When you are considering whether to pay off debt or invest money there are several factors that make paying off your debt the better option.
The basic premise is that paying off debt reduces risk, improves cash flow and provides a guaranteed return especially when viewed with tax savings.
1: Paying Off Debt Produces a guaranteed return: If you pay off a credit card with 19% interest or even an auto loan with 6% interest you are guaranteed at least a rate of return equal to the yearly interest rate charged by your debt.
In today's environment of financial ruin how many investments can you say produce a 100% guaranteed return of at least 6% and for most people much more.
2: Paying Of Debt Improves Cash flow: What would you do each month with an extra $400-$1000 dollars? It's like getting a part time job but you didn't really.
Most don't realize the effort that goes into paying a debt payment each month.
If that payment simply went away imagine what you wouldn't have to do to meet that obligation.
Keep in mind instead of imagining what other debt you could service or what you could be bought imagine how much more free you would be if you were not bound to that monthly payment.
3: Did anyone say risk and freedom? If you've just freed up $400-$1000 each month in cash flow that lowers the amount of money you really need to survive comfortably.
That makes today's environment of layoff's and jobs that pay well but are not satisfying look much more optional.
If you free your cash flow you now have options you never had before.
Options = Freedom.
4: Paying Off Debt Is Tax Free Investing: As I mentioned before.
Paying off a debt with a 6% interest rate is a guaranteed investment return of 6%.
But the government never gets a penny of your investment because you're simply paying off someone else's investment.
So let's say you have a debt with a 10% interest rate and you pay that off.
You not only get a 10% return but you don't pay another 15 - 25 percent in taxes that you would in most other investments.
So as you can see, paying off debt provides freedom, cash flow and tax free investing if you look at it through the prism of freedom.
The basic premise is that paying off debt reduces risk, improves cash flow and provides a guaranteed return especially when viewed with tax savings.
1: Paying Off Debt Produces a guaranteed return: If you pay off a credit card with 19% interest or even an auto loan with 6% interest you are guaranteed at least a rate of return equal to the yearly interest rate charged by your debt.
In today's environment of financial ruin how many investments can you say produce a 100% guaranteed return of at least 6% and for most people much more.
2: Paying Of Debt Improves Cash flow: What would you do each month with an extra $400-$1000 dollars? It's like getting a part time job but you didn't really.
Most don't realize the effort that goes into paying a debt payment each month.
If that payment simply went away imagine what you wouldn't have to do to meet that obligation.
Keep in mind instead of imagining what other debt you could service or what you could be bought imagine how much more free you would be if you were not bound to that monthly payment.
3: Did anyone say risk and freedom? If you've just freed up $400-$1000 each month in cash flow that lowers the amount of money you really need to survive comfortably.
That makes today's environment of layoff's and jobs that pay well but are not satisfying look much more optional.
If you free your cash flow you now have options you never had before.
Options = Freedom.
4: Paying Off Debt Is Tax Free Investing: As I mentioned before.
Paying off a debt with a 6% interest rate is a guaranteed investment return of 6%.
But the government never gets a penny of your investment because you're simply paying off someone else's investment.
So let's say you have a debt with a 10% interest rate and you pay that off.
You not only get a 10% return but you don't pay another 15 - 25 percent in taxes that you would in most other investments.
So as you can see, paying off debt provides freedom, cash flow and tax free investing if you look at it through the prism of freedom.
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