This is one of the great “to the point” statements about investing in a Business Insider article that Michael James sent me. Debt is the best investment to put extra money in, and it usually pays back well, too.
The clarity of that one statement is astonishing to me, it cuts through all the garbage and gets to the actual point. So the real quote is #35 on the list:
“If you have credit card debt and are considering investing in anything, stop. You will never beat 30% annual interest.”
Read more if you wish.
Is that just so stunningly clear that it can’t be ignored? It is for me.
I can hear the nay-sayers with their commentaries already:
- No Credit Card charges 30% right now. Most only charge 20% or less. So what? That means you are earning a little less when you invest in paying the debt down (and it should pay down faster).
- The Stock Market is paying over 8% a year. You’d be a fool not to take advantage of it. Pardon my arithmetic, but 8%, 10% or even 18% is not 20%, now is it?
- If you don’t put money away now, it won’t have time to grow. Conversely if you pay down debt now, it won’t have time to grow, now will it?
- You always need an emergency fund, why not invest it? Wow, that’s astounding, an Emergency fund is to be there if you need it, investing it is just not a good idea (IMHO). Why not “invest” that money in having no debt, so when the Emergency happens, you aren’t worrying about paying off debt simultaneously?
Why don’t investment professionals espouse paying down debt first? I have heard some actually do (or at least send people away), but honestly, there is no money for an investment professional telling anyone to pay down debt (unless they get paid by the visit).
I await the comments of how I am being simple (or worse, obtuse), have at it commenters.