When it comes to your financial life, you basically have two
big options. You can either pay down the debt you’ve acquired in your life, or
you can use your cash toward investments, which might pay off big in the long
run. There are risks involved either way. If you pay off your debt, you’ll be
debt-free, but you’re not going to have much to build a post-retirement life
on. Conversely, if you invest, you risk making a bad investment move and/or
having to use everything you’ve earned to pay off your debts, which defeats the
whole purpose of investing.
What to Do
Obviously, the best case scenario for everyone would be to
be debt-free and to invest regularly, but most people aren’t that fortunate-
they have to choose one or the other. If you’re in the position of having to
choose, then you have a tough decision to make.
To help you make it, take a look at what it would cost you,
after-taxes, to pay off your debts versus what you would get, after taxes, if
all of your investments turned out according to plan.
Whichever option is going to give you the most money to work
with, while still benefiting you in the long run, is likely going to be your
best choice. However, do keep in mind that there are risks no matter what you
do, and you need to think about these risks when making decisions.
Assessing Risk
Before you make any big decisions consider the following
factors related to risk:
l Your
age: Are you too close to retirement to recover if something goes wrong?
l Your
income: Can you pay off your debts/make that investment and still live
comfortably?
l Taxes:
How are your taxes looking? Are you going to get a nice windfall this year or
lose money?
As you can see, there’s a lot to think about whenever you’re
considering any big financial move. Don’t make the choice all on your own
though. Sit down with a financial advisor to talk about your current financial
situation, what you want in the future, and how best to reach your goals. A
professional can help you make sense of everything and help you to make the
right decisions. With enough time and effort, the two of you could even get you
to a place where you can both invest and pay off debts at the same time, which
would be ideal.
No comments:
Post a Comment