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Should I Invest While Still in Debt?

It is usually not recommended for individuals to invest while they are still in debt. Most likely, the interest they need to pay on the debt is higher than the interest earned on investments. However, this is not always true because in some cases, investing can yield a lot of dividends and prove to be a wise long-term strategy.

Taking your situation into consideration, how wise is it for you to invest your money if you still have some financial obligations left. Well, some factors you need to take particular note of include the amount of consumer debt you have, your 401(k), and the potential in the market. The following blogs below can help you get a better grasp of the relevance of investing while in debt:

Nickel @ FiveCentNickel uploaded a blog post titled “Pay off Debt or Invest?” In essence, the blog talked about investing only if you can reasonably expect your investments to outperform the interest rates you need to pay on your debt. It also pointed out other practical factors you need to consider including the amount of emergency fund you need and your contribution limit.

Matt @ DebtFreeAdventure pointed out that there are certain situations when investing might be a good idea in his post “Should I Invest While Still in Debt?” For example, if you only have low-interest debt such as student loans and mortgage, then it might be a wise strategy to invest some of your money provided you set aside a certain amount for emergency. Secondly, if your employer matches your 401(k) contribution, then adding money to your account will help you get “free money”.

Lazy Man provided commonsense financial advice in his blog post “How to be a Smart Investor in Any Investment Environment”. Taking careful stock of your debt, reevaluating your investment portfolio, and reassessing your financial strategy are all important steps that will keep your finances healthy.

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