The investment recommended by Stephan may surprise you.
- Graham Stephan is a financial expert.
- He recently commented on rising levels of credit card debt.
- He believes that paying off your cards is the best investment you can make.
Graham Stephan is a financial expert with a popular YouTube channel. He also discusses money matters on Twitter.
Recently, he tweeted some important advice everyone should read about the best investment you can make right now. Here’s what Stephan had to say.
Stephan thinks everyone should make this investment
On Twitter, Stephan shared troubling realities that led him to offer his investment advice. Specifically, he pointed out that credit card debt statistics show that Americans have borrowed a lot and may not be able to repay it.
Stephan is linked to a fact sheet showing that Americans collectively owe $930 billion on their credit cards – more than the $870 billion they owed during the 2008 financial crisis.
The fact sheet also showed there was a sharp rise in delinquency rates, which measure how many people have fallen behind on payments and may not be able to repay what they owe. Specifically, delinquency rates increased by 0.16% from the previous quarter, with 5.32% of cardholders in arrears. Young Americans account for a disproportionately high share of these delinquencies, as they have a 76% higher delinquency rate than other age groups.
Sharing these facts, Stephan said they were “extremely concerning”. And, he went on to give important investment advice to those in need. “If you have credit card debt, the best investment you can make now is to pay it off – Everything else can wait!” he urged.
Is Stephan right about this investment?
Stephan is absolutely right to warn of high credit card debt rates and increasing defaults. Having lots of money on credit cards can be a huge problem for you financially, and not being able to make payments can negatively impact your finances for years.
He is also right to say that in most cases, pay off credit card debt is the best investment and should be your top priority. Credit cards tend to have very high interest rates, so they can be very expensive.
Your return on investment (ROI) from debt repayment is the interest saved. So if you pay 17%, 20%, or even more on your cards, you’ll get a return on your investment that’s significantly higher than the 10% average annual return you’d get investing in an S&P 500 fund (the S&P 500 is a financial index composed of 500 major US companies, which is widely considered a measure of the “stock market” as a whole).
However, there are a few caveats. First, if you have an employer 401(k) with a business match, you should probably contribute enough to earn the match before you charge extra on your cards. And, second, if you have a card with a 0% promotional APR, as long as you’re on time to pay it off before the 0% rate ends, you don’t need to spend any extra money. you could use elsewhere.
Outside of these situations, however, the high interest rate associated with a credit card is reason enough to invest in paying it off ASAP, as Stephan suggests. As a bonus, if you free yourself from this debt permanently, you will have more money to spend on other investments and you will not risk becoming delinquent if your income drops and you do not have the money to make a monthly payment.
These added benefits make Stephan’s advice even more worth listening to.
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