Ways of Investing While in Debt

Life Benefits Best Family-Friendly Communities in Dubai Ways of Investing While in Debt
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Almost 62% of the business owners preferred staying away from loans for avoiding debt. Everyone knows that they have to start investing in order to save money for their future; however, chances are that they still have to clear a certain amount of debt, which has started because of a financial problem that has forced them to take a loan. One important question that almost everyone keeps asking is whether they can invest money even when they are carrying the burden of debt. The answer to this question is definitely yes, you have the option of paying your creditors as well as investing money. In most of the cases, this is an extremely personal choice. If you are someone who hates being in debt and wants to clear off everything before investing anywhere else, that is fine. However, if you can pay your debt at a slow rate and plan on investing money, it is a good idea too. No matter what decision you are taking, numerous things need consideration before you are deciding how much you want to invest and the total amount that you are thinking of paying off.

Making minimum payments before investing

It is true that you can clear your debt and try to make investments at the same time, but you need to understand that it is not a good idea to make an investment if you are not making at least the minimum payment for clearing the withstanding amount. If you are not making minimum payments, you are going to be charged high-interest rate, late fees, as well as penalties. Moreover, the credit score is also going to see negative impacts. You should consider making investments only when you see that you are capable of setting aside money and you can keep on making the minimum payment for progressing towards clearing at least a certain portion of the debt amount.

Tackling a debt of high interest

If the withstanding debt that you have is tied to the credit card or any other thing that is known to come with a high rate of interest, you should keep away from investing money, until you bring your debt under control. A credit card is known to have interest rates of double digits and it is obvious that you will not be able to generate investment returns, which are capable of outpacing that. Once you bring the rate of interest to zero, you will find it easier to invest money. Before that, it is going to be nothing but a burden.

Using the 401K Plan

If you are working for an organization, which is responsible for offering a 401K plan, you should definitely take part in it, despite the fact that you have to clear a debt amount. This is because most of the employers are going to match the contributions only till a particular amount. Therefore, it is almost like getting money that is free. The contributions that an individual is known to make towards a 401K will be deducted from the taxable income; hence he is also going to get huge tax advantages because of taking part in the 401K plan. You should invest when you are still clearing your debt. Then, when you have completed paying all the withstanding amounts, you can increase the contributions.

Looking at the ETFs and low-cost mutual funds

If the debt that you have is tied with the low-interest things, for instance, mortgages or student loans, it is alright to set a sum of money for investing in the things, which will be capable of generating a great return. You need to understand that numerous financial planners strike arguments against clearing the loans of low interest as early as possible if the market return is higher than the rate of interest. With time, the stocks are known to provide average returns of around 7%, which is a lot higher in comparison to the current rates of interest. For achieving this kind of return, you have to consider the mutual funds as well as the exchange-traded funds, which are known for the low fees that they have. They are also responsible for tracking the overall performance of the entire stock market. To know more, you can visit National Debt Relief.

Finding investments which trade without commission

If you are investing and trying to clear your debt together, chances are that you will be able to make small investments at that particular time. That is alright, but it is crucial that you have a proper understanding of the commission as well as fees that you are paying every time when you are purchasing and selling. For instance, if you purchase only a few shares but you are paying $8 as commission, this fee is responsible for cutting into a greater portion of the investment that you have made. However, there are discount brokerages, which are responsible for permitting investors to trade various kinds of investments, without having to pay any commission.


It is crucial that you find a balance between clearing all the withstanding debt that you have and investing money and this requires a lot of discipline. It is perfectly alright if you are in debt and you want to invest. However, the first thing that you have to do is determine the total amount of balance that you have. On basis of the balance, it is your duty to set up an automatic transfer of the money that you have decided to invest, directly into the investment account. Automating all the bills that you have is also a great idea. If you are receiving extra money due to a certain reason or there is a certain rise in your salary, you have to consider picking your balance in accordance with that. When you have decided to automate, you are going to reap numerous benefits. Automating is going to take your guesswork out, will assist you to remain consistent, and will also make it extremely easy to do the other financial planning.


Just because you are in debt doesn’t mean that you cannot make investments elsewhere. However, you need to be aware of certain things before you are investing and consider the ways that have been mentioned above for investing even when you are in debt.

Author Bio

Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA.  She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.