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Debt can lead to additional expenses from interest charges and a decrease in credit score.
Plus, it can limit your ability to finance new purchases.
To determine whether you should sell profitable investments to pay off debt, consider the following factors.
Also see five myths about debt that nobody should believe in 2024.
However, it is important to factor in the tax consequences.
When selling profitable investments, you could face capital gains taxes.
Some interest on debt is also tax-deductible.
For example, student loan interest is deductible up to $2,500.
So youll have to also weigh how taxes will ultimately affect your investments and debt.
Their investment portfolio has averaged a 12% return over the past five years.
In this case, paying off the debt early would likely reduce their overall net worth.
Selling stocks to pay your debt could be a big mistake if your debt burden is manageable.
Manageable means the income from your job and portfolio can cover your obligations, eventually paying off your debt.
Any advice prioritizing accelerated debt repayment over the past decade has been costly, Graves said.
But it can be a different story entirely if your debt has become unmanageable.
You cant out-earn such high rates; carrying that debt will erode your wealth over time, he said.
Your Goals
Lastly, consider your overall goals.
Whether to sell investments to pay off debt depends on your financial goals.
For some people, being in debt is really uncomfortable.
But its also important to consider longer-term financial goals, like retirement.
Focusing too much on debt might cause you to underinvest in your retirement.
Lastly, think about what assets make sense or dont make sense to sell, depending on your goals.
In general, avoid selling assets like your home or withdrawing retirement funds.
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