Life is full of opportunities to make decisions. Should I go right or left, forward or back, take this job or that job? Each decision we make shapes our experiences and path of life. Therefore it is important to make the correct decisions.
One of the decisions some must make is whether to pay down or invest their money, especially with tax refund time upon us. Which one should you choose? I would say, do both. There is a win-win situation if you have the ability to do both. Let’s take a look at a scenario for a moment.
Aaron has $400.00 left over each month after all of his monthly obligations have been met. He has an outstanding credit card balance of $5,000.00, which is also part of his monthly obligations. If Aaron uses the $400 each month to pay down his debt, he would retire his debt faster but two things work against him: (1) while paying down the debt there is no money to invest and (2) he might be missing a golden opportunity to take advantage of investments as they materialize.
But if Aaron were to split the $400.00 reserve evenly between investment and paying down his debt he would enjoy the benefit of retiring the debt a little faster and investing. Suppose his $200.00 monthly investment generated $500.00 per month, what type of position would Aaron find himself in? Aaron could use the profits from the investment to retire the debt even faster.
So think about the dual benefit in your next financial decision!