Question: Should I pay off my debt or invest?
Short answer: If the interest rate on your debt is less than your anticipated investment return you should invest while understanding the risks of investing. However, if you lack self control or have struggled with debt in the past you should consider paying off your debt before you invest.
Long answer: There are two approaches to this question a “head” approach and a “heart” approach.
By this I mean that the “head” approach is simply, if you can make more investing your money than you can paying in interest you should consider (note, I didn’t said consider) investing. A lot situations look good on paper, but they rarely ever turn out that way, especially not the stock market. The main reason is risk. People fail to realize the impact that risk can have. For example, if you owe $5,000 on an car loan and you are paying 7% interest and choose to pay off the car you will earn yourself a guaranteed 7% return for not carrying the loan and avoiding the interest.
The “heart” approach is one that may be better for a lot of people because you would pay off all your debt first and then invest. This would allow you to feel better knowing you can afford to invest without serious financial strain from your debt. Should your investment go down significantly or you lose it all you won’t be worried that you still need to pay down your debts.
You could find yourself somewhere in the middle rather than on either end and choose to pay more than the minimum on your debt and set aside a small amount to begin investing. This would approach would lean more towards the “heart” approach as it would provide a small sense of accomplishment that you have started planning for your future. You must understand that this decision also comes with risk because you will be diluting your ability to pay down your debts faster.
NOTE: Asking a paid financial advisor this question is rather silly because traditionally they get paid more the more you invest with them or they have as asset under their control.