Investing in an array of financial assets can lead to long-term wealth, but it’s important to first have the basics down. That includes an emergency fund and plans to pay off debt.
Your approach to investing and debt repayment should depend on your personal goals, risk tolerance and financial situation. For example, it often makes sense to contribute to a 401(k) plan — especially if your employer offers a match — while also paying off student loans. However, if you have high-interest debt, like from credit cards, you likely want to focus on paying that off before investing.
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Recently a user on the subreddit r/personalfinance shared that their mother was dealing with debt after buying $10,000 worth of silver. The user said they are "not sure how" the debt will get paid, and that the mother wants to refinance her home.
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Expert advice: Sell assets to pay off debt
Silver and gold prices have been rallying in recent months, so it makes sense that the user’s mother would want to take advantage of the price jumps. But investing comes with risk — and that risk is even higher if you go into debt to invest.
You can, and often should, invest for long-term goals like retirement while also paying off a mortgage. But if buying assets such as silver will result in you needing to take out a personal loan or spend more on credit cards than you’ll be able to pay off each month, it probably doesn’t make sense to do so. In the case of this user, they may want to recommend that their mother sell the silver and use the money to pay off debt.
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Here’s a helpful guideline from Fidelity Investments: “If the interest rate on your debt is 6% or greater, you should generally pay down debt before investing additional dollars toward retirement.”
As far as the mother’s desire to refinance her home, that’s a major decision that requires research and a review of her overall finances. If she can simply sell the silver to pay off the debt, that’s likely the better move.
Someone who is deep in credit card debt, even after selling their investments, may be able to benefit from a cash-out refinance since mortgage rates are typically lower than credit card annual percentage rates (APRs). However, refinancing comes with closing costs and origination fees that can offset the savings, particularly if the homeowner doesn't stay in the property long enough to break even. Downsizing is also a viable option for people who want to reduce their housing expenses and get back on their feet.
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