Pay off debt or keep investments?

jimjames

derekpayne said:

Without giving anything away, the debt is about 6% of the investments.

Very similar to mine. I've refinanced the 0% credit card debt fairly consistently over the last 10 years and have no intention of paying it off at the moment. Current deal is another 2 years before it ends so at that point I may need to clear it if I can't do a transfer but I'll deal with that at the time. I can't see any reason why I would clear it at 0% when the money can be invested instead.

jimjames

Thrugelmir said:

Presumably the 0% interest offers aren't free though. As will come front loaded with a transfer charge fee. That's paid everytime the balance is moved. 

Not necessarily. Natwest current offer was 0% plus zero transfer fees.

barnstar2077

As the debt is only 6% of the investments, I would pay off the debt.  If you were single I would say no way, but obviously your wife is worried about it, and her happiness is the most important thing.

Alexland

barnstar2077 said:

As the debt is only 6% of the investments, I would pay off the debt.  If you were single I would say no way, but obviously your wife is worried about it, and her happiness is the most important thing.

Yes it's hard to put a price on a happy wife but a divorce looks very expensive

jimjames said:

Very similar to mine. I've refinanced the 0% credit card debt fairly consistently over the last 10 years and have no intention of paying it off at the moment.

A few years ago I was stoozing around £40k and the biggest problem I found was spending enough money each month such that the minimum payments didn't cause the overall balance to reduce. With the virus I am doing a lot less business travel so have given up trying to run such a high balance.

thegentleway

I think you shouldn’t count on being able to get another 0% interest free at the end of this one. There’s no guarantee that will be the case. I’d suggest building up a separate saving pot so you’re in a position to clear balance. I’ve got about £23k in interest free credit cards but it’s all in premium bonds so I can repay it if needed. I wouldn’t invest it. 

DiggerUK

If the debt is 6% of what you've saved up then you have a small debt and small investments, in which case you could overpay and clear.

If your investments are large however, then your debt is large, being in debt is always dangerous. 

Having a debt and assets is as nonsensical as having the thermostat set high with all the windows open..._

Alexland

DiggerUK said:

If the debt is 6% of what you've saved up then you have a small debt and small investments, in which case you could overpay and clear.

If your investments are large however, then your debt is large, being in debt is always dangerous. 

Surely the debt is 17x smaller than the assets? But of course we don't know the liquidity, return or volatility of the assets.

barnstar2077

Alexland said:

DiggerUK said:

If the debt is 6% of what you've saved up then you have a small debt and small investments, in which case you could overpay and clear.

If your investments are large however, then your debt is large, being in debt is always dangerous. 

Surely the debt is 17x smaller than the assets? But of course we don't know the liquidity, return or volatility of the assets.

Agreed, the amounts don't really matter if the ratio is always the same.

thegentleway

Is the debt/investment ratio important? Surely it’s the ratio to disposable income that’s important. If OP can clear his credit card debt with a month or two of disposable income then he’s fine but if the credit card debt is more than that then he needs some savings to offset it otherwise he’s putting investments at risk.

barnstar2077

thegentleway said:

Is the debt/investment ratio important? Surely it’s the ratio to disposable income that’s important. If OP can clear his credit card debt with a month or two of disposable income then he’s fine but if the credit card debt is more than that then he needs some savings to offset it otherwise he’s putting investments at risk.

I guess it depends on the type of investments.  I made an assumption in my comment that they were probably stock related.  Even during a fifty percent drop in markets you could still pay off a 6% debt (although you wouldn't want to obviously.)

Personally, I can find many good funds to invest in, but I have yet to find a suitable partner in life.  So I would value my wife's happiness over a trifling debt any day of the week.