Should You Pay Off Debt Before Investing?

So often, we are asked whether someone should pay off an outstanding loan or invest. It’s one of the most frequently asked questions we get from clients and listeners alike. And while we offer endless advice on how best to manage your money and the behaviors that can lead to financial independence, this episode is a little different.

In today’s show, we put the rubber to the road and focus on the numbers. We also look at the different types of debt, how some is more punitive than others, and discuss the role it plays in your overall financial success. Yes! Debt is an important tool to help you achieve financial success. 

Tune in to this week’s episode to find out exactly when you should pay off debt and when it is better to invest. 

What You’ll in this Episode

• What the deal is with credit card debt, really (spoiler: we don’t think all credit card debt is bad)
• What the average interest rate and credit card balance is on credit cards in the United States 
• The type of person who SHOULDN’T use credit cards and why
• When it makes sense to prioritize paying off debt ALWAYS
• The two bad trends that are totally destroying your ability to invest in yourself and personal development
• How the cost of education has gone up every year
• How to prioritize paying off student loan debt
• What equity risk premium is and how you can use that knowledge to make really smart financial decisions
• When you should try to be out of all student loan debt
• Why the best way to approach car-buying is to use cash, but what to do if you cain’t pay cash 😉
• If you need a car loan, how long is acceptable to pay it off
• What percentage of your household income you should stay under if you need a car loan
• A nice rule of thumb of whether you should pay cash or finance your next car purchase
• When it’s OK and how to finance a luxury vehicle
• When to prioritize paying off your mortgage debt
• What happens to your financial trajectory if you wait to invest until after you pay off your mortgage
• What happens to your financial trajectory if you invest and pay off your mortgage simultaneously

Resources and Research Cited in this Episode

• Financial Order of Operations: How To Prioritize Your Financial Goals
• Car Depreciation: How Much Value Will a New Car Lose?

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