"Invest" in paying down debt, for high "returns"

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If you are paying high interest rates on debt, beyond what you stand to earn on your investments, you might come out ahead by redirecting those investment dollars towards debt reduction. Consider that if you are paying 20% a year on your credit card balance, but earning 5-10% in the stock market, you are spending more than you are earning. But think twice about cashing out a retirement fund which carriers additional penalties, and consider capital gains taxes which will be an immediate tax hit but one you will eventually pay anyway. Consult a financial advisor.

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User Comments

posted by hgs13 (Contributor | 120 Points) on 03-22-2010 04:53 PM
Seriously I can't understand when people do this, and I have heard this exact thing: they are carrying credit card debt and only paying the minimum, yet trying to score a good return in the market or elsewhere. Use the money to pay down debt first and dig out of that hole.
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