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While reducing your debt may seem like the obvious choice, it may not be right for you.
Ask yourself these three questions to help youdecide whether to pay down debt or invest.
What Kind of Debt Is It?
Aliche said to prioritize high-interest debt like credit cards before investing extra cash.
Diversified investing can earn between 7% and 10% annually, potentially exceeding the cost of cheaper loans.
In general, your credit score improves as your credit history gets older.
Are You Willing To Learn About Investing?
While paying off debt is pretty straightforward, investing requires additional research and discipline.
She said that clearing debt can also be a form of investing because it immediately increases your disposable income.
If investing seems too intimidating or tedious, index investing may be a good place to start.
Do You Prioritize Stability or Future Wealth?
Aliche emphasized that you should evaluate your financial goals before making a decision.
Are you more inclined toward a conservative approach, favoringimmediate financial security?
Or are you willing to take on additional risk in pursuit of greater returns?
Lets say you invested $1,000 right now.
With a 10% annual return, that $1,000 would be worth about $2,600 in 10 years.
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