Even with the Great Recession long gone, many families are still living in debt. In a world of consumerism where hefty temptations lie on every billboard and Facebook ad, it should be no wonder why so many of us fall into the deep abyss of debt.

Is investing a good idea when you’re in debt, though? What is the most sensible thing to do – to invest or to try to pay off your debt first? We have gathered some tips to help you with this – so read on and find out more.

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It All Depends

There’s no right or wrong when it comes to this question. For some people, paying off the debt is the best option. For others, investing in retirement funds is the better option. It all depends on a series of factors – including how much you have to pay for your debt, how much you have to invest, what is the Return on Investment for each of the options, and so on.

Furthermore, your age, your health status, your social status (such as whether you are a business owner or an employee) and a long list of other factors can have a huge influence on your final decision.

In the end, it is all up to you. Analyze your very particular situation and see exactly if investing in something will be more profitable for you. For example, if you are near your retirement age and if your portfolio of investments is not very profitable or too conservative, you might find that making new investments is the best alternative you have if you want to make sure you will live comfortably throughout your retirement years.

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The Simple Math

To decide whether to invest or pay your debt, do your math and see exactly how much you are paying for your loans and mortgage(s). See how much the interest rate costs you and analyze how long it would take to pay your debt off in full.

At the same time, analyze your investment options and see how much profit they can yield. If you notice that your investments have the ability to generate more profit than the loans you have to pay (including the interest rate), you should definitely settle on the investments, rather than paying the debt. On the other hand, if you notice that your interest rate and loan payments cost a lot more than the profit you can generate with your investments, you should focus on paying off your debt first.

For example, if you are a business owner, you might find that investing in your business will be more advantageous than paying off your debt first. If your business can generate a lot more profit than the sum of your interest rates and loan payments, investing in it will definitely be the option to settle for.

As mentioned before, this is a complex analysis and it the final call can be influenced by a wide range of factors. The most important thing to keep in mind is that each situation is unique in its own way – so analyze yours, ask for the advice of a professional if needed and create a short, medium and long-term plan that suits your situation and your goals.