Do you always have to pay your debt first before investing your money? Time is of the essence when it comes to investing and yet you still have your student loans to pay. This is really a very difficult question and as in many situations, there is really no correct answer. It all depends on your particular situation really.

Here Is A General Rule Of Thumb

Yes, time is very important in building wealth for the long term. But there are still too many factors to consider. It will help if you will remember this rule of thumb:

Start to pay off all of your debts with higher interests. They could include your student loans with over 5 percent rate and your credit cards. Make all your minimum payments regardless of their rates. If you are already working, maximize the 401(K) match in your company. Then make your investments to achieve your goals.

Being In Debt Is Not Really That Bad

There is no reason to be discouraged just because you still have to pay your student loans. All debts are not equal. There are debts that will enable you to improve your income level and there are debts that will set you back financially. The loans that you have taken when you’re still a student will enable you to increase your income potential. By earning more, you will be able to increase your assets. They’re the kind of loans that can generate the goods that you want.

If you are like most American students, you may have undertaken around $26,500 in student loans. This amount could scare the wits out of you. However, it is the type of debt that a student in your situation should undertake. The benefits that you get for your college education will far outweigh the difficulties of paying it. Your earning potential after graduation will considerably increase enabling you to pay all your student loans in a matter of time.

Don’t Be Afraid Of The Interest

Loans are predicated by their interest rates. But don’t think that interest rates are always working against you. This is only true when you are paying off a debt. However, interest, especially compound interest, will be your friend when it comes to investing. Interest represents your earnings in whatever investment you have put your money into. This is the essence of investing: you let your money earn by itself. It is investing your money so that it can work on your behalf.

Look At Your Student Loan Positively

Here is how you can look at your student loan positively. The interest rates of your loan could be between four and eight percent. The precise rate will depend on what year you took out the loan and its type. When you are paying off this loan, it is like getting a guaranteed return. In other words, if you are paying off five percent of your loan, it is just like receiving a return of five percent. The only thing is that you have already received this return in advance – while you were still studying.

How You Can Invest While Still Paying Off Your Student Loan

Here are three simple investment tips while you are still paying off your student loans

• Always pay your minimum dues – always keep on paying the minimum amount required in your student loans to avoid ending up in default.

• Get all your student loans under one umbrella – consolidate all your loans into just one roof. You may have different loans with different interest rates. This could make their payments complicated. But getting them into one consolidated loan will make matters easier. You can refinance your loans through private financial service providers or banks or you can use a federal program to consolidate your loans.

• Start investing your freed-up money – once you know the exact amount of your student loan payments, you will be able to see that amount of freed-up money that is left. This is the amount of money that you can start to invest. If you invest it in some financial instrument that will give your more than 8 percent interest which is more than the 5 or so percent interest you are paying on your 

• Student loans, then you are ahead. If this is the case, you are paying your loans and earning money at the same time. You’re good.

This article is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities. None of the information or analyses presented are intended to form the basis for any investment decision, and no specific recommendations are intended. Accordingly, this article does not constitute investment advice or counsel or solicitation for investment in any security. This article does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. The author expressly disclaims any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained in the article, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom. You should perform your own due diligence and contact a qualified investment professional before investing.

Shareef Abdou enjoys writing on anything finance, travel or sailing related. See more helpful financial articles on my blog. 

Photo: By BrianAJackson