Should You Pay Down Debt or Invest Excess Cash?

When you have a large cash reserve, should you take that opportunity to pay down debt or should you invest it? The answer is “it depends”. It depends on:

• What is the interest rate on your debt?
• What is the funding level of your emergency fund?
• Do you have any big one-time expenses planned within the next 12 months?
• What is the status of your financial goals? (college savings, retirement, house purchase)
• How close are you to retirement?
• What type of economic environment are you in?
• Understanding the debt secret of the super wealthy

All too often, we see people make the mistake of investing money that they should be using to pay down debt, and this statement is coming from an investment advisor. In this article, I am going to walk you through the conversation that we have with our clients when trying to determine the best use of their idle cash.

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