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credit and debt

never say never

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When it comes to debt and investing, it seems to me that there are two camps. Some people think that if you can make more from investing than you are paying out in debt interest, you should put extra money towards investing. On the opposing side, there are the fans of Dave Ramsey (amongst others) who put debt repayment above all other financial goals.

The pf blogosphere sees advocates for both sides of the argument. The Simple Dollar’s recent post on the issue of what he and his wife’s tactics attracted strong comments in favour and against investing whilst in debt. M-network member debt-FREE revolution is a big fan of paying off all debt first whilst jim @ blueprint for financial prosperity says that debt isn’t a bad thing.

Personally, I fall more on the ‘its ok to invest whilst in debt’ group since I am in fact putting my spare money into investments (index funds) rather than paying extra on either my mortgage (5.48%) or student loans (approx 3%). But this isn’t important.

To me, the biggest thing to remember is never say never. It isn’t the case that you should never invest when you have debt - if you understand and are comfortable with the risk, then go ahead. And on the flip side, it also isn’t the case that you should never pay off low interest debt - again, if you understand and are comfortable with the risk, then its a good approach. There are no hard and fast rules that suit every person in every situation, always evaluate each case on its merits bearing in mind that its as much about the personal as the finance.

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