Wealth: Debt Optimization

Living with debt can be hard. No, really. Ever hear Dave Ramsey’s show? Hear his guest’s “debt-free screams” when they come on the show to publicly announce that they have eliminated all of their debt? Crushing all of your debt is a big deal and it’s not an unreasonable thing to do when you’ve annihilated a lot of debt. However, one thing that I feel gets missed in all the hustle bustle about identifying and paying down debt is that sometimes investing in other items can be more beneficial than paying down your debt. Please allow me to explain.

Everyone knows that debt is huge in the USA but just how huge? In 2015, studies conducted found that the average American has $15,609 in credit card debt. That’s not including student loans, car loans, home loans, or other much larger loans that are generally expected. That’s just the amount that was currently sitting on credit cards. If you do the math at the staggering 25% interest rate that some credit cards are subject to, you’ve got an amount of credit card debt that is by all intents and purposes insurmountable by a lot of households. For this type of debt, the Dave Ramsey, “attack the debt with a sledgehammer” is probably the best approach. However, once that type of debt is gone and one if left with only other lesser interest rate debt, there could be a much better direction to take.