Flip and Danny help you decide whether to pay off debt or invest extra cash when you have 3-6 months saved. Compare each debt's interest rate to your expected investment return: pay off credit card debt at 22% but invest instead of paying a 3% mortgage. A 0% balance-transfer offer can buy you time to invest while reducing interest.
Hey, everybody. Flip and Danny here, founders of the Freedom Real Estate Group family of companies, and welcome to our podcast called Freedom through Passive Income. That's right. And today's episode is called Should I Pay Off My Debt or Invest My Extra Cash?
That's a really good question, Flip.
That is a great question. Now, before we get any further, this assumes that you have about three to six months in your savings and has to cover your expenses for three to six months. And you have this in savings and this is truly extra cash. And for those of you not watching, I'm doing the quote fingers extra cash.
We wanted to make sure that you knew that part because we're not covering the three to six month savings in this video. We're just saying you already have it, you've got extra cash. Now what do you use it for? Pay off your debt or invest.
Right.
So here's going to be the two things I'm going to ask you to do. First, number one, analyze the cost of all your debt that you intend to pay off.
Yes.
Number two, analyze the return on investment of any opportunities that you're considering investing your money into. That's the first two steps.
Got it.
Once you have those two things done, we can do the game that I'm going to play with you.
Yay.
You ready?
I like games.
All right, flip. You have a credit card that you'd like to pay off and the interest is 22%.
That's pretty good. The higher the better. Right?
You have an investment opportunity that you're looking at and the interest of return on investment is 8%. Tell me what you're going to do.
Is this like golf? The lower the number, the better I believe it is. We're going to want to pay off that credit card because it's going to save you, well, hundreds to thousands of dollars. Tens of thousands of dollars, depending on how much is on that credit card.
Yes.
So that would save you the most money and the 8% would make the most money.
I should have brought one the Betty's bill. Clint wins. All right, we're going to give you another example.
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You have a mortgage on a house of who cares? $250,000. Your mortgage interest rate is 3%. Okay. You have some investment opportunities that you're looking at and the return on Investment is also 8%. Which one do you choose?
This is. People always say, should I pay off my mortgage?
Right.
No, don't. Plus there's tax benefits of paying your mortgage, right? Yes, I listen. How about that?
Yes. Ding, ding, ding, ding, ding, ding. You are right. Do not pay off your mortgage at 3%. You're going to want to actually invest your cash into the opportunity where you're getting anticipated. 8% return on investment because you can earn more money with that money than paying off a debt where you've got other tax benefits and is only 3%. Okay, then let's talk about 0% interest cards. You have done this for us, right?
Yes, I have.
So what do you do when you have an opportunity and you apply for a car? That's 0%.
So I take the 0% interest card and I take the credit card that's not zero percent. And I take the funds. I do a funds, whatever the transfer. Credit card transfer. And I transfer whatever is on that credit card over. Over to the 0% credit card. Because now it's. I'm not paying interest on it.
That's right.
I can just make monthly payments. And it's just going to chisel that down well until you get to your deadline of the 0%. So make sure because sometimes they'll. They'll knock you back to day one.
Yeah.
And so make sure you know exactly what the 0% interest entails, all the rules and regulations. But I move everything over there. That way I get rid of the 16 to 20 or whatever it is on the credit card and put it in the zero percent.
Yes. So that is a really, really important tip. So opening up those credit lines where it is 0% and then you evaluating all of your cards and having a list like Flip does for us. We just looked at it earlier today before we started recording these videos. And you know, some credit cards are 16.99 or 21.99. So what flip would do is he'd look at the one that has the highest interest rate and he'd take a chunk off that card or all of it, and he would transfer it to the zero percent. He would evaluate the terms of the zero percent, make sure he puts a task somewhere to make sure that we pay that off before we get kicked in the rear with an entire year of interest at expense rate. So that's just another tip on what you can do. Because what Flip just allowed you to do is if you were paying, say, $5,000 a month towards a credit card or investment opportunities, depending on how you were doing that maybe the transfer to another 0% card allowed you to make a minimum payment of $500, because now you're at 0% interest and now you have $4,500 to go ahead and move into that investment opportunity. So all of these things are just strategies that you can use in order to put more of your money to work and the best way possible.
Awesome. Well, again, if you're out there and you're watching on Facebook or LinkedIn or YouTube, make sure you're hitting all the buttons that you're supposed to hit. Make sure you subscribe to our channel. Right down here is our website, freedomcapitalinvestments.com make sure you go onto our website and we've got. What is it? The investor club.
Yes.
Yes, the investor club.
The Freedom Investor Club.
Yes, that's right. You can join the club. That's right, Biffy. So again, make sure you join the groups. Get in there, especially on Facebook, facebook.comgroups forward/freedom through passive income and then also another group on LinkedIn and go to the search bar, type in Freedom through.
Passive income and get in there.
All the team's all in there. Yeah. So ask questions, get to know everybody. Let us know how we're doing. Let us know if you have any questions or recommendations, some topic you might want us to talk about. So let us know. But we always like to. Wait, hold on a second. I. There was a quiz there. What did I win? What's he win, Johnny?
What did I win, my love?
Oh, yay. We always like to end these with Invest smart, Live happy. Bye, everybody.
Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss, y'.
All.
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