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Invest in Your Debt

  • 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.

With the huge advantages associated with paying off your credit card debt, there are few better places to put your money. If you are carrying credit card debt that has interest rates in double figures, paying down this debt should be a priority before considering most other investments.

Once you have finished paying off your credit card debt, you should look at all the other debts you have, such as student loans, your car loan and your mortgage, to see how these compare with other investments you are considering. By not bypassing your own debt when deciding where to place investment money, you may get much better returns than you ever imagined.

Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and get their finances in order. He currently owns and runs SavingAdvice.com.
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