Financial experts are always of the opinion that you should invest the money you’ve saved such that you can see it grow. Now there are many factors that can actually prevent this from happening and debt would be one of the most prominent examples for it. Now if you’re dealing with debt, be it in any form, even then it’s very much possible for you to save as well as invest.
Importance of investing
It’s true that when it comes to debt elimination, then it’s going to take something on the lines of a loan which would be a long term capital. This is obviously going to rob you of money as well as time. Now, in the long run the time you spend towards paying off your debts would obviously amount to something more than the money you actually pay. This is both in terms of the interest and money you pay to the lender.
You see, the idea is to give your money as much time as you possibly can. This is why it’s essential that you begin a portfolio irrespective of your debt scenario. Okay if not much, then you could definitely start with small investments at least. Well, yes this won’t give you huge returns; but something will come of it. Most importantly, it’s a start! Moreover, the small investments of today are bound to grow big with the passage of time.
Related: How To Invest Little Amounts
Major kinds of debt
There are essentially 3 kinds of debt. You should be aware of them to know where you’re headed and design your investment plan accordingly.
Debt with low interest: This can be anything on the lines of a car loan to a bank loan. Here the interest rates are essentially what’s the prime plus or minus a particular percentage. Hence investing in this kind of debt still entails some performance pressure of sorts.
Debt with high interest: The best example for this would be none other than your credit card. How high the interest would be isn’t always constant or specific, but it’s definitely going to be above the 10 percent mark.
Debt that’s tax deductible: These essentially include the likes of business loans, student loans, investing loans, etc. Here the interest you pay would be returned to you ultimately in the form of tax deductions.
See through a proper plan
Even when in debt, it’s important for you to craft out a traditional portfolio. This should include both high as well as low risk investments. Plus you could add certain fixed income investments. You see a proper plan can actually take you places for that’s going to take care of your debts as well as guarantee certain returns for what you invest. Even if your risk tolerance happens to be rather low, the bulk of the money you invest would still be directed towards your loan payments. In spite of that there’s still going to be a percentage that’ll make it into the market which would ultimately ensure returns for you.
Finally the fact remains that you can very well invest in spite of your debt situation. Now if you personally decide not to, then it’s completely your call. There are benefits involved and quite a few, so it wouldn’t be too wise to overlook them. You’re to benefit for sure.
Related: How To Review Your Financial Plan
About The Author: Stewart Bradley is a contributory writer associated with the Debt Consolidation Care Community and has written several articles for various financial websites. Though he holds his expertise in the Debt industry and has made significant contribution through his writing, he has interest in budgeting, mortgage, investing, bankruptcy, bad credit advice and more.
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