Debt is like staying in a room containing knives on sealing. You need to go out of that room as quickly as possible. Sometimes you need to build some safety for you to stay in that room.
There are two conditions to choose it depends on the situation
- Condition 1: Pay off debt first instead of savings. (Get out of the room as quickly as possible)
- Condition 2: Need to do both, pay off debt and savings. (Need to stay in the room with safety measures)
Okay, Let’s see, when you need to save or pay off debt.
Pay off deft 1st instead of savings
Situation – If you have a debt with an interest rate of 12% and your savings or investment gives an interest rate of 9%.
At that time you need to cut out the investment/savings and need to pay out the debt first. Otherwise, your investment will lead to a loss of 3%. So first closes the debt and then start investing or savings.
Need to do both, pay off debt and savings
Situation – If you are paying taxes. To get the tax benefits you can get loans such as a home loan. Where do not need to close the loan quickly? So you can split out the earning and spend on both – pay off debt and Savings/Investment.
Now you have a question about where to invest the amount. This post will really helpful for you – Best Investment Options for Salaried Person.