Paying Down Debt vs. Investing
Striking the right balance between debt and investments
Should I Pay Down Debt or Invest?
Simple math and solid advice can answer this question. First of all, to understand how your debt is affecting your finances, you need to know your net worth. It’s a simple calculation that allows you to understand exactly how much you own and how much you owe. An MD advisor can help you calculate your net worth.
The MD online debt assessment tool gives you a snapshot of where you stand financially. Try the debt assessment tool.
Boosting Your Net Worth
Knowing your net worth helps you set realistic goals to stop accumulating debt. And it helps you divide your debt into good and bad debt.
Good debt covers things like paying for medical school and taking a mortgage on a house. Your education and your home are assets that ultimately can increase your net worth. Bad debt covers things like credit card purchases.
Residents’ salaries are usually high enough to make it possible to live within your means. If you have money left over at the end of the month, you have the option to invest it or to pay down debt. Typically, paying down high-interest bad debt, like credit card balances, is usually the first priority.
Once you’ve cleared up your bad debt, making an RRSP contribution might make sense. This kind of investing can trigger a tax refund. Then you can use that refund to pay down debt.
An MD advisor will help identify the right steps for your specific situation. To talk to an MD advisor, email MD Financial Management or call 1 866 243-9505.