest
If you can earn extra cash by investing some of your money is better than paying all your debts at the same time. Because you’ll be left with no money and once again you’ll abide loan. Facing this kind of situation, prioritizing investment over paying debts makes sense.
For example, you’ve taken a legit loan that demands 5% of interest on return, and on the other side, we have an individual firm that accepts money and would provide you 10% on your investment. What makes sense? Obviously, the company that is offering you 10% of the profit. So, in such situations, you should invest. Well, to be honest, Investments aren’t always a good choice. When you invest in a company, you become a shareholder and a partner of that company. Being a partner, you’ll earn if the business is earning successfully, but you’ll lose money too if the business doesn’t work out. Make sure to invest in a company that guarantees to give you a profit.
Remember, Investment isn’t a business for weak-hearted persons. Successful Investors are always ready for the rise and fall of their stocks. You can either conquer the world or lose everything you have. But, if you can tolerate the loss, you’re a more suitable candidate than a person who can’t sleep at night thinking of his money loss and is scared to take the gamble.
The case for paying your Debt
There are some positive points to paying your debt first before investing your money in any kind of business. As we mentioned above, business is not the thing for a person who wants to live a normal life with his family in a small house, 2 kids, one car, a 9-5 office job, and that’s all. If a person can’t bear the burden of loss of money, he should pay his debt first. Because if he didn’t pay his debt and also lost all his money in a stock crash there would be nothing left for him. Additionally, the interest rate would also be rising with the progression of duration.
Another logical reason for prioritizing paying the debts first is that you’ll be free of the chains which are held by someone else’s hands. Further, if you ever faced financial issues, you can also borrow some money from a person. Plus you’ll be living without worrying to pay about other or previous debts because you’ve already been done with them. The more you lessen the load of your loan from your shoulders the more you’ll feel unburdened.
A Chinese saying:
There is a Chinese proverb that states,
”Timely return of a loan makes it easier to borrow a second time”
The third and most important reason is that unpaid debts can bring nightmares in your daylight. A study was published in which it was noted that people who struggle to pay off their debts can be more likely to be seen as unhappy and depressed, as compared to the people who don’t hold any debt-returning responsibilities.
If your debts are making you insecure and uncomfortable, you should pay your debts first. Your mental health and physical health should always be your first precedence. Even if you’re getting an opportunity to earn a fair amount on your investment, and you know that you’ll face mental issues while investing, leave it because your health comes first.
What if you invest and pay the debt at the same time?
Once you reached here, some of you people might be thinking what should I do? Should I make an investment or pay the debt? Well, why do one when you can do both at the same time? Yes, you can do both, and sometimes you should do both to stand 2x more profitable. For example, you have taken some money from a friend, and now the time has come that he wants his money back because of some emergency. It’s the last week of the month and you’ve only been left with a few hundred dollars. Now, you’ll be paying the dollars to him within the next 24 hours, plus then you’ll be left with none. In such a situation, the backup in the form of investment can work out for your financial issues. To secure your tomorrow, investment can be the best possible way in the market.
If you don’t know the basics of investment, read this: Investment advice for starters
Everyone wants to be in a situation where they are surrounded by a lot of money. However, every individual human has their own different mindset from one other. It’s up to you whether you want to invest or pay your debt as per your current situation. But, the most important thing is to use your money in a better way than spending it on inappropriate things. Whether you should use your money to pay the debt or to invest for your future income. Both decisions are equally productive and useful. I am sure you’ll make the right decision.