Investing
Invest in Your Debt
Jeffrey Strain
03/15/07 - 12:11 PM EDT
Where is the best place to invest your hard-earned money? It's a
question that a lot of people spend a lot of time
investigating. For many, however, the answer is right in front of
them.
When looking at investments, many people disregard one of the best
and easiest places to invest their money: their own debt.
Perhaps people simply don't think about it, or maybe they think it's not as glamorous as investing in stocks (most people will be more than a
bit reluctant to let everyone at the party know they are getting
double-digit returns investing in their own debt). But your credit
card debt should be one of the first places you look when you have
money you're looking to invest.
You can see why this is a superior investment opportunity by simply
taking a look at five general investing questions that you should ask of
every investment you make. When you ask them of investing in your debt, the answers are so incredibly favorable
that you'll find it difficult to find a better place to invest your
money.
- What is the risk? While almost all investing entails some form of risk, especially when you are referring to investments with double-digit returns, investing in your own debt is an exception to this rule. There is absolutely no risk involved when you put money toward your own debt. Once you pay money toward your debt, it disappears, and you save whatever interest you were paying on it.
- What type of return can you expect? Unlike most investments that can yield high returns, there is no guesswork when it comes to your investment return. You know exactly what the return on your investment will be -- whatever interest rate you are paying on your credit cards. For most people, that is a double-digit figure and can be as high as 30%.
- What type of tax implications are there? With most investments, you will be required to pay taxes on any gains you make. Most people are happy if the investment has some type of tax deduction associated with it. When you invest in your own debt, you are getting a return that is 100% tax free. There are no taxes of any kind to pay.
- What type of fees are there? Most of the time when you make an investment, there are fees associated with it that can reduce your overall return. When you invest in your debt, however, there are no fees to pay. The amount that you save is 100% yours.
- How long until you receive your return? Because many investments fluctuate quite a bit in the short term, you often need to consider an investment to be long term in order to achieve the expected return. This is not the case with your debt. The instant that you pay money toward it, you receive that percentage return.