Pay down bad debt or save for investing ?

Question

If you had $5000 saved up would you:

Pay down bad debt (such as credit card and student loans)?

Or save it for investing?

I’m curious to know what people would do in this situation that I’m in right now. Although I do want to get out of debt I also want to start investing soon so what do you think I should do?

Brian Koons · Answer

Depending on the interest rate, I would recommend paying down the bad debt first. If the bad/consumer debt is higher than about 2-3% interest, I would recommend paying that down first as inflation rates are generally at about 2%. Additional, for most areas, 5k is generally a fairly small and will be somewhat insignificant in most cases if specifically invested in something like stocks or direct mail marketing. I would utilize the money to buy books, audiobooks, maybe pay to take some "been there done that" investors out to lunch and try and figure out how you can provide mutually beneficial value to them. Also, spend this time saving as much as you can and live as below your means as possible reducing your housing, transit, and food expenses as much as possible. If you commit to learning and reaching out to others in an attempt to provide value, I promise that will be a better investment than 5000 could ever be as a start out amount

Edy Lagares · Answer

@Brian Koons

Appreciate the input @Brian Koons .

Happy investing