Should you pay off debt, save or invest?
This is a question people often find difficult to answer.
Recently, I was at a friend’s house party and one of my best pals and I got talking about debt, specifically mortgage debt. We were discussing whether he should put a lump sum toward paying off mortgage debt attached to an investment property or use his money for something else. The question was particularly apt as the value on this house had depreciated by c.40% over 2 years and was now in substantial negative equity.
Putting in Good Money after Bad
My take on it was that it makes no sense putting in good money after bad. If the debt we were talking about was non-mortgage debt (e.g. very high-interest credit card debt) then I’d have said pay it off pronto. But we weren’t. The way I figured it was, since the interest rate he was paying on his house is 4%, if he could get greater than a net 4% return from his investments than he was better off.
Read more about debt and savings in my next post: Paying Off Debt vs. Savings
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Questions to the readers: Would you rather pay your debt off first or invest? Share your opinion and experience in the comments below.
About Keelan Cunningham
Keelan Cunningham is an entrepreneur, multiple business owner, author, and personal finance/wealth building specialist. Keelan’s passion is helping people improve their business acumen and personal wealth creation strategies, so they can lead a truly wealthy life in all aspects and with any luck similarly transform the lives of others.
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