Investing allows you to grow your money. You greatly increase the rate of your return on your money when you invest it instead of simply leaving it in the bank. However carrying credit card debt while you are investing money is a poor choice. The interest rate on credit cards is usually higher than the average rate of return you will receive on money that is invested.
Additionally it does not make sense to invest your money when you are having more money going out than you are having coming in. Most financial planners will encourage you to get out of debt before you seriously begin investing your money in other sources. You can take the money that you would be investing and apply it to your credit card debt. This will benefit you financially because you will reduce the amount of interest that you would pay.
Once you have paid off your credit card debt you can take those payments and add it to the amount of money that you would be investing. This will increase the amount that you invest, and you can quickly make up the time you spent on getting out of credit card debt. This will change your financial picture because your money will be working for you instead of against you.
The one exception to this rule is investing in your retirement account through your work. You should invest up to your employer’s match while you still have credit card debt. This is one way to receive extra money for retirement and you should take advantage of the opportunity. Once you are out of credit card debt you should work on bringing your retirement savings and investing up to fifteen percent of your income.
If you have never invested money before you may want to use a financial planner who can help you plan to reach your financial goals. An easy way to begin is using mutual funds because the risk is lower since mutual funds spread the risk over several different stocks for each share. Once you begin to understand the market you can spread your investments out a little bit more. You should never invest all of your money in one single stock or fund. This is too risky.
