4 Reasons to Wait to Invest Until You are Out of Debt
Most people are in an avenue of their lives that they are curious about whether their jobs are stable and if they have enough money to cover the necessary expenses. However, some are looking to invest during the COVID-19 crisis. With the stock market down, those who are not in a panic feel like this is an appropriate time to invest because it is like the stock market is on sale. While it might feel like it is killing you not to invest at this time in your life, it would be more beneficial to you in the long run.
You are Holding a Credit Card Balance
According to The Motley Fool, the average credit card annual percentage rate is 16.61 percent. Meaning that if you have a $10,000 balance on your credit card and you pay $300 a month, it will take you over three and a half years and $2,800 in interest to pay it off. Attacking your debt will allow you the peace of mind to invest fully without fear of losing all your money in the stock market. In terms of pure math, it makes financial sense to pay off credit cards before you invest.
You have Student Loans in Your Life
If you have student loans in your life, then there is a high likelihood that the student loans take a large chunk of your take-home pay. Say you have a student loan balance of $36,000 at a 6 percent interest rate; if you choose to pay a lump sum payment towards the loans, you can shave off five months of having those loans in your life and over $875 in interest. While it might not make sense from a purely mathematical point of view to pay down your student loans, it makes sense in terms of emotional benefit. Student loans should not have the lifespan of most pets!
You have Zero Emergency Fund
The COVID-19 pandemic has proven to everyone that Americans, in general, were not financially prepared for a crisis or to miss a paycheck—over 75 percent of American live paycheck-to-paycheck. The United States Emergency Preparedness site says that people should have an emergency fund covering 3 to 6 months of personal expenses. If investments are tying up your money, it will prove challenging to get ahold of the funds if you have a real emergency.
Saving for a Special Purchase
If you plan on purchasing a vehicle, a home, or any larger purchase soon, it would be best to keep your money close and not let it ride out the stock market. Due to the stock market’s volatility, you should invest money only if you have five years or more that you are fine without that money. Five years allows the money to grow while still riding the stock market roller coaster. Keep in mind that vehicles, RVs, or motor homes are not investments because they go down in value; you shouldn’t have all your money tied up in things that are going down in value.
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Other Useful Links:
https://myjourney.rocks/great-ways-to-make-money-online-right-now/
https://myjourney.rocks/how-to-make-a-basic-budget-for-2020/
https://myjourney.rocks/millennial-mortgage-tips/
https://myjourney.rocks/pros-and-cons-of-debt-settlement/
https://myjourney.rocks/questions-to-ask-a-significant-other-before-sharing-a-credit-card/
