INVEST OR PAY OFF DEBT? - How You Can Do Both
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- เผยแพร่เมื่อ 28 ก.ย. 2024
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Our Rich Journey - INVEST OR PAY OFF DEBT? - How You Can Do Both: Ever wonder if you should pay off debt or invest? That's what this video is all about! In this video, we break debt into two categories and discuss when you might want to consider investing versus paying off debt (and vice versa!) and when it makes sense to do both!
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I really appreciate how you included loans from family and friends and tax debt! Most videos wouldn’t even include those and the damage to your relationships really needs to be considered. Thanks for a very balanced POV on this topic!
lanbao2010 - Thank you for commenting on the video! We love that you found it unique!!! :)
Do you have videos for Late starters? 40 or 50 year old? Getting parents to start? Getting family members to invest?
Glad you asked! We created this video: th-cam.com/video/X813QisNkJEB/w-d-xo.htmlut will be developing one for startingin your 30s and 40s. This was another video for starting young that is applicable at all ages too: th-cam.com/video/xurFcAFhyf8T/w-d-xo.htmlhank you!
The psychology is so important to acknowledge. Doing what motivates us has helped us to achieve our goals.
Exactly! Thank you for sharing!
I struggle with this soooo much! I go back and forth from year to year on this. We have $110,000 in assets and a $30,000 mortgage with about a 4% interest rate. I cannot decide to pay it off or not. We save about $30,000 in cash every year. We have about 8 years left to reach our goal. This $30,000 is our only debt. The average rate of return is 9%.
I love y’all! Specifically I love your contribution to the world. The knowledge and wisdom you willingly give, the genuine excitement in your videos and the effort you put into making the information clear, organized and understandable. Thank you so much!
WOW! That is so kind of you to say! Thank you so much!!!
I really needed to hear this. Thank you!!!
My home loan interest is 11.45% in South Africa. We pay interest from the first to the last payment. I think its like a 50/50 ratio. My return on investments were much much lower. So for me im going to pay off my home first. Thank you!!
That's a very high interest rate.
Continuing to at least get your match while paying Down debt is a concept dave ramsey doesn't push. He overlooks the power of compound interest working in your favor. Love the video
I do both. The only debt we have is student loan and loan on our appartment. Our student loan only has 0.15% interest, so we put more effort into our appartment loan which has a 1.28% interest. We also have a savings account and invest in stocks and bonds. We have little money coming in due to me being on sick leave, so it's not the way it could be.
Joyful Living - even though you have little money coming in, it's fantastic that you're able to invest and pay off debt! It's not an easy thing to do - especially when you have little money coming in. Congratulations!!!
Did I read that correctly?? How do you have student loans with such a low interest?? My federal loans are all 5% or more!! :(
@@batshevabecher5848 You read it correctly. I live in Sweden :)
Thank you for this video! I have been going back and forth on whether to pay off my debt or invest and this video helped reassure that I made the right decision.
Glad it was helpful!
Thank you for your take on this hotly debated subject! As usual, your information was well thought out and comprehensive. Thank you for teaching us! You guys have me constantly on the edge of my seat waiting for the next episode.
CmaxEnergi - You wrote such a cool comment - we LOVE it!!! Thank you so much for your kind words. You are really too kind!!!! Thank you so much for your support!!! :)
Thank you! It’s a blessing to have you. You have cleared a lot questions.
yvette Guerrero - LOVE that you found the video useful!!!! Thanks so much for watching!!! :)
Thank you for this informative video. I am at the early stage of 30yo mortgage payment (first 5 yrs). Your video really put me into ease abt investing, saving while paying back a little bit more each month if has extra dollar. When I think of investing/saving and mortgage- I also think about inflation and how that could impact the sum of total payment.
Congratulations on purchasing a home!!! So happy you're at ease with your investments - LOVE that you are saving and investing!!!
I know you went to law school. I am considering going but so scared of the student loans. I would love to hear your thoughts on student loans, going to law school, and financials during grad school. Thank you for all you do!
I wouldn't touch a student loan with a 10 foot pole. My friend is a pharmacist and has over $200k in student loan debt. He stays unhappy and broke.
Finally! Someone outside of Ramsey that I can agree on about debt. Personally IMO, all debt is bad debt! I can see how some people like taking a mortgage on an investment property and I'm OK with that as long as the returns are higher than the interest gained.
JAYMATIK - Agreed!!!! Thanks for watching!!! :)
JAYMATIK agreed. I’ve never understood how owing someone could be classified as “good” - doesn’t make sense and is just a bunch of suggestive marketing made up to make us feel better about the risks of debt.
you guys rock! thank you for paving the way.
Joe Velasquez - What?! YOU rock - for writing such an awesome comment! LOL! Thanks so much!!! :)
Some great advice in there.
Please consider using a different metric than average returns over 100 years. Consider using annualized returns for a rolling window of a specific time horizon. It's a more realistic metric.
Thank you and thanks for the advice :-)
Thanks for the video. Started the investment because of your video and I learned a lot.
WOW! Thank you! Congrats on taking action to build wealth. We are so happy to be on the journey with you :-)
Christina has a great accent - sounds midwestern! Great video as always! 🤗🤗
This is fantastic! Utilising on the skills you already have or can learn & knowing how to earn extra money is financial changing advise. Learnt so much on how you can assess so many online platforms. Thank you both so much.
Something else to consider on investment vs debt is your tax bracket when contributing to 401k/IRA after hitting employer match. Example, if you are in a 22% tax bracket now while you are working and money you can put in now tax deferred might have a tax rate of 12% or less after FIRE can increase your rate of return in an investment account above just the 7-9% the market may or may not get. Your tax bracket now vs your estimated tax bracket in retirement should absolutely be considered when weighing investment on tax deferred account vs paying debt now.
Excellent point! Thank you for adding to the discussion :-)
Thanks for this informative POV. Really enjoy and appreciate your perspective. Great job on your channel 👍👏
nan Anouk - Thank you! That is so kind! We're so glad that you like the channel! And we love the comment!!! :)
Although you may come out ahead on a long term investment vs paying off your mortgage quickly, I would say it is generally more prudent to pay off the mortgage first as that will make investing more enjoyable and less stressful. My 15 year mortgage is 3.125% and I have saved almost enough to pay it off 9 years early. If we were currently close to the bottom of the stock market cycle instead of the top, I would be tempted to go all on the market with that cash.
Jason - Yes! For some people, paying off debt (no matter how small or how low the interest rate) is better psychologically. If debt creates stress - definitely a great idea to eliminate the stress by focusing on paying off the debt! Thanks for watching and don't forget to subscribe! :)
I love this video because this is me! I am 70 percent toward My FIRE number. I have the cash to pay off my mortgage. However I am 51 and want to reach FIRE by 54. Psychology plays a part. I am excited to pay off my mortgage as I will need less each month without it. However, investing that cash for three years will increase my net worth! I appreciate your channel. I have learned more from your videos than I did in four years in college as a business major!
When you purchased your first home , how did you know how much to spend on it other than what the banks tell you you can afford ?
We first made sure we could still max out our retirement accounts (401K and IRAs) and save for other goals. Then we looked at our monthly expenses.. What was left was what we could spend on the house. We'll have to do video to detail this in the future.
@@OurRichJourney awesome, yes do s video on this, I believe is important
You can do both I do and it works my return are consistent and my
Total returns yearly can handle my interest. There is no bad or good debt debt is debt it’s the reason you took out the debt and how you use it. I love debt and I leverage it. Invest first then debt and pay debt base on the schedule and or throw extra money on the debt but always invest while you paying debt. ❤️ you all videos
Frame of Mind - Thanks for sharing! Totally agree that people should look at the reason they have debt. Is it because they overspend on non-essential items and put everything on their credit card? Is it because they have a mortgage and are leveraging it to finance another rental property? If it's the former, more lifestyle changes probably need to take place! Thanks for watching and commenting! :)
Did you retire at the age of 39 like this couple did?
Just found y’all and appreciate your content! If our only “bad debt” is mortgage, should we keep emergency fund at 1 month and throw the other savings on the house or was that only for the “worst debt”?
Great videos, awesome advice on all the videos I've seen so far.
Great Video guys
Thank you!!! :)
The best method is to save up some money first, life happens then budget your salary accordingly, why this question is hard to answer is because everyone’s life and circumstances is different, so planning for life is the key.
Pay extra on the debt only when you have
Saved a little
Met all your payments and have extra cash 👍🏾
Thank you so much ❤️ for all of this fantastic information.
I'm a huge fan of your channel!!!.. Thanks for creating awesome content! However, I've been dying to know how old you both are? I'm only asking because your wisdom seems far beyond your apparent ages... Also, I'm wondering at what age you became so financially aware/savy?
Thank you for the kind words. I started investing when I was 18 and Christina when she was in her early 20s. We'll have to keep you guessing on our ages :-)
If you’re putting in 50k and taking out 50k after 5 years, how do you separate the gains from investing because you can’t touch the interest made in the Roth?? Right?
Hi guys! Love your videos, I’m a new subscriber and I wanted to know, what are your views on debt consolidation loans and if you can do a video on it? Appreciate you guys and love that you guys retired at 40! You guys are an inspiration
Very solid advice. 👌🏽
Thank you so much! So, if I am at the beginning of my mortgage (10 months in) is it worth it to pay it "aggressively" so that I pay it faster and don't have to pay as much interest? Thanks!
Good advise
Great informative video. I’m thinking that Paying Yourself First in this context would be for me to put away at least some amount into my IRA that’s less than 10%. At least I will lower my tax bill. Which I categorize under the worst debt column.
I
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Good Morning :) Thanks for sharing
T K - Good morning over there!!! :)
@@OurRichJourney I just want you guys to know I thank GOD for you and always look forward to learning from your video's because you all share information in a very simplistic way that I can understand. Yeeeah I am excited to Learn :D
Money and family. You guys could’ve done a whole video just on that.
You're right Keith! :) Thanks for all your comments on our videos! :)
Thank you!
U guys should meet with Dave Ramsey. Love the content!
is Vanguard S P 500 fund too high to buy now?
Hello two most beautiful people. I came across your videos about a month ago. I am enjoying every bit of it. Also the videos has helped me make so changes in my life. God has been good to us in themes of my 21 daughter never took a loan in her 4 years in college. She is about to leave college. I am trying to help her by watching your videos to help her. My question is where should sge
Should she start and what to invest in. Thank you so much for both your time and your knowledge,🙏
What about a debt that is interest free for a period of time (and that you know will be paid off before interest is applied)?
According to this video, it would make sense to invest while paying off debt of course. According to Ramsey, no.
I am on my 2 year on my mortgage loan and I have some money sitting on bank. Do I need to invest and pay off say like 10k on my mortgage payment?...
Hi! I love your videos so much! I have a specific question about a friend of mine that is a lot of debt. She is a single mother to twins. She is at the beginning of paying off a mortgage, and has car payments as well as credit card debt and no savings. After watching this video it seems like the best plan would be for her to build a one month emergency fund, tackle the credit card debt, then start investing small amounts while paying off the car rather than putting more money to the house? Thanks :) Any advice for the best broker for this kind of person would be appreciated! I was thinking Fidelity for the kids for investing in index funds or Ally for her 401k?
great suggestions!
I love your channel thanks
Here guys, love the videos. I have a question.. I have student loans which sum up to about 20000. It stated that after 30 years it gets wiped.. but! If the UK GOV changes in anyways that means I'll have to pay it back after 30yrs then I will have to pay it back. I am on my work break at the moment, but if you respond I can supply more details
So useful and want to learn your way more. Cool and brilliant couple!!^^
Thank you so much your youtube updates.
I wish I can be like you guys in someday ;)))
Amon is not wearing a tshirt?? I’m confused! 😆
If my only debt is student loans, would that mean I’m in a similar position as someone who is at the beginning of their mortgage?
It depends because at the end of a mortgage (once it's paid off), the owner has something tangible - an asset that they could sell if they wanted to. That's different than a student loan. But, at the same time, there are loan forgiveness programs for certain professions/public sector jobs AND student loans could be less (or more) than certain mortgages. :)
Thank you
I currently have 3 majors debts
Car note: 4200.00
Credit cards: 6,000.00
Student loan: 5500.00
I am expecting 10,000.00 should I pay off the credit and car note in one shot?
If i were you I'd pay off credit cards and student loans first.
@@ciarraflannagan9424 - Agreed.
Ok, I have $30,000 in credit card debt. Would it make ANY sense to take a loan from my 401K to pay this off and stop the high interest rates? I am also wondering if I should declare bankruptcy to try to eliminate that debt.
Bust your butt pay off debt dont take anything out you will be fined heavily..do side jobs. Sell stuff pay it off..
Dave Ramsey!!!
Dean Marko 😊
@@OurRichJourney question, what are your jobs in Japan? and how much are you guys are earning?
@@2legofreak They don't leave in Japan. They leave in Portugal!
Question fro you: I don't have a home (or condo) yet, but I really would like to buy one. All my worst debts are gone, I only have bad debts with students loans (about 2% interests) for about 8000$. Should I go and ask for a mortgage now or should I pay back my bad debt first? P.S. I also have money on the side for a month of no salary.
Thank you!
I think it's really a matter of how you feel holding the debt. $8K in student debt at 2% isn't bad at all. Not sure how much you make or how long it would take you to pay that off - but that's something to keep in mind. Would you prefer to pay it off and get rid of the debt or would you be okay with holding onto the debt longer? Also, take into account the debt that you have and how it will impact the amount you can borrow for a mortgage. Again, not sure how much you make, but I'm guessing the debt impact wouldn't be huge. Happy FIRE journey!
HELP people
👍🏻
Koh Lee - I would notice your thumbs-up anywhere!!!! Thanks so much for the continuous support!!! :)
After I left the Air Force, I had an overpayment that I didn't know about for several years. The $3,000 overpayment turned into about $10,000 by the time I found out and committed to paying it. I paid off about a 1/4 up front and the rest over 6 months. When I finished paying it off, I realized that I could easily continue putting the money I used to pay the debt into investments. That's what I've been doing since then and tightened up on my budget and spending as well. The reason I picked to pay off the debt was an Air Force overpayment was considered Government debt. Not only did it hurt my credit score but it hurt me for applying to Government jobs.
Awesome! Thank you for sharing why paying off debt is so powerful. And thank you for your service!
I JUST WANT MY DEBT GONE! lol..doing what I can to get this off my name and build my credit back up
I’m doing a little of both! Can’t leave that free money on the table with my 403b match. BUT once I get this high interest debt gone, I’m gonna BLOW UP my saving and investing!!!! And I can’t WAIT to vlog the journey- so much debt payoff on TH-cam, but not a whole lot about both!🔥🔥🔥🔥🔥
That is awesome!!! Such a great opportunity to make huge gains with savings and investing once your high interest debt is paid off! It's like all the money you would normally have used to pay off the debt could then start going towards investments. And if you are doing the match?! - Savings/investing explosion!!! :)
Money and family don't mix. I never lend money to friends or family. Instead if they ask for a certain amount of money and they say they will pay it back. I respond by saying that I can gift you an amount and you don't need to pay me back. That way I don't give up money that I saved for something else and I don't get upset when they never pay me back which always happens when you lends money to friends and family
Jose Alaniz - It's like a test without the test! :) At the end of the day, it's important to do what makes you happy! :)
Q*bert - Totally agree with what you're saying, but I also understand the struggle: when you know what's best for people but they refuse to listen to you or learn. I think that's where the evaluation of happiness and financial independence come into play and assessing whether you're (not "you" specifically) being held back by certain types of people. Thanks for watching! :)
You're right , it's been 5yrs and I till owe my brother and his wife $4000.
@@ewlinitis You need to pay that money back. They don't have it any more than you do, and it's theirs. Pay them back
@@tamaralaird3389 yeah I'm trying but they are cool about it and understand my situation. They will get it for sure
I divide my pay or check in three ways. (Savings, paying off debt and investing)
Do you snowball or avalanche your debt? I pay my worse which would mean I prefer the avalanche method. With the snow all you actually end up losing more money .
Eman namE I need to look into that
@@thoryan3057 - I agree. I have $4,900 Credit card debt so I'm paying it down and investing in Index funds. I believe you can walk and chew bubblegum at the same time.
Your content is GOLD!
shawn singh - Totally smiling when reading your comment! You are way too kind!!! Thank you so much for the positivity!!!
I need a relationship like this
So I looked into the Dave Ramsey snowball method, I have $28k in student loans and I want to invest. I have an emergency fund that’s well over 1-3 months worth of expenses (I don’t have many bill). I didn’t feel comfortable exhausting my savings leaving only $1k for emergency. So I appreciate this video because I really want to get into investing. I’m 22 btw and make about $25k a year
We’re like twins. I’m in the same boat at 22 years old but we got this and we’re starting early.
Excellent video, informative and educational. Thank you!
Zaida Artiaga - Lovely!!! Thanks so much - glad you liked it!!! :)
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I do both because of The Richest Man in Babylon book 📖
We need to read that book! Thanks for the suggestion!
@@OurRichJourney Just FIY, I found it free on a PDF on Google. 😉
@@mtheron100 thanks I just found the pdf online
@@Mikalya100 - Was it free to download? Please post link. Thank you
I love your channel. Keep the content coming.
Vic G - So glad to hear that! Thank you so much!!!
Another wonderful video guys. Keep up the great work
Aww, that's so nice! Thank you for the kind comment! :)
I love your channel! I just refinanced my house with a 30yr note at 2.99%...would you guys try and pay down the mortgage or should I keep aiming to max out my wife and my Roths?
Thank you for making this video, very helpful.
It's a bit different in the UK, as our student loans payments are deducted from our paycheck (although one can pay it all off at once if they want), so I can have been paying off my student loan slowly without even thinking about it, while building my emergency fund and investing in the stock market. :)
This is very insightful, I've been debating within. Thank you
I actually do both Invest and Pay Off debt at the same time. I find the Pay off debt is better for me because I gain a quality of life and sleep much better.
@@MP-fm2ip that's great. I got student loan that I may have allocated much time than I should.
Nyakio Kamau - Thank you! So glad you liked it! :)
M P - I LOVE your comment because you illustrate that, sometimes, it really comes down to what you feel most comfortable with! When you're uncomfortable with something, there's more hesitation and less motivation. And motivation is such an important factor in reaching financial independence. Thanks for sharing (and thanks for watching)!!! :)
Good morning, , I am very glad to see its chanel, Congratulation and Succses for Alls, (salam from Indonesia saba@Tani )🙏🙏👍👍
I need this... THANK YOU!!! All your videos have given me hope.
Good points. Would you apply the same advice to real estate investing as well? For example, putting 20% down to lower the mortgage amount and avoid PMI, but losing out on the extra money you could leverage to buy another property? If you only put 3.5% down on an FHA loan (or 5% conventional), you'd have that additional cash free to invest- but trading off for a higher mortgage + PMI.
That's a great question! I think it depends on so many factors. For example, what is the purchase price of the property? What's your PMI rate? If you didn't put more down to avoid the PMI, would you use that full amount to invest? How much profit would you be making on the rental property? Would you use that profit to further invest? How much is the second investment property? I would suggest running the numbers through an amortization calculator to see what scenario works out best. Thanks for watching!
@@OurRichJourney Thanks for the thoughtful answer. Awesome channel with great content!
Hi Amon and Christina, I've been following your youtube channel for 4 years now (have signed up for your courses) and you have definitely changed my life! My question is: Last year, I took out a few loans/credit cards to pay for home renovations and university tuition but now it's at the point where i cannot save and invest. We've been trying to pay off our debt aggressively using the snow ball effect but just seems like we are on thin ice every paycheck. Would you consider selling stocks from a brokerage account in order to pay off debt?
Good debts= is a debt that someone else is paying for you.
Bad debts= is the one that your paying like cc, student loans, car loans, etc...
You two are the best!!!😊
crheim - YOU are the best! Such a sweet comment - thank you for that!!! :)
nice video! very easy to follow and inspiring!
Great video! Would you mind sharing your thought on using Home Equity Line of Credit (HELOC) to pay off debt quicker or to purchase stock during pullbacks. Video would be great! Thanks again for sharing.
Great question for a future video! Thanks for the note!
No, no, no. Don't do it.
It is never advisable to move unsecured debt (credit cards, etc.) to secured debt such as your home.
I totally agree with this video, I want as little debt as possible, this is my goal!
Great channel, guys ! Keep it up ! Cheers from 🇧🇷!
Thank you so much :-)
Awesome stuff!
Thank YOU!!!!
Now we're talking people..
Thank you!
Advice: I have no "bad" debt other than a small mortgage. I invest heavily. Should I 'pay my mortgage off sooner than my remaining loan of 3 years by cooling my amount of investing or stick with heavily invest and reap benefits when my loan is gone in 3 years?
Sorry for the late response. We're on vacation ;-) But wanted to get to your question...You should review the amortization schedule on the mortgage. If this a 30 year mortgage and you only have 3 years remaining you've already paid most of the interest and the remaining 3 years is mostly principle.
If we were in your situation we would continue to invest because the interest savings would be so low compared to the average return in the market.
From a numbers standpoint paying more on your mortgage in the beginning of the loan is better. Unfortunately you've missed the window to save significantly on interest with only 3 years left.
Ok...back to our vacation :-)
You guys are amazing.
Thank you so much :-)
Thanks guys. I’d say good debt is debt that you use to generate income. Like taking a mortgage on an investment property where the rentals are paying off the mortgage.
So in summary compare the interest you’ll pay vs the return you can get and decide based on that
Simba Magumise - Thanks for sharing! Yes - interest and return are definitely part of the equation. We purchased investment properties that paid huge returns. Although we had mortgages, the returns were so fantastic! It's such a numbers game - and psychological - finding out what motivates people to either save or invest. Thanks so much for watching and commenting! :)
Pay off debt
What do you think about mortgage recasting V paying down the principle
Thank you!
simryusom8811 - Thank YOU . . . for watching and commenting!!! :)
I had problems lending money to ex boyfriends and my experience was being ghosted and not getting any or much of the money back. So right now I would say don't barrow money to boyfriends anyway.
I wanted to ask a question. I am doing some planning for fire by 45. I have a small mortgage but it is a new one as I have it only 4 months. I have no other depts, I have about two months emergency fund saved, is it better to pay off the mortgage or to invest in index funds and bonds? My mortgage is with a credit union a bank for poor people in Ireland is the best way to describe it. The interest rate is at 5% with is high than the banks but my pay is to low for a regular mortgage in Ireland. Do you think it is better to put my savings down on the mortgage or to invest in index funds?
Thanks for reading my comment.I love your video's. Karol
Robert kiyosaki says Good debt is debt that can put money into your pocket as a surplus. Getting a loan for a business, or a home you can rent out more than the mortgage. Borrowing at low interest rate and having it earn more interest in an interest bearing account.
So good debt is a term robert kiyosaki uses to say debt that brings you money is good debt. And bad debt is any debt that takes money from you. He believes house mortgages are bad unless you rent out rooms and make money on it.
For me it's focus and running the numbers. I owe about 480k in totally I could either pay 10k/month for 4 years then invest or 4k/month for 10 years and invest 6k/month during that time. The difference is the sense of accomplishment 500k not in compound interest if I achieve 15% per annum.
Your philosophies differ from Dave Ramsey. I have watched a ton of his videos and I also took your course. I was putting 9% into my work 401 and almost eliminated it Based on Dave's view. I took it down to 5% which is the min to get full company match. I just could not eliminate free money like this. It seems to contradict every sensible thought I have ever had. This free money comes with no strings attached. Dave's Philosophy is to put 0% into any investment until you are debt-free 100%. I just cannot bring myself to eliminate the company match. My wife and I have 124k in student loans and our house. This is all the debt we have and we have a 2-3 year plan to get rid of that debt. I just don't see anything wrong with this approach which continues to collect company money for those 2-3 years. Any thoughts anyone?
First off, I have to say I love your videos and find the information extremely useful. With that said, at the risk of sounding like I am splitting hairs, I wanted to comment on the difference between good and bad debt. Good debt is not considered debt with low interest rate and long payback time period. The better term for good debt is productive debt, or debt that is used to generate assets, such as rental properties. Bad debt would then be consumer or unproductive debt - debt that is used primarily for consumption without generating any assets. Probably my preferred way of distinguishing the two is leverage vs. liabilities. Liabilities take money out of your pocket, while leverage is used to put money into your pocket.
Hello, I love your channel. Do you have a video on life insurance? Whole life etc.....
I did see a video that had a little bit about why it's not a good idea to invest in your life insurance. Please expand on that.
Thanks