The investments Stephan recommends may surprise you.
- Graham Stephan is a financial expert.
- He recently commented on rising credit card debt levels.
- He believes paying off your credit card is the best investment you can make.
Graham Stephan is a financial expert with a popular YouTube channel. He also discusses money issues on Twitter.
He recently tweeted some great advice everyone should read about the best investments you can make right now. This is what Stephen had to say.
Stephen thinks everyone should make this investment
On Twitter, Stephen shared some disturbing realities that prompted his investment advice. Specifically, he pointed to statistics on credit card debt showing that Americans have borrowed a lot of money and are at risk of not being able to pay it back.
Stephen links to a fact sheet showing that Americans owe a total of $930 billion on credit cards, more than the $870 billion they owed during the 2008 financial crisis.
The fact sheet also showed a sharp rise in the delinquency rate, which measures how many people are behind on their payments and may not be able to pay what they owe. Specifically, the delinquency rate rose 0.16% from the previous quarter, with 5.32% of cardholders delinquent. Younger Americans are disproportionately represented in these defaults, as their default rate is 76 percent higher than other age groups.
In sharing these facts, Stephen said they were “very concerned”. And, he goes on to offer some great investment advice for those in debt. “If you have credit card debt, the best investment you can make right now is to pay it off — the rest can wait!” he urges.
Is Stephen right about this investment?
Stephen is absolutely right to warn about high rates of credit card debt and rising delinquency rates. Owing a lot of money on your credit card can be a huge financial problem for you, and not being able to pay can have a detrimental effect on your finances for years.
He’s also correct, in most cases, Pay off credit card debt Yes Making the best investment possible should be your top priority. Credit cards tend to have high interest rates, so they can be quite expensive.
The return on investment (ROI) you get from paying down debt is the interest saved. So if you pay 17%, 20%, or even more on the card, you’ll get significantly more money than investing in an S&P 500 index fund (the S&P 500 is a financial index of 500 large U.S. companies and is widely viewed as A measure of the “stock market” as a whole).
However, there are some caveats. First, if you have an employer 401(k) match with the company, you should contribute enough to win the match before paying additional fees. Second, if you have a card with a 0% promotional APR, then as long as you pay it off on schedule before the 0% rate ends, then you won’t need to spend any extra money that you can use elsewhere.
But, outside of those situations, the high interest rates that come with credit cards are enough to make investing like Stephen suggests to pay it off as quickly as possible. As a bonus, if you get out of this debt for good, you’ll have more money for other investments, and you won’t run the risk of defaulting on your debt if your income drops and you don’t have the cash for your monthly payments.
These added benefits make Stephen’s advice all the more worth heeding.
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