Paying off a credit card charging 22% is a guaranteed, risk-free “return” of 22%. Few investments reliably beat that, and none do it with zero risk. Many planners suggest clearing high-interest consumer debt before considering any long-term, illiquid investment.
Questions to ask yourself
- Do I carry a credit-card balance month to month?
- What rates am I paying on car, student or personal loans?
- Is my mortgage rate fixed or variable? How many years remain?
- Would an investment loss make any of these payments harder?
The mortgage question
A low, fixed-rate mortgage is different from credit-card debt; some people prefer to keep it and invest, others value being debt-free. There is no single right answer, but you should be able to keep paying it comfortably even if a private investment returns nothing for years.
Related
Your journey
More on this stage: Deep Dive: How 506(c) Accreditation Verification Works · Deep Dive: Calculating Net Worth Without Your Home · Deep Dive: Talking It Through as a Household
Start the next stage: Phase 2: Now you think you are an investor