Debt Payment as the Key to the Future

Thinking about the future and taking steps to ensure financial stability  is a very daunting task for most individuals. Debts in different forms have become increasingly difficult to pay up, thereby making preparations for the future a lot more difficult. This is often the dilemma for individuals who want to secure their future as soon as possible but they do not have the luxury of having enough salary to pay for their monthly debts as well as future savings.

Debt as Investments

Because of the inability to pay for debts as well as fund the future, the choice has been set between today’s payments for debt or future savings. There are people who entertained and followed the idea of investing the money they have in order for them to have more than enough to pay for the outstanding debts. This decision is commendable since debt payments are placed on hold (or at least paid in minimum) so debts could be paid as soon as possible if the investment has been successful.

Unfortunately, there is a great discrepancy with this plan. Investing the savings to increase the amount invested significantly is a very risky and often questionable practice. There are those who have posted double earnings in the first year but these actions are often scorned and illegal. But even though the investment plan is not scam ridden, it’s still a very bad idea. A good amount of capital will never mean success in a business. Any business would have to admit there is a certain kind of risk that should be taken before earnings are posted. The earnings could be great but the losses could be very significant.

On the other hand, paying your debt before investment is a safe and sound financial plan. Instead of withholding payment, debts are settled as soon as possible. Some investors would frown in this idea since money could have been invested for more profits.

Aside from the risk, the savings that could be obtained for investment first is very dangerous since no one will be there to help. By placing your finances in an investment, the money owed would accumulate debts until the debts are so exorbitant, the debtor can never pay them.

To fully understand this, let’s place it in a situation. When you miss a payment for your credit card, you automatically incur an additional 19% or more on your outstanding debt. If you have opted to spend that money as an investment, you are expected to earn with at least 19% profits for the missed payment. On the other hand, if you are able to pay your credit card bills on time, you are preventing the additional 19% interest rate to be applied to your outstanding debt. By paying your bills on time, you are saving 19% since you are able to prevent penalties in your outstanding credit.

Debt has never been dubbed as an advantage for consumers. It is seen as a tool for exploiting the finances of individuals since they are not protecting their finances smartly. Instead of education in proper use of debt, consumers are often encouraged to use credit cards for ease of transaction. The companies that accept credit cards will provide convenience but they will never be able to provide financial support as they cripple their customers with exorbitant interest rate and other fees.

Never disregard your outstanding debt just to invest for the future. By paying your debts to different establishments or lending companies first, you are able to save the interest rate. Preventing payment on outstanding debt is very dangerous even though they are invested for a good cause.