There is a lot of discussion in the media and specifically amongst economists of a turn around in the stock market and the economy. An escape route from the recession is wanted by all. But such discussion is giving hopes to many American families that investing in the market at this juncture will solve their financial problems. As the thought goes, perhaps big gains from investing at the trough in the market cycle will result in the much needed funds to end a dependence on debt.
Not only is this line of thinking deceptive, but I would caution against investing what money can be scraped together when other more pressing financial needs exist. Given the typical debtload of a household, scarce funds need to be prioritized for debt reduction and other uses that reduce financial risks for families, like building an emergency fund that covers at least six months of expenses, including medical needs. Even more clearly is the importance of guarding against the loss of a home to foreclosure — if a family determines that continuing to meet mortgage obligations is the best course of action from strictly a financial standpoint — instead of investing additional funds into the stock market.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs. DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
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