03-10-2015, 08:13 AM
I wanted to spark a discussion about how people split their cash flow between paying down debt and investing. Is it more important to lower your expenses or raise you income?
Personal goals for each month:
1) Increase my net worth (assets minus liabilities)
2) Increase my net income stream (total income minus expenses)
In order to accomplish the above goals, I have the personal choice of allocating free cash to buying more dividend paying stocks (increase assets/increase income) or paying extra towards debt (lowering liabilities/lowering expenses).
If a personal debt's interest rate is higher than most dividend stock's yield (5%+), should you allocate most, if not all, of you free cash flow to debt instead of dividend stocks? Conversely, if you debt's interest rate is lower than easily attainable dividend yield (2% or less), should you forgo paying more than the minimums and invest extra cash fully into dividend stocks?
A bigger challenge for me is the case when the interest rate in debt is roughly equal to typical dividend yields (3-4%). Which do you focus on? Do you split your cash evenly?
Thoughts?
Personal goals for each month:
1) Increase my net worth (assets minus liabilities)
2) Increase my net income stream (total income minus expenses)
In order to accomplish the above goals, I have the personal choice of allocating free cash to buying more dividend paying stocks (increase assets/increase income) or paying extra towards debt (lowering liabilities/lowering expenses).
If a personal debt's interest rate is higher than most dividend stock's yield (5%+), should you allocate most, if not all, of you free cash flow to debt instead of dividend stocks? Conversely, if you debt's interest rate is lower than easily attainable dividend yield (2% or less), should you forgo paying more than the minimums and invest extra cash fully into dividend stocks?
A bigger challenge for me is the case when the interest rate in debt is roughly equal to typical dividend yields (3-4%). Which do you focus on? Do you split your cash evenly?
Thoughts?