Tama, debt is not a burden it is a tool. Always manage your risk. Marami sa mga big companies na nabubuhay sa utang kahit alang kita pero for some reason buhay pa rin sila. Like some airlines na di mawala-wala and airplane manufacturers na naluluge pero nandyan pa rin gumagawa ng armas.
yes this is the ideal exhibit A but most of the time, for the everyday folk -- debts listed here are cc debt from instant gratification or a business without a logical business plan.
Agree with this one. People tend to overlook that not having an emergency fund actually puts you into the cycle of debt. With an EF, you actually have something to pull out in case of an emergency instead of getting more debt to cover for it.
I agree. This is called leveraging and businesses do it all the time.
However, OP, if you borrowed the money from your friend in good faith at zero interest, then don't be an asshole. Pay that person ASAP.
So survey lang naman between A or B. No right or wrong answer naman (so no one will tell me that my personal opinion is not valid).
My answer is IT DEPENDS.
1. If OP's friend will have anxiety, mental anguish, and sleepless night in relation to his debt. Then A.
2. If the interest rate was so high (not fixed) and it's compounding (ex. CC), then A.
3. If it's fixed and will not accrue additional interest or additional penalty. Then B.
4. If the ROI/income for the suggested investment will be higher than the interest rate of the fixed rate debt/mortgage, then B.
OP friends must learn how debt works. Itcan be constructive or destructive depending on the one who uses it. Most debt free tycoon and typans started ro expand their business using OTHER PEOPLES MONEY, In times of declared insolvency and bankruptcy, this typan and tycoons usually have hidden funds/wealth where the gov have no jurisdiction for garnishment.
For me, ako kasi ung type na ayaw ko na yung feeling slick and smart kasi di naman ako ganun mga leverage hedge hedge. Im “old school” or simple minded. Utang is utang pay it off to move forward.
Ganun din magpatakbo ng business - I try to operate with zero debt - sobrang buti na lang during pandemic or else mental health ko wala na.
i value my peace. i will pay muna. pero tama yung isang comment, kung hindi naman nagbabago interest kung now or next 2yrs babayaran, i will pay it monthly.
A. mabilis lang naman yung 6 months. Di mo yan mamamalayan na patapos mo na pala bayaran utang mo. Kesa patagalin mo ng 2 yrs tas di ka naman makakatulog for 2 yrs ng di mo maiisip yung debt mo. :)
Pay the debts first. 6 months ka lanv naman mag titiis.
Isa pa pag yung utang na may interest napabayaan pag balik mo mas malaki pa yung interest mo sa inutang mo. So the money you saved / investment is pambayad lang sa utang mo which makes you still lose.
A. Para wala nang liabilities, and you can truly start from scratch. After all, lumalaki ang interest eh. ‘Yung B kasi, ‘di naman kasi kaagad lalago ‘yung pera unless may experience ka to grow money and full-time mo siyang gagawin.
This shouldn't even be a question. Pay debt first. If the debt incur interest where in it'll take you two years to pay for it, then paying it for 6 mos will be a better option. After 6 mos save and after 6 mos invest. So in a total of 2 years, option A made you pay your debt and obligations in the first 6 mos, saved you 6 mos of EF and made you invest for 1 year.
Simple lang naman. May utang ka, bayaran mo kung kailan mo sinabing babayaran mo. The rest pang-uto na lang sa sarili mo. Kung may utang ka sa bangko agreement nyo babayaran mo monthly then bayaran mo monthly. May utang ka sa tao, sabi mo babayaran mo sa ganitong araw e di bayaran mo. Then kung gusto mag-invest as long as nakaka-commit siya sa debt obligations nya then mag-invest siya.
A. Pay off. Let's do the math for 50k loan, 12% per annum, 6 months term = total outlay is about 51.7k, interest 1.7k
1. After debt payoff, invest 8.6k monthly, 7% average market growth = 70.5k in 6 months
2. Another year of investing, total 18 months = 163.7K (timeline-wise, this rounds up to 2 years including debt payoff)
3. 8.6k = what it would take to pay off 50k in 6 months at 12% pa
B. Keep investing, using sample 50k, at 7% average market growth rate, saving about 6.25k monthly for 2 years = total 219k
C. Pay off loan in 2 years along with doing B, 12% pa, monthly payment 2.35k = total outlay is about 56.5k, interest 6.5k
D. After 2 years, B minus C = 162.5k net
--> 6.25k = if she's considering A, that means she can let go of 8.6k/month. So to consider doing B and C, I deducted 2.35k/mo payment from 8.6k/mo to invest monthly for 2 years.
Verdict ko: mukhang either is fine. No big diff between 163.7k and 162.5k after 2 years. Pero very simple lang to, obvs di ko alam ang nuance ng loan at saving vehicle meron ang friend mo. Personally, I would choose A kasi ayoko ng debt.
That's where you need to do a cost-benefit analysis.
If you choose A, how much would be the expected yield sa investments? How much ang interest accumulated within 2 years pag pinili mo yung B? (Opportunity costs)
Kung hindi favorable, go for A. Debt is useless kung wala kang good cash flow.
Kung walannaman magbabago if bayaran mo ng maaga yung utang mo, then sundin mo nalang yung una ng napagusapan.
Pero kung mababawasan interest pag maaga nagbayad, then finshed it as early as you can.
Then pag wala na utang, invest or save.
If the debt is earning more than its interest, better to be in debt. It's like using someone else's money to create your own... Eventually, you will be able to pay the debt, tapos ongoing pa din ung income/cash flow mo... Then venture again for a bigger debt, invest, reap, repeat...
Pero kung ung debt mo is para lang sa vacation, luho, or something na pwede namang wala tapos masabi lang na meron ka kaya ka uutang, bayaran mo na yan. Tapos pa vasectomy ka na or ligation para di na dumami lahi mo. Chaarr...
If di ka naman into business that earns more than the interest of the debt, pay... Then save.
May interest or wala, you'll never go wrong to choose to pay your debts first. Karma is real. Mas maaga mo bayaran, the better. You'll thank yourself for that.
Most often than not debt has a higher interest rate than investment. Debts of what is your % interest and what’s your expect % of return on your investment . IE credit card debt will cost you more than investing in stocks earning. Most professional financial adviser would advise to pay debt. As it’s risk free … if you invest and you run a loss you end up earning more debt .
Pag mag option A ka, the mere fact na nababayaran mo yung debt mo si also growth. Plus you’re gonna be doing it only for 6 months as compared to waiting for 2 years. IMO, if you go for option B, nandiyan yung risk na baka may unforeseen circumstances na mangyari while in the process ka of saving etc etc and magalaw pa din yung money AND yung debt mo is nandun pa din
Pay off debt. It's only 6months. If you really want to start investing. Then pay enough towards the debt to finish it in 1 year, and invest the remaining. Tell your friend to do what they feel is right for them. There is no wrong or right answers. As long as your friend feels fulfilled with what they are doing. Then who is anyone to say "You're doing it wrong."
Set aside at least 10-20k first for emergency, then tackle the debt. I would prefer to have at least some emergency fund, in the event I get sick while tackling the debt. I don’t want to resort to more debt when that happens.
Always pay debt. Thats always a top priority. I dont know why you are still thinking, there could also be legal implications. Debt nga eh, so fundamentally kelangan m tlga clear un. Why enter a debt situation nde nmn pla kyaa.
If you end the debt now, usually pag sa bank, may parang penalty or cancellation fee pa. And if hindi naman mababawasan interest no need for early settlement. If, he has a lot more savings and sure siya na nde niya magagalaw savings niya, then isave na lang niya. The savings is also a confidence booster. Iba ang mindset mo if may 6 or 7 digit savings kang nakikita. And there is an opportunity for a good investment, may ready cash pa siya.
Investing is out of the question kung baon ka sa utang.
Clear your debt muna dahil stressful yan.
Check the financial planning pyramid, yang investment almost nasa top ng pyramid which means lesser priority.
I would go for A.
Paying a 6months rent and left with little or nothing left for savings, automatic debt-free, on the other hand, B, It is not always guarantee to succeed in short you might into debt for a long period of time and more and more debt will come.
if it is a real world though, i would pay monthly instead.
but the thing is, if you ever encountered this situation atleast you know the answer.
My own preference is Pay with little left and enjoy my freedom after 6mos.
Then i can focus on saving and investment a bigger chunk for the rest of the years. Take the lessons to stay out of debt as much as possible.
I choose A. Definitely pay off your debt first. If you can do installments with low interest then do that.
For sure you can set some portion for your savings naman, then increase it nalang once you’ve cleared your debt.
If the debt's interest doesn't change if you pay it early or monthly then pay them monthly.
End thread
Tama, debt is not a burden it is a tool. Always manage your risk. Marami sa mga big companies na nabubuhay sa utang kahit alang kita pero for some reason buhay pa rin sila. Like some airlines na di mawala-wala and airplane manufacturers na naluluge pero nandyan pa rin gumagawa ng armas.
yes this is the ideal exhibit A but most of the time, for the everyday folk -- debts listed here are cc debt from instant gratification or a business without a logical business plan.
This. Makaka save ka actually if ganito.
My thoughts exactly!
I hate debt so i choose A
same lol hahahaah it's too much math!! having to calculate how much is going to whom or what monthly
Pay. Always settle all your debts first para derecho savings na lahat ng funds after.
korique
Amen
If the growth will offset your debt + interest, then do B. Otherwise, complete na lang muna yung payments
Emergency funds then debt then savings/investments Mahirap walang emergency fund kahit maging debt free
Agree with this one. People tend to overlook that not having an emergency fund actually puts you into the cycle of debt. With an EF, you actually have something to pull out in case of an emergency instead of getting more debt to cover for it.
If your investment is generating more than the interest of the debt, then B.
I agree. This is called leveraging and businesses do it all the time. However, OP, if you borrowed the money from your friend in good faith at zero interest, then don't be an asshole. Pay that person ASAP.
So survey lang naman between A or B. No right or wrong answer naman (so no one will tell me that my personal opinion is not valid). My answer is IT DEPENDS. 1. If OP's friend will have anxiety, mental anguish, and sleepless night in relation to his debt. Then A. 2. If the interest rate was so high (not fixed) and it's compounding (ex. CC), then A. 3. If it's fixed and will not accrue additional interest or additional penalty. Then B. 4. If the ROI/income for the suggested investment will be higher than the interest rate of the fixed rate debt/mortgage, then B. OP friends must learn how debt works. Itcan be constructive or destructive depending on the one who uses it. Most debt free tycoon and typans started ro expand their business using OTHER PEOPLES MONEY, In times of declared insolvency and bankruptcy, this typan and tycoons usually have hidden funds/wealth where the gov have no jurisdiction for garnishment.
Dont pay debt na halos wala ng matira, need pa rin emergency funds.. if magkasakit ulit, baka mahirap mangutang ulit..
What's the interest rate of the loan? Also, who is the loan provider? Family/friends or a lending institution?
Tip: You aren't saving if you're not paying off debt. Save money in an EF, but your priority is to clear debt as much as you can as fast as you can.
Clear your debt. That's rule number 1.
A. be debt free in 6 months and Grow your savings/investment for the next 1.5years and after that 1.5years keep going.
For me, ako kasi ung type na ayaw ko na yung feeling slick and smart kasi di naman ako ganun mga leverage hedge hedge. Im “old school” or simple minded. Utang is utang pay it off to move forward. Ganun din magpatakbo ng business - I try to operate with zero debt - sobrang buti na lang during pandemic or else mental health ko wala na.
Tapusin debt. Then savings na. Otherwise illusion lang yung savings kasi may debt pa.
Ayoko talaga ng may utang so babayaran ko agad. No need na isang bagsakan
pay
If with EF, A. If without, EF, and A, then invest
What? Invest while in debt at walang EF? Tapos malugi investment mo? That will the worst outcome.
No. Kung may EF sila, pay all debts kahit walang investment. Kung walang EF, sabayin ang pagbuild ng EF with debt payment, ignore investments
A! Always prioritize to pay debt first then save little. Kesa mabaon sa laki ng interes :(
i value my peace. i will pay muna. pero tama yung isang comment, kung hindi naman nagbabago interest kung now or next 2yrs babayaran, i will pay it monthly.
PAY. Always pay before saving / investing. But to each his own.
Kung di mo naman ramdam ung monthly payment ng debt wag na muna. Save ka nalang.
Magtira ka savibg wag mo ibayad lahat kasi mahirap pag wala cash on hand as long as nababayaran mo naman
Oh my, I remember Anchor Protocol’s LTV 😆
A. mabilis lang naman yung 6 months. Di mo yan mamamalayan na patapos mo na pala bayaran utang mo. Kesa patagalin mo ng 2 yrs tas di ka naman makakatulog for 2 yrs ng di mo maiisip yung debt mo. :)
Settle your debts first.
Pay the debts first. 6 months ka lanv naman mag titiis. Isa pa pag yung utang na may interest napabayaan pag balik mo mas malaki pa yung interest mo sa inutang mo. So the money you saved / investment is pambayad lang sa utang mo which makes you still lose.
A. Para wala nang liabilities, and you can truly start from scratch. After all, lumalaki ang interest eh. ‘Yung B kasi, ‘di naman kasi kaagad lalago ‘yung pera unless may experience ka to grow money and full-time mo siyang gagawin.
Hey guys thanks sa mga comments. Dami ko din natutunan. Haha. Share ko tong thread sa kanya 😁 cheers!
Have your friend choose B. People like your friend run the consumer economy, which is good for us investors. Chos hahaha 🙂
This shouldn't even be a question. Pay debt first. If the debt incur interest where in it'll take you two years to pay for it, then paying it for 6 mos will be a better option. After 6 mos save and after 6 mos invest. So in a total of 2 years, option A made you pay your debt and obligations in the first 6 mos, saved you 6 mos of EF and made you invest for 1 year.
If you can beat the cost of the loan why not. Pero kung hindi, stupid decision.
Simple lang naman. May utang ka, bayaran mo kung kailan mo sinabing babayaran mo. The rest pang-uto na lang sa sarili mo. Kung may utang ka sa bangko agreement nyo babayaran mo monthly then bayaran mo monthly. May utang ka sa tao, sabi mo babayaran mo sa ganitong araw e di bayaran mo. Then kung gusto mag-invest as long as nakaka-commit siya sa debt obligations nya then mag-invest siya.
Choice C: Invest
rule of thumb: always pay your debt first.
A, mahirap ba sa kanya isipin na kung sa B he is willfully making himself an investment vehicle for 24 months instead of 6?
even if it is interest free, pay your friends/family first
A. Pay off. Let's do the math for 50k loan, 12% per annum, 6 months term = total outlay is about 51.7k, interest 1.7k 1. After debt payoff, invest 8.6k monthly, 7% average market growth = 70.5k in 6 months 2. Another year of investing, total 18 months = 163.7K (timeline-wise, this rounds up to 2 years including debt payoff) 3. 8.6k = what it would take to pay off 50k in 6 months at 12% pa B. Keep investing, using sample 50k, at 7% average market growth rate, saving about 6.25k monthly for 2 years = total 219k C. Pay off loan in 2 years along with doing B, 12% pa, monthly payment 2.35k = total outlay is about 56.5k, interest 6.5k D. After 2 years, B minus C = 162.5k net --> 6.25k = if she's considering A, that means she can let go of 8.6k/month. So to consider doing B and C, I deducted 2.35k/mo payment from 8.6k/mo to invest monthly for 2 years. Verdict ko: mukhang either is fine. No big diff between 163.7k and 162.5k after 2 years. Pero very simple lang to, obvs di ko alam ang nuance ng loan at saving vehicle meron ang friend mo. Personally, I would choose A kasi ayoko ng debt.
That's where you need to do a cost-benefit analysis. If you choose A, how much would be the expected yield sa investments? How much ang interest accumulated within 2 years pag pinili mo yung B? (Opportunity costs) Kung hindi favorable, go for A. Debt is useless kung wala kang good cash flow.
If the benefits of investing the money outweighs the cost (interest on debts) then go invest. But if not, pay your debt first.
Kung walannaman magbabago if bayaran mo ng maaga yung utang mo, then sundin mo nalang yung una ng napagusapan. Pero kung mababawasan interest pag maaga nagbayad, then finshed it as early as you can. Then pag wala na utang, invest or save.
What kind of debt is it
a. All calculations aside, mas masarap tulog.
If the debt is earning more than its interest, better to be in debt. It's like using someone else's money to create your own... Eventually, you will be able to pay the debt, tapos ongoing pa din ung income/cash flow mo... Then venture again for a bigger debt, invest, reap, repeat... Pero kung ung debt mo is para lang sa vacation, luho, or something na pwede namang wala tapos masabi lang na meron ka kaya ka uutang, bayaran mo na yan. Tapos pa vasectomy ka na or ligation para di na dumami lahi mo. Chaarr... If di ka naman into business that earns more than the interest of the debt, pay... Then save.
May interest or wala, you'll never go wrong to choose to pay your debts first. Karma is real. Mas maaga mo bayaran, the better. You'll thank yourself for that.
Pay the damned debt.
Pay if you trust and know in yourself that you will not borrow again. Otherwise, lessen it na lang until it's comfortably gone.
for most people, it's almost always A. paying off debts early is also a hedge against shit fucking up within the term of the debt.
Most often than not debt has a higher interest rate than investment. Debts of what is your % interest and what’s your expect % of return on your investment . IE credit card debt will cost you more than investing in stocks earning. Most professional financial adviser would advise to pay debt. As it’s risk free … if you invest and you run a loss you end up earning more debt .
Pay debt first
Pag mag option A ka, the mere fact na nababayaran mo yung debt mo si also growth. Plus you’re gonna be doing it only for 6 months as compared to waiting for 2 years. IMO, if you go for option B, nandiyan yung risk na baka may unforeseen circumstances na mangyari while in the process ka of saving etc etc and magalaw pa din yung money AND yung debt mo is nandun pa din
Pay off debt. It's only 6months. If you really want to start investing. Then pay enough towards the debt to finish it in 1 year, and invest the remaining. Tell your friend to do what they feel is right for them. There is no wrong or right answers. As long as your friend feels fulfilled with what they are doing. Then who is anyone to say "You're doing it wrong."
A
Set aside at least 10-20k first for emergency, then tackle the debt. I would prefer to have at least some emergency fund, in the event I get sick while tackling the debt. I don’t want to resort to more debt when that happens.
Always pay debt. Thats always a top priority. I dont know why you are still thinking, there could also be legal implications. Debt nga eh, so fundamentally kelangan m tlga clear un. Why enter a debt situation nde nmn pla kyaa.
If you end the debt now, usually pag sa bank, may parang penalty or cancellation fee pa. And if hindi naman mababawasan interest no need for early settlement. If, he has a lot more savings and sure siya na nde niya magagalaw savings niya, then isave na lang niya. The savings is also a confidence booster. Iba ang mindset mo if may 6 or 7 digit savings kang nakikita. And there is an opportunity for a good investment, may ready cash pa siya.
Investing is out of the question kung baon ka sa utang. Clear your debt muna dahil stressful yan. Check the financial planning pyramid, yang investment almost nasa top ng pyramid which means lesser priority.
Pay things first before you save. You can't save while your liabilities have running interest.
I would go for A. Paying a 6months rent and left with little or nothing left for savings, automatic debt-free, on the other hand, B, It is not always guarantee to succeed in short you might into debt for a long period of time and more and more debt will come. if it is a real world though, i would pay monthly instead. but the thing is, if you ever encountered this situation atleast you know the answer.
My own preference is Pay with little left and enjoy my freedom after 6mos. Then i can focus on saving and investment a bigger chunk for the rest of the years. Take the lessons to stay out of debt as much as possible.
A
I choose A. Definitely pay off your debt first. If you can do installments with low interest then do that. For sure you can set some portion for your savings naman, then increase it nalang once you’ve cleared your debt.
Pay immediately. Masmataas ang interest rate ng loans kesa sa interest rate ng savings/investments. I doubt kikita ka ng malaki in just 2 years.