In This Article
Are you stuck in a dilemma about whether to pay off your debt or invest for the future? Here’s a helpful discussion on balancing between paying off high-interest debt and investing.
We cover topics like understanding your personal goals, and values, finding ways to make more money, and how to set small goals – all with the aim of helping you make informed financial decisions!
Don’t miss this valuable opportunity – join us as we discuss the options for paying off debt vs investing and take steps towards achieving financial success.
Every Tuesday, Tiffany answers one of your submitted questions. To submit a question for an upcoming episode, visit here: https://www.moneytalkwitht.com/asktiffany
To book a consultation with Tiffany to find out if she can help you, visit https://academy.moneytalkwitht.com/15-minute-consultation
Intro/Outro: You know what it is? That’s right. It’s time to talk money with your money nerd and financial coach. Now tighten those purse strings and open those ears. It’s the Money Talk with Tiff podcast.
Tiffany Grant: Hey, hey, this is another Tiffany’s take episode where I answer your money questions. If you have a question that you want me to answer on the podcast, feel free to go to www.money talk with t.
Com slash ask Tiffany and I will be more than happy to answer for you. So this question came in and someone asked, should I be paying off debt or investing first? And so I wanted to tackle this question because I feel like it’s a common question that comes up, especially when you’re facing mountains of debt, but you’re like, oh my gosh, I wanna get in on investing, so what should I do?
And I do have an answer for you. So, First and foremost, let’s talk about it because debt can come in many different forms. Okay? So, you know, there’s consumer debt, which will look like credit cards and things. There’s, um, you know, real estate debt, which can look like your mortgage. You can have a car payment.
Um, there’s so many different types of debt. So when I’m referring to debt in this, Case, I’m talking about the consumer debt, so I’m talking about the credit cards and stuff. So if you have credit card debt and you are wanting to invest now, ideally you would want to do both at the same time, right? So you wanna be able to pay off your debt and put some in investing because when you are investing it, Ati.
Um, the timeline matters. The timeframe matters, right? Because the longer you have in, the better your chances of your money to grow. Now, this is not investment advice, so I just wanted to make sure that we’re clear there. But when you are investing, you wanna look at your time horizon. The longer you can be in the long, the better it is for you.
Generally speaking, right? So consider that. So for instance, I have clients that have, you know, debt and when we’re looking at their credit card debt, you know, the interest rates are like 20 something percent, sometimes even 30% now. Um, and they’re like, should I be putting money away? You can put very little money in investing.
Like you can start off with. A dollar if you want to, you know, um, so for instance, I have some clients that are doing $25 a month. I have some that are doing $50 every paycheck. You just have to see what your, um, you know, spending plan or budget can support while still paying off your debt. But I highly recommend doing both.
Now, with that being said, You’ll not find in the market, generally speaking, where you can get a return of over 20 something percent. Or 30% like the credit card debt is gonna have, right? So if you pay off your, let’s say your credit card is 25%, you are getting a 25% return on your investment, cuz you don’t have to pay that, um, you know, interest back, right?
And so you’re not gonna find that anywhere in the market. So that’s why I tell people to prioritize their credit card debt, you know, if it’s important to them to prioritize that as the first debt that you knock out. Because I. No market’s gonna give you that at the same time. It’s all about the timeframe and the timeline and the time horizon when it comes to investing in the market.
And so you wanna make sure that you’re putting that in as well. Now, let’s say for instance, you have to make a decision. Let’s say your spending plan on budget does not support doing both. Then if that’s the case, and this is very general advice because I don’t know your personal situation, so take it with a grain of salt.
But if that’s the case, then. I would say six times outta 10, I’m telling people to pay off their debt. And the reason goes back to that return on investment. If the, uh, credit card companies are hitting you upside the head for 20, 30%, um, then yeah, it’s gonna be more beneficial for you to go ahead and pay that debt off.
In some situations, it could be more beneficial to not focus on the debt. And in those situations, let’s say for instance, uh, you have student loans, right? And maybe the student loans are like three, four, 5%, or you have a mortgage, you know, a 30 year, 15 year mortgage, right? Then in those situations, I would prioritize investing.
Now, I say all of this to say you need to focus on whatever’s important to you. So just like my priorities, my goals, my values are not your priorities. Your goals are your values. And so if you’re asking this question, I think that you need to sit down and figure out what is the most important to me is.
You know, having this debt lingering over my head, causing me to lose sleep at night, causing me to stress out. If that’s the case, then absolutely. I. Absolutely prioritize the debt. If you are the type of person where you’re like, well, you know, the debt’s really not that big of a deal for me. You know, I’m okay with carrying a little debt.
Um, you know, it’s not that big of a deal. Then prioritize investing. You know, maybe put a little more in your investing pot versus your debt pot. You know, so it really depends on you as a person and what’s important to you. For me to give you an example, I am very debt averse. I do not like having debt at all.
And so if it’s between debt and something else, I’m almost always gonna go for the debt, right? Um, but that doesn’t mean that I’m not investing as well. I have been in situations where I’m only paying. Or I’m only putting $25 a month in my investments, but I make sure that I’m still investing. You know, nevertheless, because that part is also important to me, it’s not as important as paying off this debt because I know I have time, but it’s still important, and so I wanna work that in as well.
So, A lot of times and what I’ve seen with working with clients, and even in my own situation, it doesn’t have to be an or, it can be an and. So I just wanted to make sure that I put that out there as well. Don’t feel like it has to be debt or investing. It can be debt and investing and you still won’t throw yourself off, you know?
And. And I also wanna add, if you’re like me, where you’re very debt averse, I found ways to make sure that it, it, uh, went into my spending plan. I made, made sure I made some more money doing something, you know, a side hustle or what have you. I made sure that I was able to tackle both at the same time. And so what you have to also realize is that regardless of what your situation is now, Money is abundant, it’s all around you.
It’s really just a matter of you finding where that money is with what your skills, your abilities, your expertise is. And I highly, and a lot of times when I’m working, well, sometimes when I’m working with clients, it’s not really a spending issue, it’s an income issue. They. Are living at their bare, you know, minimum.
So I can’t say, oh, well you need to cut out your lattes. No, no, no, no, no. You like, there’s some cases where you just need to make more money. I’ve been in that situation myself, and I had to have someone else tell me, Tiffany, you don’t make enough. And then it, it took that for me to see, wow, like what is my true worth?
Right? And so, I say that to say if things are important to you, you make the time space. Inability to to get them done. And so if both of these things are important, you can start off small. You don’t have to go big a go home and finance. You don’t have to do that. Don’t put so much pressure on yourself.
Just do things little by little. You are on your own timeline. You’re not on anybody else’s timeline. So don’t look around and say, well, this person’s doing this. Well, this person said I should put $200 a month. I can only afford 25. If it’s 25 due 25. You are the only person that matters in your financial situation, and so don’t feel pressured to do what everybody else does.
Look at your money, look at your values, look at your goals, and figure out what makes sense for you. Okay, so anyway, I’ll stop preaching on this Good Tuesday. But if you have any question, and hopefully that answered your question, so if you have a question that you want me to answer on the podcast, just go to www.moneytalkwitht.com/ask.
Tiffany, if you need ideas on how to make more money, Hit me up. I help people with that type of stuff all the time, whether it’s asking for more money in their career or starting a side hustle or growing their business. I help with a variety of things to help people. Get their money flow going, so just let me know if you need help.
I’m here to help and I also have a wealth of information on the blog and a wealth of information on the podcast. So whatever Can’t you fallen, whether it’s negotiating for more money at your current job, there’s a blog post for that. If it’s starting a new side hustle or starting a business, there’s an episode or a.
Article for that. You know, there’s so much information that I share with you all and if this is something that’s important to you, tap on in, tap on in. I’m here and I’m here to help. But I hope you all have a wonderful rest of your day and. Please. If you have a question that you want me to answer money talk with t.com/ask Tiffany.
Until next time, see you soon. Bye.
Intro/Outro: Thank you for listening, joining and being a part of the Money Talk with Tiff podcast this week. You can check Tip Out every Thursday for a New Money Talk podcast, but if you just can’t wait until next week, you can listen to previous. Podcast episodes at Money Talk with t.com or follow TIFF on all social media platforms at Money Talk with T.
Until next time. Spend wise, by spending less than you make a word to the Moneywise is always sufficient.
In today’s global economy, debt has become a part of most people’s lives. But when it comes to managing debt and investing for the future, it can be tough to find the right balance. Tune in to this episode of [Money Talk With Tiff, titled What Should You Do First: Pay Off Debt OR Invest? as we dive into managing high-interest debt and investing for a more secure financial future.
- Debt comes in various forms such as consumer debt, real estate debt, car payments, etc.
- Focus on personal values, goals, and your time horizon to decide between paying off debt or investing.
- Start small with investing if you have a limited budget, and seek additional income to simultaneously tackle debt and investing.
Understanding Different Types of Debt
When discussing debt, it’s essential to differentiate between various forms. In this episode, Tiffany specifically refers to consumer debt, especially credit card debts.
The Ideal Scenario: Paying Off Debt AND Investing Simultaneously
Ideally, one should focus on paying debts and investing at the same time. Here’s how:
- Prioritize credit card debt – With high-interest rates of 20%-30%, paying off these debts can yield a substantial return on investment.
- Invest depending on your time horizon – Consider your financial goals and how long you have to achieve them.
Making the Choice: Paying Off Debt vs. Investing
In cases where you must choose between the two, Tiffany generally advises to:
- Pay off debt first – Due to the return on investment, it may be more beneficial to clear high-interest debts before investing.
- Invest in specific cases – With low-interest debt such as student loans or mortgages, it may be wiser to prioritize investing for long-term growth.
How to Manage Debt and Investing
- Identify what’s important to you – Consider your values, goals, and debt aversion when creating your financial plan.
- Start small with investing – If you have a limited budget, begin with small, manageable investments while paying off debts.
- Increase your income – Explore side hustles, negotiate for a raise, or launch a business to increase your income and tackle both debt and investing.
- Focus on your personal financial situation – Avoid comparing yourself to others, and make informed decisions based on your situation and goals.
Tiffany offers various resources to help generate more income, negotiate, and create side hustles or businesses. To book a consultation, please visit https://academy.moneytalkwitht.com/15-minute-consultation.