Highest and Best use of your money
I read a post by @shortsegments yesterday, which I enjoyed, and I wanted to continue those thoughts.
I think that it’s really a struggle to look at our debts and our investments, and think about them comparatively as investments. But I think that’s what this article asks us to do.
I think we need to see our debts for what they are, a bad investments we spent money on something, which is costing us monthly payments of principle and interest, which are not appreciating the majority of the time. We are paying interest, not making interest, so debts really have a negative return on investment.
Perhaps it would be easier to understand if they were actual investments we purchased through our stock broker, I don’t know for sure.
Perhaps, a better comparison would be borrowing to purchase an investment, which your holding which is going south or depreciating in value. While you continue to pay the loan. Your return on that investment is negative your paying interest on the loan and the investment is depreciating, instead of appreciating.
I hope you can now see how this bad investment, is a debt, and therefore you should pay it off quickly, even consider selling the investment to get back some of your loan proceeds to payoff a large portion of the loan.
Finally, as long as you are paying interest on this debt, you are negating any gains you have from other investments. So while I don’t necessarily advocate selling all your good investments to payoff your bad ones, it’s something to be considered, because if your net gain is zero, it’s hard to get ahead.
