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? man | Now I got 30k debt to clear. If my earning is 5k per month, will u choose to invest or CLEAR debt asap? |
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Olivia
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Interest Rates are Rising and the economy is slowing.
We could also have high inflation soon with energy prices rising.
I would clear the debt
unless you are shorting the market or thinking about buying long term put options. (never buy any options with less then 6 months exp.) |
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agentdenim
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Depends on the debt, the rates you're paying to clear it, and your payments. I'm in a similar boat. My focus is currently on clearing the high-interest debt. For instance, if you have $8,000 on a credit card that's sitting at a promotional rate of 0% for 6 months, and you have $15K in student loan debt at between 3 to 5% then pay minimums on the credit card, and send extra to your student loans. If your credit card is at 10.4% or worse, it's a GREAT idea to pay it down as fast as possible. Don't make minimum payments, always send as much as you can to the highest-rate debt to get it paid down. Don't forget, student loan interest and mortgage interest are tax deductable so they're better debt to have than high-interest credit card debt. Another strategy is to find a promotional offer for a credit card to transfer a balance for 0% for a certain time, and use that time to bring down other debt. Be careful though, select the card carefully, and only apply for one, since the credit check will go on your credit report, and you don't want too many of those to show in a short time period.
Alternatively, if you're feeling hopeless (you should not in your case, your financial situation is not as bad as some) you can see a credit counselor. However this will also go on your credit report, and is not a good thing to have.
If you are employed, look to see if your employer offers a 403(b) or 401(k) plan. This is the best way to invest. Generally you can contribute up to $15000 a year of pre-tax dollars to a 403 or 401 fund, so let's say you pay $1000 a month into your retirement plan, then your paycheck is actually only about $800 smaller, because the $1000 is pre-tax. This is a smart and safe investment, since it is investing for retirement. If you are self-employed, talk to your accountant about setting up a SEP-IRA account to invest in. Otherwise I would not play the stock markets, they're too volatile, unless you really know what you're doing. At this point, focus on reducing debt and saving/investing for retirement. When you're more financially solvent you can explore investing for the short -term return. |
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goose1077
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Put your money wherever the highest return is. If you hare paying 5% on your debt and can invest at 10% then invest. On the other hand if you are paying 29% on your debt and can invest at 10% then pay down the debt. You must also consider the risk of the investment. Only you can determine how risk tolerant/adverse you are. The longer the term the lower the risk is a good rule of thumb. |
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JasonLee
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I think it depends on what type of debt you have and your risk profile. Credit card debt depletes any money that you have, whilst HDB mortgage is a 'good' debt. If you are a high risk-taker then you probably don't mind the debt and won't lose sleep over it. Also you need to see if there is any penalty for early clearing of your debt. But you must either clear the debt or investment the $30k that you have now otherwise you'll lose money. Investing is always med-long term (>5 years) and you should expect 10-12% returns on equities. In any situation you should have at least 12 months of salary (or expenses) saved up in case you lose your job. |
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GN
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I would do a litte of both. Get debt down as quick as possible but also save some. |
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Nadie0822
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I would clear dept first. Get your finances undercontrol. It will be easier to enjoy your life, with out haveing dept in the back of your mind. You'll sleep better too! |
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dave a
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i would clear the debit first |
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kapp4309
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Depends upon the debt, interest rates etc.. Personally I would always make the debt go away. You never know when you could need every penny. Make the debt go away, pay off the highest interest stuff first and then once out of debt dump every spare cent into savings.
Just my humble opinion.
Kapp |
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homeschoolmom
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First, have an emergency plan - $1000 in savings for any unforeseen financial crises.
Then, get rid of the debt. Any earnings you make on your investments will be whitled away by the interest on the debt. For example, if the debt interest is 7% and you earn 10% on the investment, your REAL earnings are only 3% which doesn't even beat inflation (which runs around 4-5% annually), so you're still losing money.
Just think how nice it will feel to know you are debt free! And then, all that money is YOURS! Trying to do both (pay off debt AND invest) is just plain wrong - it will prolong the time you take to pay off the debt (higher interest) and decrease the time you have maximum investing (longer time = higher returns). The ONLY exception to this is a 401(k) with an employer match - even if they only match 50 cents on the dollar, that's still a 50% return on investment and NO other investment can touch that! Put in up to the company match and no more until you are debt-free. |
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psd1941
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The option should not be single. You must apply both the options of investment as well as clearing the debt. Debt clearance is a must to save your prestige, honour and creditworthiness, so should not miss installments, which may be easy. Since we cannot predict our future, we must have something in hand also to meet with the crisis, if any, we have to face under unforeseen circumstances. So, some money, equivalent to about half of the debt installment must be invested in some good business or income yielding securities. |
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jamesPurple
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I'd clear my debts
... but keep some savings at the bank - no real investments |
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michel_le_logique
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Definitely clear the debt first. The interest rate on the debt is almost always going to be higher than the rate of return on a conservative investment. In particular, start by clearing the highest interest debt (eg. credit cards) first. |
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ill tell u
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well i think you should clear it first |
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Ryan
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You can always put the investing on hold, but you don't wanna put the debt on hold or else you'll screw yourself. |
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Unique
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I recommend you first clear your debt. Investment will always be their but there is no guarantee that the investment you choose will make a profit or a loss. |
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adamkenzo
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Invest in yourself. It is always best to clear debt. You pay tax on earnings and interest on debt...see my point? |
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