Which should you do, pay down debt or invest? You can find different arguments for or against, but I generally say that you should pay down debt, assuming you have a minimal amount of savings ($1000) to cover emergencies. A good list of reasons for paying down debt is provided in this post at I’ve Paid for This Twice Already.

However, my biggest reason is the risk factor. I think Dave Ramsey sums it up best when he says, “I’ve done extensive research and found that 100% of home foreclosures occur on homes that have a mortgage.” Sometimes he might substitute “home foreclosures” with “car repossessions,” but it’s the same idea: If you have debt, you have risk. And don’t get me started on the issue of people willing to incur debt-related risk where they’re sure to lose money but are afraid of investment risk where they have a good chance of making money.

Ultimately it’s up to you to decide how much risk you are willing to take; my main recommendation is that you at least make it a conscious choice.

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