Financial Management-Presentation

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FinancialManagement : Presentation

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Invest
Debt
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Pay Off Your Debt or Invest

FinancialManagement

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Should I pay off my debt or start investing
The answer depends on two variables:
1. The rate of after-tax interest on debt
2. The after-tax rate of return on investment
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Pay Off Your Debt or Invest

FinancialManagement

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What should we do
Scenario 1

Assume
you have a 30 year, $150,000 mortgage with a 6 percent rate.
Also you are in the 25% tax bracket. Due to the itemized deduction of mortgage interest, your after tax annual percentage rate is really 4.02% (not the 6.00% you are paying).

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Pay Off Your Debt or Invest

FinancialManagement

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What should we do
Answer 1

Hence, if you expect to earn an after-tax return higher than 4.02% on your investments
(odds are substantial you will if you have a long-term horizon),
then you should invest.
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Pay Off Your Debt or Invest…