1. Money
Joshua Kennon

Finding a Balance Between Debt Reduction and Investing

By October 29, 2012

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I've been receiving questions about debt reduction versus investing lately.  People seem to think it is an either / or proposition.  It's not.  In an ideal world, you should strive to pay off your debt entirely.  Short of a few rare events, such as a catastrophic health crisis without insurance coverage, you cannot go bankrupt if you don't owe anyone a penny.  At the very least, I don't think you should ever carry any credit card debt.  If you want something, pay cash for it.  Don't squander your future to provide for the needs of today.  That will lead to a self-reinforcing cycle of poverty that can be difficult to escape.

Until that day comes, it is important that you find a balance between investing and debt.  Take advantage of any free money your employer will give you in a 401(k) match, but then start obliterating your high interest balances.  You can't get ahead if you are giving all of your wealth to banks.

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