[OPINION] What's the Best Use of Your Cash?
Updated: May 5, 2020
Memes are hilarious and can be a great way of getting your point across. In all seriousness, though, debt can be extremely dangerous. The dangers of debt are complicated even more by compound interest. This can send a person's finances spiraling out of control. Albert Einstein, one of the world's smartest men, once said, "Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn't pays it." So for anyone out there looking to get their finances in order and wants to begin investing, your number one priority should be to pay off your debt, starting with your credit card balance first. Warren Buffett, the world's greatest investor, was once asked by a woman what she should do with the money she was saving up to invest. Buffett kindly asked her if she had any credit card debt, to which she replied yes, a significant amount. His advice to her was that the best use of her cash was to pay off her credit card first. Interest rates on credit cards can be near 20%, so unless you are using your cash to earn more than 20% per year (which is nearly impossible to do consistently), paying off that debt is the most efficient use of your capital. Everyone wants to invest and grow their money, but the first step to getting your financials in order is to reduce your debt to a manageable level. Only once you have got that sorted can you look to start growing your wealth. Stay prosperous, Professor Dollar