Approaching Debt as an Investment
Wipe our Debt (Photo credit: Images_of_Money)
Confronting debt head-on is not a task for the faint-hearted. Whether you are steeped in student loans, credit card debt or endless accounts, creating a tally of what you owe in its entirety is enough to leave you feeling terrified.
Surprisingly, today’s investment professionals are advising you to gather up everything you owe and place it within your portfolio as an investment opportunity. This wacky approach might seem too unusual to make sense, yet it comes from the former executive and investment expert, John C Bogle. The concept was even referenced by Forbes. Traditionally, debtors think that they need to make a decision about whether to invest or pay off debt but, if Bogle is to be believed, managing both simultaneously will offer you better financial results.
The Basic Concept
Compound interest and fees can play havoc with your finances, leaving you paying off nothing but your interest rates for years on end while your principle amount remains untouched. Paying down debt thus acts as a fixed income investment which generates returns through decreased interest rates and adjusted tax returns. Lower debts can place you in a different tax bracket, and to make the tactic more attractive, there is no risk involved.
The Old Rules
Almost universally, financial professionals advise debtors to establish a liquid emergency fund before they begin to pay off their debt. This is intended to cover extreme events that could lead you further into debt. It also helps you to develop the habit of saving between 10 and 20 percent of your salary while teaching you the fundamentals of financial management. Debt relief is not only a financial process but one of personal development, too, and a core part of the latter is the formation of a holistic approach to your money.
Investing in Peace of Mind
Anyone who has ever been buried in debt is well-acquainted with the anxiety and fear attached to it. Many fall into depression as a result. Approaching debt as an investment places repayment plans at the top of your priority list while allowing you to see your debt relief plan in a more positive light. Once you have created a strategy with the help of nationaldebtrelief.com and begun to implement it, your stress levels will begin to decline. This form of investment generates the kind of returns that cannot be monetized.
Avoiding Errors
There are several well-known ways to approach debt repayments. The snowball approach tells you to pay off debts in order of size, with the smallest first. Other techniques advise you to approach the largest accounts first so that interest rates can be kept to a minimum. Debt consolidation, mortgaging, and debt settlement plans are alternatives that suit many scenarios. All tactics have their benefits and pitfalls but the most common mistakes apply regardless of the method being used. One of the most damaging and anxiety-provoking of these is trying to ignore the problem. Businesses are typically accommodating of those who have repayment plans, even if those payments are lower than requested. By tackling the issue in advance, you can confront the problem with a solid proposal and a calmer state of mind.
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Category: Debt
