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Ask Dave

Use Investments To Pay Off Business Debt?

Tom's side business is struggling and has put him in debt, but he has the investments to pay it off if he cashes them out.

QUESTION: Tom brings home about $70,000 and is barely breaking even with his part-time business.  He and his wife had twin babies prematurely a couple years ago and have just paid off those ongoing medical expenses.  However, he has $75,000 in debt with the side business.  Should he cash out his $250,000 in investments to pay off the business debt?

ANSWER: Cash out the investments and pay off your business debt immediately.  You wouldn’t borrow against your business to take out an investment, would you?  Then you shouldn’t keep this investment if you have debt to pay off.