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If you have debt, it’s safe to say that you are not alone. Debt has gradually risen to be at its highest level since the recession of 2008 and 2009. If you are looking to pay off your debt but also wonder if you should invest in a retirement savings account or another option, the fact is that you should be doing both. Paying off debt is crucial to improving your credit score so you can get approved for lines of credit that will benefit you but at the same time, you’ve got to look at the bigger picture and be aware of what you need for retirement. So let’s show you what you need to consider with both aspects.

How Should You Balance Paying Debt Against Investing?

It’s important to focus on both, but the fact is that there are three different areas you need to focus on: paying off debt, focusing on retirement, and putting money into an emergency fund. And a lot of people believe that they have to focus on putting a large amount of money in there, but the reality is this even if you contribute a small amount every month to your savings or retirement in addition to paying off debt, it is still worth your while. 

But you have to remember that if you overcommit to investing and only make minimum payments off your debt as a result, it could mean you pay off too much interest over time, so therefore you’ve got to have an understanding of the figures and if you pay more interest, is this going to hamper your abilities to save for the future? It shouldn’t be an either-or situation.

What Are the Factors To Consider What You Should Be Focusing On?

When we are talking about paying off debt and investing, it’s important to remember that both of these are essential financial goals, but weighing up which one to dedicate more time to can be a big ask. Therefore, you need to consider some of the following factors:

How Long Until You Retire

It’s important to avoid carrying any form of debt into retirement, but we’ve got to weigh up the worst-case scenarios of each type of debt we have. Because if you are trying to play catch up in saving, you will need to look at other avenues to reduce your debt, while also increasing your income. 

This is why many people are now looking at alternative investments, such as cryptocurrency. And while cryptocurrencies like Bitcoin and Ethereum have gone “overground,” you’ve got to use it as part of the long game, rather than thinking it will be a quick buck. The current price of Ethereum will fluctuate, which is par for the course when it comes to investing. The rule of investing is to start young so you can level out your investing mistake, but also gain compound interest. When it comes to debt, if you are nearing retirement age, you will have to bear in mind that it’s likely you will have to cut spending, make catch-up contributions, and even work longer to hit your targets.

The Debt Amount

When you are deciding how much debt you need to pay off, the higher your credit balance is, the lower your credit score will be. So if you can only afford the minimum payment on all of your debts, the best thing for you to do is step back and aggressively assess your budget. 

Because if you learn methods of lowering your credit utilization rate, you are going to make things a lot easier. Paying off the minimum on all of your debts is not a good approach.

Choosing a 0% Balance Transfer or Refinance Option

Both approaches will reduce your interest rate costs, which reduces your monthly debt payments. And when you are looking at which option is best, one of the biggest issues is if you continue to spend on the card you are paying off. 

Choosing these options can help you to deal with debts easier, but you’ve got to be disciplined and potentially make changes to your lifestyle.

What To Consider When You Are Investing While Trying To Pay Off Debt

The biggest thing we have to remember when it comes to balancing investing while also paying off debt is the amount of money we are happy to play with.

This is why you’ve got to remember that when investing, you should not overinvest. It’s always tempting to put more in, especially if you have a good feeling about a stock or have seen a method that has worked for someone else. However, when it comes to managing investments and debt concurrently, the best approach is to play it safe and ensure you meet your monthly minimum payments as a priority. When you pay off a credit card, this might be the perfect opportunity for you to transfer what that monthly payment was and put it into a brokerage account, which can help you build long-term wealth. 

If you can stay under 20% of your credit limit and then reduce that percentage slightly every month, this should give you enough to invest in the stock market, cryptocurrency, or your preferred method. When we consider investing, we’ve got to remember that if we are burdened with a significant amount of debt, it makes sense to focus on the ones with the highest interest, which is usually the highest rate loan or card.

It is a balancing act that can prove difficult to get right. But the fact is that we should all be making progress on working towards a lifestyle that we would like, as well as paying off debt. Many of us get caught in this never-ending cycle of using credit and not being able to afford to invest because we cannot get our credit utilization down. This doesn’t just mean that you can’t invest, but it also means you can’t save for retirement! But the reality is that we need to work on both.