- April 9, 2018
- Posted by: fortunatetrader
- Category: Finance 101
Paying your debts VS Investing now
There are two kinds of people:
-People who are disciplined enough to get rid of their debts by putting all the extra money they have towards reimbursing their debt account and then begin to put aside hundreds of dollars in their savings account.
-People like me.
I always have been good at paying debts; regardless if they’re good or bad.
I always have been good at moving money around; a debt to another account.
I was never smart enough to save a lot of money after I got rid of some debts though.
I was always increasing my standards of living and starting up new debts.
There is a common saying that you are always better off paying ALL of your debts off first and starting investing after that.
By doing that you could then have a lot more money on hand to put in an investment account, improving your end result.
We could talk about this topic for hours with a lot of hypothetical discussion with some “yeah, but, what if”.
Like I said there are two types of people.
Personally speaking, that is a strategy that doesn’t work.
I’ve always thought that even if I’m not saving or investing right now I could be putting more 2-5-10 years from now that will even up what I could have been generating if only I’d invested earlier.
Yeah, that could work; but not for me.
And I wasn’t taking into account the power of compounding; well, I was, but not that seriously.
Your $100 invested in a decent investment strategy* could get to $259 in ten years. That’s a 159% profit: decent enough.
Do you remember the article about putting some money aside every week?
Or when you had the luxury to start at 14-15-16-17 years old?
So I got excited a lot of times during the past ten years, making big bucks and thinking out loud that I will pay everything and invest massively after.
I’m still waiting for when the “Invest massively after” time will come.
After a while, that’s how I made it work out.
I was splitting it.
With some money in the Financial Freedom Account and some money in the Long Term Saving & Spending account, that a portion of it resolves to be a “Pay your debt account”.
I had probably $350 locked in for reimbursing credit cards but I was taking $25 a week of that out for the FFA (Financial Freedom Account).
“Yeah, but that’s stupid if you hold on to debts at 12-21.99% interest rate and put your money into a vehicle that generate 8-10%.”
I will talk about the power of compounding in a future article but keep in mind for now that investing vs paying doesn’t even up at the same interest rate.
All this is because of compounding.
So from my personal perspective that’s how I could have been able to start saving money.
Even if I stayed a little bit longer in the liabilities column.
Like I said earlier there are disciplined people and there are people like me.
Which one are you?
What are you going to change to make a difference?
Let us know on the Fortunate Trader Community.
And please share this article if you know a friend that could benefit from it.
– Make It Happen –