Quote:
Originally Posted by fotze
I think the paying off debt vs investing thing that made me lean to the debt side, was that paying off debt has zero percent risk. 100% chance of what you are doing with that money is going to what you want. All investments have significant risk. I'm not sure if the average person knows the math either. If you plop $20k on your mortgage, every morgage payment from that point on, you are saving i.e $150 that goes to principle and not the interest.
Couple that and my RRSP's and safe investments never making me any money anyway, it made it a pretty easy decision.
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Paying off debt compounds at exactly the after tax rate of the interest rate on the debt. Unless you're confident you can compound money at a higher after tax rate than that, paying off debt is the right choice.
I happen to believe I can compound money at a higher after tax rate than my mortgage, but that's not necessarily the right decision for everyone.