AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question I have always heard that you should pay off your credit card debt before you take any money to invest it. I am currently in a situation where I have to regularly charge large amounts of money on my credit card (for attorney fees) and I don't see being able to pay this money off for 7 or 8 more years. I may be able to pay it down in about 3 years. I am 38 and need to start saving for retirement. Should I invest any money I get or should I use it to pay off credit card debt? The interest rate on the cc is currently 15%.
Answer Hi. Conventional wisdom based purely on the opportunity cost of $$ would suggest that you need to earn more than 15% on any $$ invested before deciding to do this vs paying off credit card debt. No guarantees there! However, there is also a practical part of the equation which could suggest you start to accumulate some savings which may result in the lowering of spending. If you choose this route and continue to charge more than you normally would then this would be counterproductive. Another option may be to find a way to consolidate your credit card debt or lower the interest rate. There is no right or wrong that applies to everyone so I hope this helps.
