OLD DEBTS OR NEW INVESTMENTS?

What do you suggest: Should I park my savings in new investments or should I settle my debts first?

AIndeed, both options have their own benefits; by paying off debts, you might be more stress-free, while building a source of passive income to safeguard the future is also imperative.

The choice of paying off debts or investing would depend on how the calculation is done. Using a simple formula, one can decide the best course of action. Study the interest rate – calculate how much you are paying on the debt, then tote up the interest you are earning on the investment. Opt for the one that is higher.

In simple words, if the debt has high-interest rate payment, settling the debt will be a lucrative option. But if the interest rate payment is manageable you can look for adding extra income by investing in the right product.

I would also suggest you study your debt first; look for the option to reduce the interest paid if you are already sitting on high debt interest ratio. Look for a debt consolidation option – try to do a balloon payment (a lump sum amount) without forfeit to reduce the interest payment over the principal amount. Or even look for some buyout option if you have the equivalent better option available.

Additionally, if you think the current EMI is smooth and you can manage monthly expenses with saving easily, then set your money to work.

Currently, interest rates are surging. You may look into saving options for short-term investment plans here or in foreign currency where the value is relatively high.

Consider capitalising in the property market now but study the scene well. If your budget allows, look for small properties and build assets with better returns in the long-term. It’s always advisable to allocate your investment portfolio under multiple opportunities to minimise risk.

Whatever the decision, ensure you have an emergency fund for daily overheads.