Can you invest while paying off debt? This can work for some people, but not for others. Let’s talk about when you should or shouldn’t do it!
So before you start, you need to take a look at the type of debt and your interest rates. If you have debt like personal loans and credit card debt, with very high interest rates, that should be your priority. You’ll need to be paying that off aggressively to really make a difference because of the way the interest works.
On the other hand, lower-interest debts like a mortgage or some student loans can work well with an investment strategy where the returns from the investments are earning more than the interest rate of the loans. In some cases, people can use the proceeds from their investments to help pay off those loans.
You also need to take your financial stability into account. If you’re barely able to pay off loans and you have no cushion of emergency funds, if anything happens, you might end up turning back to credit cards or high interest loans. It’s probably best to get your debt under control first so you can start building a small emergency fund and having extra money to put towards investing.
A very important thing to consider is also your stress level. If you are finding that you are unable to cope with the stress of paying off debt AND investing at the same time, you might need to take a step back from investing and focus on paying off your debt. Debt can lead to many people feeling overwhelmed and stressed, so it’s totally normal for people to want to get that dealt with in order for weight to be lifted.
This question is not one size fits all, and everyone is different. Your strategy may change as your debt, income or life changes. It’s important to be flexible and stay informed on the options open to you.
Learn more about managing debt here!