Hello;
We receive this question a fair bit – Do you invest your money and slowly pay down your credit card debt or focus entirely on reducing your credit card debt?
Think of this as another way, every dollar you own in credit card balances is a dollar you are not investing. Let’s say you are in a 31% average tax bracket. If you are paying 19.99% in non-deductible loan interest (credit card), you will need to earn 28.97% from a fully taxable mutual fund, just to match the return from paying down the credit card balance. To put it another way, you need your investment to return 28.97% before tax in order to provide for this payment. Where are you going to get this kind of rate of return?
The lesson learned here is to pay-off non-deductible debt as quickly as possible. With every dollar of debt you eliminate, you will free up future funds for saving and investing in vehicles that can appreciate, grow and earn income over time. Also, as you chip away at the debt, you’ll likely feel a sense of empowerment.
If you like further information, please let us know.
Sincerely,
Mike Busby (22-Sep-2020)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANCIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH FUNDEX INVESTMENTS INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF FUNDEX. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILITY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF THE PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NO CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS PROVIDED THROUGH FUNDEX INVESTMENTS INC.
