By Jonathan Croswell, eHow Contributor
Investing in your debt sounds like an oxymoron, but it's actually a wise approach to money management that has been around for centuries. Debt investments may not provide a stream of incoming cash, but they do reduce the money you owe while your cash assets and value remains stable, resulting in an overall financial gain for you. Like any investment, you don't want to put all your eggs in one basket, but with a little planning and information you can invest in your debt to build yourself a future.
Instructions
1. Consider the risk of your debt investment. While you can't lose any of the money you invest, you don't want to overextend your wallet and come up financially short in other areas of your life. You will need to make sure you can do without whatever money you are planning on investing.
2. Consider the rate of return in comparison to other investment opportunities. The rate of return on a debt investment is whatever the annual percentage rate is. On a credit card, this can be as high as 30 percent. Compared to a loan, which might carry an 8 percent rate of return, you will want to put your money into the credit card debt first.
3. Balance your investments between debt and market, and short- and long-term. Investing in debt provides immediate relief, while other forms of investments tend to be longer-term. If you have long-term goals, such as owning a house or car, and have specific timeframes in which you hope to achieve these goals, you should strike a balance between the two.
4. Close your highest-rate accounts first. As more accounts close and multiple debts close, you can either devote more of your money to your remaining debt accounts or invest in savings or market investments. If you do not have savings immediately available, you should build up a buffer to avoid having to dip into debt again.
5. When your debts are paid, continue investing---this time in market investments. The financial freedom of debt relief will allow you to build towards larger goals, such as a mortgage, and set you up to receive better rates as a result of your responsibility with past debt accounts.