Released: September 15, 2006

Pay off debt or invest?

Source: By Mindy Fetterman, USA Today

Suppose you have $10,000 just lying around. Just suppose. And say you also have $15,000 in debt and a mutual fund account that has about $10,000 in it.

What should you do? Pay off the debt? Or invest more money in your fund account? There are two possible paths to take when making that decision — two different ways to think about your options.

One focuses purely on rate of return: Could you make more money on an investment than your debt costs you? If so, then invest. If not? Then pay off the debt. That simple.

The other path focuses more on how debt vs. saving affects you emotionally: Would you just feel better paying off the debt? Or would you feel better saving more money?

Let’s take a look at the two paths, which actually lead to the same goal: how to make financial decisions that are smart for you.

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