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Anonymous

06 Oct 2019

Credit Cards

Is it alright to start investing in something while clearing a credit card debt?

Just cleared my school loan and now I have extra money to use (monthly) from my salary. However, I have a credit card bill to clear as well which I am doing so monthly. Hence, would like to seek advice if I should prioritize in clearing the cc bill or can I concurrently start on some investment?

Discussion (3)

What are your thoughts?

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Clear the credit card bill first. Most credit card annual interest rates are 24-27%. Which averages about 2% a month.

If you look at it in another way, paying off your credit card debt is also like making annual returns of 24-27%, except you "stop" earning when that debt is paid off.

It's guaranteed returns paying down the credit card, versus non-guaranteed returns on investment.

Cedric Jamie Soh

19 Sep 2019

Director at Seniorcare.com.sg

Yes of course! I will start something too.

Mathematically, it makes sense to clear the credit card debt first. Not many returns that can beat 24% pa on credit card debt.

Psychologically speaking, the starting on the investment part can help you in gaining some time and experience. I won't dwell too much on it, it's compartmentalizing your finances into different "boxes". It helps you to get started.

People who compartmentalized has been known to actually get a better financial well being even though it is not as mathematically sensible.

I will strongly suggest you get started with this, I've seen how many people who tried to clear debt first but didn't have a sense of happiness and a sense of "wasted time".

No point crying over spoilt milk, do some light investment and spend 95% of energy to clear the debt. the 5% in investment will help you in better financial well-being.

PS: The investment should be a small sum just to get started and the difference mathematically won't be a big difference significantly.

Just Being Ernest

19 Sep 2019

Content Creator at www.youtube.com/c/JustBeingErnest

There are two paths

1) Pay off all debts fully then go into investment (Most Preferred to me)

2) ...

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