Credit card payments, loans repayment and EMI’s are the most hard-hitting transactions on our bank statement.
But if I say you shouldn’t ever have debt in your life, it would be unbelievably optimistic of me.
As all of us at different stages of our lives have some capital requirements, which we sometimes fulfil by borrowing money.
Borrowing money isn’t bad.
But what’s worse is getting into the debt trap and then hampering your financial wellbeing. Debt becomes the most convenient excuse for you not to save, invest, and get into more debt.
But now that you are here, we are going to change that; and by the end of the article, you will be all pumped to start investing even when you have debt.
And the transactions made towards your investments will offset the pain of credit card payments and loan repayment (to an extent!).
Investing While in Debt
1. Perform a Debt Audit
This should be the very first step before you invest.
You should know how much money you have in debt, the interest rates on them, the time you have to repay that loan etc.
Once you perform an audit, it gives you a clear understanding of your debts. And then you can make some sound choices.
E.g. If you had taken a loan when interest rates were at the peak, and now the interest rates are meagre. Then what you could do is take out a low-interest rate loan to repay the high-interest loan in full.
This will save you enough money to put towards your investments!
2. Pay Yourself First
Paying yourself first is a straightforward notion that involves you to pay yourself first before paying others.
Whenever your salary hits your bank account, you should first set aside a sum for investing before you pay for rent, subscriptions, etc.
It could also be as simple as setting up a certain percentage of your salary as an automatic payment against Mutual funds, NPS or PPF.
What this does is it instantly takes that sum out of your bank account and puts it towards your investments, conditioning you to work with the balance.
3. Start Small
I know it’s difficult to invest when in debt, but that shouldn’t be an excuse for you not to invest.
You can’t set aside Rs 5000, it ok, set aside Rs 1000 but at least start somewhere.
Something is better than nothing – apply this in investments and reap the benefits of compound interest.
You can start investing small sums periodically and gradually grow your contribution as your debt decreases.
And once you become debt-free, you can invest all the money that you were earlier paying for debt towards building your investment portfolio.
4. Find a Side Hustle
If you feel that your income is so stringent that you can’t take money out of it to put towards investments, then it’s time to find a side hustle.
A side hustle as simple as freelancing, consulting, or running e-commerce store should help you make some extra cash to put towards your investments.
It will not only give you some extra cash but also will diversify your income, making you less dependent on only one source of income.
5. Use Credit Cards the Right Way
This is not for you if you are someone who gets swayed with credit cards.
While using a credit card, you must acknowledge the fact that ‘it is not free money.’ It would be best if you never use it to buy anything that you can’t afford to buy in cash.
But the smartest move to use them is to collect the reward points.
Use Credit Cards to pay for expenses that you anyway incur like groceries, bills, etc. And then pay your card bill before the due date to avoid incurring any interest. This way, you will earn points that you can then redeem for travelling, shopping, and even paying off your balance sometimes.
And the money saved can be put towards your investments like an RD or savings account or even cryptocurrencies as the investment in them starts with as little as 100 INR.
6. Cut Back on Lifestyle Expenses
Lifestyle inflation is real!
It refers to a rise in your expenses with a rise in your income. Whenever you get a raise or your income increases, your standard of living also increases, which curbs your ability to save and invest for the future. So the best way to cope with it is to maintain the same standard of living or significantly less high than your income to save and invest.
People who know about lifestyle inflation are subconsciously more financially responsible for their spending.
The Bottom Line
Investing isn’t that hard, and it’s a myth that it is only for the rich.
If you wish, you can start investing today and gradually make your way up. Nobody starts at the top, everybody starts from the bottom and makes their way up!
So let me ask you now:
- Are you ready to invest alongside tackling Debt?
I know you are, so start budgeting, track your incomes and expenses and start setting aside some money towards your investments.
Let me give you a bonus here and share some mediums where you can start investing with minimum amounts !!
[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]
Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.
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