Invests? Pay debts?

It's been half a year I graduated from University. Same goes for most of my friends. Most had been working over months. During this information era, especially all "bachelors" are highly educated. We are not only educated on how to be a good employee, yet we are also well educated as an entrepenuer or investor too.

Investment is definitely a good idea, infact a good choice if we do not debts while we are young. Sadly, most of us borrow money from our government in order to further untill tertiary. The sum we borrow is huge. Some even borrow the money enough to buy a car. If you happen to get a car, you are considered as paying 2 cars installments... Which is a heavy amount of money.

Although most of them choose to pay the loan with lesser amount of money (we are able to choose how much we want to pay) and try to save or even put the money into other investment plan such as fixed deposit, mutual fund or unit trust. (actually big portion of the people salary are enough for saving even though need to pay car and loan installments. Good news as all of my dear friends are not underpay and threaten unwell.

Ok, back to the topic. Like what i said, most of my friend choose to invest their money instead of paying back the loan. Their investment basically are putting the money into unit trust or fixed deposite. Some invest in share market or forex. Right now, none are capable of investing in real estate. Some even plan to save alot of money get the interest from the bank only pay back to the loan. All of these are good to practice. Let me show you an example on simple calculation as you start invest at 1st of January:

Loan interest - 3%
Inflation - more then 4% a year for Malaysia (US almost 2%, last year more then this figure, and many people forget to add in this into their calculation)
Fixed Deposit(FD) - 7% is the best for I can find (Amanah Saham Malaysia)
Unit trust/Mutual fund(MF) - 3% to 4%
Let take average of 6% for FD and MF (for easier calculation cause no matter which 1 also results the same)

So you add up the loan interest and your depreciation of your money value due to inflation, you actually are losing 1% of the loan interest each year. So end up you'll be paying more for your debts instead of gaining in your investment. More over, FD you have lost control of your money; once you need money, your interest gain will be forfeited. For MF, it also varies like share (although its safer compare to share market). You won't be so lucky each year. You also have lost the control over your cash flow. However, paying debts especially study loan, you still have the control every month.

My advice for you all is try to pay the loan/debt first before you start investing. You'll find yourselves truely earning money through investment once you are debt free. Do not hestitate on earning alot of money now.

PS. Those friend who do not have debts, start invest now and plan for your future.