Should I Pay Off My Car or Invest My Money First?

Have you ever had money sitting there and felt stuck with what to do with it, asking yourself, should I invest it or try to grow it or maybe pay off some debt and feel that relief? If you've ever gone back and forth second guessing your decision today, I'm going to help you bring clarity to that exact tension.I got a real positive takeaway for you today. Hello, friend. Ralph Estep Jr. Here.This is financially confident Christian, where every day my goal is to help you break that cycle of financial shame and live with confidence. Now, we got a really specific question today, which I'm going to make a little bit bigger.But the question today was, should I pay off my car or invest my money first? Great question, but let's get right to it. This was sent in by email. Listener writes this. Hey there, Ralph.I'm wondering if I should invest my money or pay off my car first. The interest rate is 7% and I've got $17,000 left on it.I recently sold my house and have enough money to fully pay off the car while still keeping about six months of savings for emergencies. My mom keeps telling me I should invest instead, but in my mind, I feel like I should just pay off the car.Is there a good reason she's suggesting that I'd really appreciate some advice? Well, first of all, when mom says something, you got to listen. Mom's got that ability to say that. And it's really a great question.I get this question all the time because on the surface, this feels like a math decision. You're saying, I got 7%, 17,000, I got money in the bank. But see, underneath of this, I think it's a little deeper than that.What you're really asking me is about peace. It's about risk, and it's really about how you want to move forward. And I want you to hear this right from the jump.There isn't just one right answer. I wish I could say to you from my experience, from my professionalism, hey, go do this. There is no right answer.But I do think there's a wise way to think through it, and that's what I'm really going to help you with today. Because in the end, the best choice isn't just about maximizing returns. That's what your mom is saying. How do I maximize returns?But the best choice is about aligning your decisions with stability and peace. That's what the show is all about, stability and peace. Well, let's get right into the nitty gritty.First thing I want you to do, understand what Your interest rate is really costing you. You kind of understand this. You said, ralph, the rate is 7%. That means if you're paying it off, you're guaranteeing a 7% return.It's what you're going to get, right? Because you're not paying that 7%. And that matters because any investment that you make would need to be consistently higher than that.What do I mean by that?If you decide to take the money that you could invest and you could earn more than 7% on that investment, then keep the car loan, because the car loan is going to cost you less. But here's a great example of that. I had a client I was working with last week.Clients said to me, ralph, I've got this car loan, it's a 7% interest rate. And I've also got these investments, but they're only making about 3%. That's the issue, right? So you're paying 7%, you're earning 3.Guess what, you're losing 4%. So that's where you got to start. Understand the true cost of interest.Now we can get into a whole tax discussion about the effective rate because it's tax deductible. We're just keeping it really simple. But also understand why investing is being suggested. You might be saying, well, mom is riding me about this.She doesn't understand what she's talking about, but she's not wrong in this. She's probably thinking this. Over time, the market can return more than 7%. And historically, I can't argue with your mom, that can be true.But here's what your mom might be missing. And listen, I'm not calling out mom because I don't want to get you in trouble with Mom. But here's what you could be missing.Market returns are not guaranteed. The last several years, numbers have been great. I look at my own investment portfolio, it's been growing at 10, 12, 14.I had a couple years ago where it grew at 18%. Hey, that's a no brainer. If I can make 18% and it's only costing me seven, hey, I'm making money on that deal. But those things aren't guaranteed.Timing matters. And listen, short term volatility is real.But right now, as I record this episode, in the United States, we're in the midst of a very volatile financial situation. Prices are going up, specifically oil prices. So you have to realize that there's volatility in this.And what might seem like a simple decision might not be so simple. This isn't just about potential. It's about certainty versus risk. That's what I mentioned. But how do you make a practical decision?I first think you need to do is look, look at your current foundation. And I love how you said this, because this is where your situation stands out in a good way.One of the things you mentioned, you said, ralph, I already have six months, nine months of emergency savings. I don't remember exactly what you said, but you had a lot. You have the ability to fully pay off the car. Hey, that's a great place to be.You have this money sitting on the side, and at any moment you could say, ralph, I could just pay that thing off. That's a beautiful place to be. That means you're using credit wisely, which means you've got margin to make a thoughtful decision.A lot of people don't live in that same place, but that is a super strong position. You're not in this place of pressure.You're not in this place of, well, I have no other choices, Rob, you're making a choice from stability, which makes this so much easier. But I want to key in on something you mentioned here. I want you to really think about the emotional and financial weight of debt.I want to get real practical. What changes in your life if this car is paid off? Because this is really not just a math decision. It's an emotional decision.But think about it in your own mind. What's changing if your car gets paid off? You might be thinking, well, Ralph, I'd have no monthly payment. That's great.What are you going to do with that money? If you don't have a monthly payment, your cash flow gets better. Great. You have less financial pressure. You have more flexibility moving forward.But that's why I say this is not just a financial decision. This is a mental decision. There's mental space here. And a lot of people. I counsel clients like this all the time.They'll say to me, ralph, we could pay off our house right now. We take the money out of our investments and pay it off.And I know, Ralph, you've told me that my investments are making more than my interest rate, but I just want to have peace of mind knowing that my house is mine. Hey, there's a lot of value to that. Where it might not be the best financial decision, it might be the best decision for you.And that's what matters more here than that math decision. So you've got to make a choice to choose a path that you can stay consistent with. And here's where the wisdom comes in.Here's what you could do, you've already said it. I could pay off the car now and then. I could invest that freed up money monthly. I can make money with that.But here's something you hadn't thought about. Maybe you do this. This make mom happy and you happy at the same time. Maybe you split the money.Maybe you make extra principal payments on the car every month and then you invest the rest of that. But like I said at the beginning, whichever you choose, you've got to make a decision that you won't second guess every month.If you listen to nothing else I say on the show, consistency is what builds momentum. But I want to go a little deeper here. Take a minute of faith here. Because decisions like this can quietly carry pressure.I can already hear the pressure. You've got mom talking over here and you've got yourself over here and you've got this fear of making the wrong move.You got that fear of missing out. You got that fear regret. But here's the thing. God's not waiting on the sideline to correct you after a mistake. That's not the kind of God we have.He's walking with you as you decide, even in this decision. So listen, let's not forget about this. Maybe you drop a prayer right now, say, lord, guide me in this decision.Help me to choose what I should do with wisdom and peace. And he'll talk to you. Because in the end, you don't need a perfect decision. You just need a peaceful one. So here's your win for today.It's time to decide your direction because I can already sense the emotions and your emotions are gonna take over. It's like riding a roller coaster. You got your hands gripped up and down. Talk to mom. Talk to your.But you've got to write down this sentence, I'm choosing to, and then fill in the blanks because it supports my long term stability plan. Write that down. That clear decision is going to remove that ongoing stress. And that depends on the person. Again, I go back to.I'm not telling you what to do. I can tell you financially if you can make more money in the market than what the interest is costing you from a financial Check the box. It's easy.But you might be saying to Ralph, I've never owned a car. I never had a position where I own my car outright. That may be a decision that makes your heart feel great.You've got to decide what works best for you. Well, let's get into the word of God. We're going to go to book of James chapter one, verse five.And this just nails exactly what we're talking about again, James 1:5. If any of you lacks wisdom, you should ask God, who gives generously to all without finding fault, and it will be given to you. I like that one.Just ask for God. And he said, hey, I'll give you the wisdom. Because God invites you to seek his wisdoms in decisions just like this.Yes, God wants to give you decisions on money. God wants to give you decisions on buying a car, paying off a car. And he wants to do it without fear or pressure. So take it to him.Let's do that right now, together. Heavenly Father, I lift up my friend who's trying to make a wise decision.And you see their heart, Lord, you see their desire, you see their ability to handle what they've been given. And Lord, I just want you to remove that confusion and that pressure.Give them wisdom to see clearly, Lord, and peace to move forward confidently in whatever they decide to do. Help them not to be driven by fear, Lord, or comparison or second guessing, but help them to be driven by steady and grounded decisions.Lord, we know that you guide all of us even in choices like this. And I ask this in the name of Jesus. Amen, friend. Wisdom isn't about doing more. It's about choosing well. And you've got a decision to make.I know you'll make the right decision. And if you're stuck between two financial choices just like this, I want to encourage you, I want to hear from you, I want to hear your voice.You can go to financiallyconfidentchristian.com/voicemail we'll put a link in the show notes. It's super simple. You click on the link and you record your voice and bam, I've got it. And I'll play your question on the show.I'll answer your question directly. Again, go to financiallyconfidentchristian.com/voicemail I want to thank you so much for joining me today.I want to encourage you stay financially savvy. May God bless you and you have a great day today.