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

I'm your host, Laura Adams.

If you're fortunate enough to receive a cash windfall or to have some extra money

left over each month, you've probably wondered about whether you should

invest it or use it to pay down your debt. Today's episode is part two of this

topic, so be sure to read or listen to part one to fully understand it.

Since this issue is a hotly debated topic,

I've also included common pros and cons

that are argued on both sides of this issue.

That made this episode a little longer than usual, but if you stay with me I think the information will help you make wise financial decisions

Before you can make a decision about the best way to use your spare cash, it's important to analyze your options and see

which one is the most profitable. The key to figuring that out is getting down to

what a debt costs you after taxes or what an investment will earn for you after taxes.

Faking taxes into consideration is so important because it allows you to make an

apples-to-apples comparison using the real numbers.

In the prior show, I discussed how to calculate the after-tax

interest rate you pay for tax deductible debt. Remember that there are three

personal debts that are tax-deductible, mortgages, home equity lines of credit, and student loans.

Most people who have those types of loans are eligible to claim a tax deduction and reduce their taxes.

That can substantially lower the effective annual interest rate that you have to pay for a debt.

It's kind of like getting a mail-in rebate on something you buy. You pay full price now,

but the rebate lowers the real price you eventually pay once the rebate

...