Mother In Debt After Buying Silver. What should I do?
Investing in a variety of financial assets can lead to long-term wealth, but it’s important to have the basics down first. That includes an emergency fund and debt settlement plans.
Your investment and debt repayment strategy should depend on your personal goals, risk tolerance and financial situation. For example, it often makes sense to contribute to a 401(k) plan — especially if your employer offers one — while paying off student loans. However, if you have high-interest debt, such as credit cards, you probably want to focus on paying that off before investing.
Recently a user of the subreddit r/personalfinance shared that their mother is facing debt after buying $10,000 worth of silver. The operator said they were “not sure” how the debt would be paid, and that the mother wanted her home back.
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Pro tip: Sell assets to pay off debt
The prices of silver and gold have been rising in recent months, so it makes sense that the user mother would want to take advantage of the price jump. But investing comes with risk – and that risk is much higher when you go into debt to invest.
You can, and often should, invest for long-term goals like retirement while paying off your mortgage. But if buying an asset like silver will result in you needing to take out a personal loan or spend more on credit cards than you can afford to pay each month, it probably doesn’t make sense to do so. In this user’s case, they may want to recommend that their mother sell the silver and use the money to pay off the debt.
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Here’s a helpful guide from Fidelity Investments: “If the interest rate on your debt is 6% or higher, you should generally pay off the debt before putting more dollars toward retirement.”
As for the mother’s desire to refinance her home, that is a big decision that requires research and review of all her finances. If he can just sell the silver to pay off the debt, that’s probably the best way to go.
A person who is deep in credit card debt, even after selling their investments, may be able to benefit from a cash-back loan since the loan rates are usually lower than the credit card’s average annual percentage rates (APRs). However, refinancing comes with closing costs and initial fees that can offset the savings, especially if the homeowner doesn’t live in the property long enough to break even. Downsizing is also a viable option for people who want to reduce their housing costs and get back on their feet.
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