Should you invest money while carrying large amounts of debt?
How do you manage debt while investing? Watch this quick video to find out! As always, thank you for supporting the channel!! Don’t forget to drop a like & leave your thoughts in the comment section!
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Haven’t seen this video yet cause I’m in school but in my experience I’d pay debt off first. If your investment goes wrong you’ll just be digging a hole.
Exactly!!
There’s a quantitative argument, definitely pay off that high-rate debt before investing but I feel like there’s also an argument to be made that investing even before debt-free (even if it’s just $50 a month) will help build that habit of saving. The fact is that spending and shopping is too much fun and many people will never be completely debt-free…but everyone (God willing) will need something for retirement eventually.
Right on the money, Joseph! Investing is not something that can be learned overnight, it’s important to learn the ropes for a while anyway!
You read my mind….Thank you!!!! #100
Thanks for checking out the video, Amanda!!!
*There really couldn’t be one answer to this question for ALL people. Some people will have debt with a fixed rate of 1.8% (for example) and some people will have a debt with a inflation-adjusted rated, etc..But if you have a debt with a fixed rate of 2% and you’re able to generate 20% returns off the stock market (for example) why would you even think about it?*
*On the other hand if you have a fixed rate of 14% and you are just starting in the stock market and you don’t think you’d be able to return a greater percentage then you could probably pay off debt first.*
As I said, no “one-size-fits-all” answer is possible.
You’re right, there’s no universal answer to every situation, that’s why he is advising rules of thumb. He addressed your hypothetical scenario, using an example of a student loan with a rate of 2-3%, saying that you could stand to have that debt for a while, without any real loss, while investing
Definitely not one size fits all
Exactly!
Great advice ! Debt is less unpredictable vs investments which is more unpredictable. Pay of your high interest debt first then focus on investing.
Thanks! Congrats on your channel!
Hey everyone! Thanks for checking out the video! Don’t forget to drop a like and share your thoughts in the comment section!
Nate O’Brien You look like my friend jai van der Kran. Are you sure your not related?
hmm I am not familiar with that person. Who knows, it’s a small world!
Nate O’Brien Have a look on Facebook, he looks exactly like you!!!
Debt and leverage introduce risk.
Nate, what field of work are you in? Enjoy the videos man.
I’ve been in this situation for about two years now, and this video was very helpful. I currently am very slowly paying down high interest credit debt (Δ100/mo after minimum payments and interest) on a large principal, while investing about 10% of my income. Perhaps it’s time for me to reevaluate my plan, but I’ve been happy with it because investing has allowed me to make plans in the future. Do you think that net worth should play a factor in this situation? I think once I reach a certain net worth benchmark, it will make more sense for me to evaluate what amount of debt will hurt my goals for future wealth, especially because I may have a greater income, more experience, and more assets at that point
Hey Nate, what do you think about the US stocks dropping recently? Anything to be worried about you think?
Heart = Pay off debt
Head = Leave the debt and invest the rest at a greater return than what the debt costs.
I prefer being debt free, because if anything unexpected happens in life, i know that I’m not burdened financially.
Exactly!
*Why not both?* 👏🏿 👏🏿 👏🏿
Lester Diaz dumb
Welcome back nate I love your videos
Great video Nate, an excellent point. Using the interest on your investments as a sole strategy to pay of debt, even at a low-interest rate, is not wise.
I prefer paying off debt first
This was a good nuanced video without diving too deep into the details. Pulling back the reins is tough to do when answering this question. Once you start diving into the types of debt and types of investments then it turns into a monster of conversation involving detailed individual topics. Good job on keeping it dialed back and using simple rules for prioritization.
Everyone has there own route. Most do a little bit of both. For sure pay off all the bad debt first.
Debt and leverage introduce Risk!
Great video Nate, always depending on the interest rate.
For me, it’s (generally) pay off debt first. With debt, you are throwing away money every week (in paid interest), whereas with investing you’re not losing anything unless you sell while down.
You will be charged interest on your debt. So unless making more than what you’re paying out pay off the debt.
I’m glad you discussed this subject. I been cracking my brain over it for the past year. I asked on Phil Townes’ channel the same question and I don’t think I got much of a reply. You gave some good insight and some confidence in my problem solving that will help me sleep at night. Till the next video.
Love it
We all would like to invest in a higher yielding investment but I agree paying off debt is the safer and better way to go about it to be debt free 🙂
Hi Nate! I was hoping you could make a in depth video on how to make money online for twelve year olds. Also one on how you make your videos.
If you can only do one,
Look at the percentage, if the debt is higher then the profit then pay the debt. If the profit percentage is higher, invest
One can do both . But focus on the debt with high interest. And the ones with low interest you can pay it off while investing
Watching your video after a few days…. first part about not having debt is great since investing is too much risky now a days . Nice video Nate .thank you
Thanks for always watching the videos, Ali!
You could use debt to you advantage too. I have a 0% intro rate credit card which I use to even out my spending from month to month to make my expenses more predictable and buy everything in bulk which saves more money as well. The trick is not to let it get out of hand though!
True.. most of my credit cards gave me 0% APR for the first year.. very useful
If you focus in on your budget most people can pay off all their debt (besides their home) within 1-3yrs. Then invest after your debt is paid off. It’s a blip in retrospect of your entire lifetime.
If you have an opportunity in sight, invest and use the money to earn from your investment to pay off debt. If you have no oppertunites in sight, just pay off the ****ing debt.
I’m still paying off debt from when I bought my first bottle of Voss Water. JK! Excellent information Nate! 100K is around the corner!
I bought Voss once. Only cried for 20 minutes afterwards
One can never go wrong with paying down debt. No matter the interest rate, debt is debt. Unless one is using the debt as a leverage for something bigger, no debt is good.
personally, i think its important for people to stay patient and disciplined and pay off debt first before investing. Being debt free adds synergy and confidence to one’s financial strides in the future. Sure it is boring and can take a long time, but having that peace of mind where no one can exercise leverage against you is a really powerful feeling by itself and it just relieves all the stress in the life.
i love your videos.. I’m a photographer as well… You should white balance your videos.. Will make allllll the difference! Thank you for putting out the positive information that our generation so desperately needs! you rock
If you’re young, the S&P 500 if you give it a 30 year window will average no less than 7.5% and as high as 14%. Most of the time it’s between 8-11% per year if you pick 30 year windows. So someone who is in their 20’s should absolutely get the ball rolling. Even at a 7% interest rate, I’d bet on the market over the interest rate savings. The reason why is when you pay it off early, you’re not saving 7%. The investment you get all of that 7% if you want to use a conservative number. If you pay down debt early even drastically before all is due, you might still pay 3% which is only a savings of 4%. I agree though there has to be a happy medium. I have a boat loan and at some point I might buy a house or buy a new car. I need to make sure I am in good financial straights in order to get approved for those loans. At the same time I can’t blow off my retirement. I could make it so I’m so rich that I would not have to sell any stock and just take dividends when I’m older. But that could squeeze me 10-15 years down the road.
Great topic
Thanks!
@Nate O’Brien nice response time man I like that lol I wish Graham Stephan did that too😅😂 I’m interested in his opinions on this too. But yeah I have debt and also invest some too in dividends and rarely on others that just might go up.
Yeah I have a few student loans at 6.8% that I want to pay off before investing. Still have 401K at least.