Hello everyone and welcome back to Money Girls Quick and Dirty Tips for a richer life.

I'm your host Laura Adams.

Hmm, does it make more financial sense to invest my spare money or to use it to pay down debt?

It can be a perplexing question, but I'm going to help you with the answer in this and in next week's show.

Whether you should invest your extra money or use it to pay down debt is a hotly debated topic in personal finance.

No matter what type of debt you may have, a mortgage, car loan, student loan,

credit card, or all of the above, it's likely that you want to pay it off as soon as

possible. But you also want to pay it off as soon as possible.

But you also want to save for the future so you'll have financial security.

With only so much money to go around, how do you decide where to send it?

When you boil down the investing versus debt reduction issue, the real

question is which option will bring you the highest return on your money? In other words,

what's more profitable, investing with the expectation that your money will grow, or saving the

interest expense that you have to pay on your debt.

When you pay off debt early, you're actually earning a guaranteed interest rate that

you'd otherwise have to pay.

The tricky part about this issue is that income taxes come into play.

Taxes can make a huge difference because they make some investments less profitable, but they also make some debts less costly.

In this show, I'm going to focus on how tax breaks affect tax deductible debt.

Next week in part two of this topic, I'll discuss how taxes affect your return on investments.

After you hear both shows, you'll be able to make a wise decision about what to do with a financial windfall

or discretionary money that you have left over each month.

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