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Debt Management Solutions

By Carl Trevison and Stephen Bearce Debt Management Solutions Balancing debt repayment with investing goals takes some strategy and planning. Some consider investing as a first line of defense while paying down debt as a second. The debt dilemma The process for eliminating debt is anything but an easy-to-solve financial equation. Many people wonder if they should pay off their debt as quickly as possible or invest their money, letting debt payments run their course. The answer depends on whom you ask. Theories about balancing investing with debt vary widely. Some financial experts say freedom from debt is the most important goal. Others say it’s more about the math: Your money should go toward investing if your investments earn a higher rate of return than your debts cost you. Still others focus on the emotional aspect: How comfortable are you with a certain level of debt? Neither one nor the other Better yet, perhaps, is a balanced approach to wealth management. If you’re like most people, you’ll need to manage finances for both present and future needs. That means paying off some debt today while simultaneously investing with an eye on the future. Although your decisions should take into account your own needs and circumstances, consider the following guidelines for handling debt in light of investing goals: Save for a rainy day. Before paying down debt (beyond required payments) or settling on an investment strategy, make it your first priority to put funds aside for an emergency reserve. We recommend six months or more of living expenses; an absolute minimum is three months’ worth. These funds should be in traditional savings or very short-term, highly liquid, low-volatility investments. Put your future first. As a general rule, your long-term investment plan should take priority over applying extra amounts toward debt. Be…

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