Last year, I was thinking about the different ways people can use their money to improve their net worth.
They can pay off debt. That will definitely improve their net worth calculation by decreasing (or eliminating) the charges against their assets.
They can save money and invest it. In the long run, that invested money should increase their nest egg nicely, thereby increasing their net worth.
However, it wasn’t really clear to me that using the same amounts to either pay off debt or invest would give the same results. After all, paying off debt is great, but if you aren’t investing, you are missing out on that special sauce: compounding interest.
I decided to run through a few scenarios using “typical internists” to see how these choices could play out.
I found out a few things, including that my underlying assumptions didn’t necessarily give the results I was looking for.
(This post was originally published in 2021, but has been changed modestly.)
Continue reading “Which Is Better: Investing Or Paying Off Debt?”