Pay off debt or invest in business ventures?

[BePhenomenal]

Hi everyone, I'm quite new to the forum (and hesitant to post this..) but I've been reading a lot and think that this is a pretty awesome place. You all have really great insight, so I was hoping I could ask for some advice.

(I read the rules, but let me know if this is the wrong place to post, I'll move along no hard feelings [emoji14])

Anyway, I'm in first year of uni (Australia) and I have a scholarship. The thing is, it's cash in hand every semester to use as I see fit. Generally, people just use it to pay off tuition straight away (that's what parents and friends all tell me to do). Yet, part of me is thinking that I should be taking risks with this money and using it to help in any business ideas I have over the next few years.

If I just paid off debt it would probably kill off half of my degree's expenses. If I invested it in fastlane ideas, it would help a lot.

So I'm just looking for some plain old advice. I'm young and I know everyone says to get rid of debt while you can, I just want to hear what you all have to say. (Keep in mind this is Australian uni system, so I would be paying off about $20-40k student debt through tax once I earn over $50k/yr). Thanks a heap everyone!

 

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[phenom4hire]

If you were to use it for a fastlane idea/business, I wouldn't jump straight in with guns blazing throwing money at just any idea if I were you. If your career choice is offering you a good prospect, you would be wise to finish your education with as little debt/risk as possible. I don't think it would hurt to test the waters on a few ideas through validation. If the time came where you are pretty sure you can make a profit/break even then the risk of using loan money would not be as great. Start with an idea and try and validate it on a small scale first. Minimal investment/Minimal risk and just try and execute on that and go from there. Throwing a lot of money at any idea will not necessarily make you successful.

 

[BePhenomenal]

If you were to use it for a fastlane idea/business, I wouldn't jump straight in with guns blazing throwing money at just any idea if I were you. If your career choice is offering you a good prospect, you would be wise to finish your education with as little debt/risk as possible. I don't think it would hurt to test the waters on a few ideas through validation. If the time came where you are pretty sure you can make a profit/break even then the risk of using loan money would not be as great. Start with an idea and try and validate it on a small scale first. Minimal investment/Minimal risk and just try and execute on that and go from there. Throwing a lot of money at any idea will not necessarily make you successful.

Thanks for that, those are some good points. I guess it does make sense, I should be finding a way to start small. I appreciate the advice!

 

[phenom4hire]

Plenty of time to go big my friend. The hardest part of the battle is sticking with something and following through. I know from experience.

 

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[Jon L]

Here's the thing with business...you're gonna make mistakes. Unfortunately, they don't teach real business in school, so the only way to learn it is through trial and error. Yes, you can learn from other people, but often you're not even ready/able to hear what they're teaching until you've made a mistake that you're trying to fix.


So...make mistakes with small amounts of money first. Certainly not borrowed money. Start something that can be profitable on day one - some sort of 'consulting' type work - web design, freelancing of some sort. That is what I'm doing currently. Even though I 'trade my time for money' and I 'own my job,' there is nothing more freeing than the idea that I can sell my services to multiple clients, do work for them, and then get cold hard cash in return. I'll never need to look for a job again. Plus, its the first stepping stone for me to grow it into an 'actual' business where my business system is what makes money instead of me making money.

 

[BePhenomenal]

Here's the thing with business...you're gonna make mistakes. Unfortunately, they don't teach real business in school, so the only way to learn it is through trial and error. Yes, you can learn from other people, but often you're not even ready/able to hear what they're teaching until you've made a mistake that you're trying to fix.


So...make mistakes with small amounts of money first. Certainly not borrowed money. Start something that can be profitable on day one - some sort of 'consulting' type work - web design, freelancing of some sort. That is what I'm doing currently. Even though I 'trade my time for money' and I 'own my job,' there is nothing more freeing than the idea that I can sell my services to multiple clients, do work for them, and then get cold hard cash in return. I'll never need to look for a job again. Plus, its the first stepping stone for me to grow it into an 'actual' business where my business system is what makes money instead of me making money.

Yeah I think you're right. That's probably the best way to go about it. I don't want to make any decisions I'll regret. I always have trouble with the idea of consulting though. Maybe it's because I don't have a real specific passion/talent, I'm just a bit interested in everything. Thanks for the input man!

 

[Jon L]

Yeah I think you're right. That's probably the best way to go about it. I don't want to make any decisions I'll regret. I always have trouble with the idea of consulting though. Maybe it's because I don't have a real specific passion/talent, I'm just a bit interested in everything. Thanks for the input man!

sure thing. Best of luck to you!

When you do decide what you want to do, post about it in here and get feedback. You'll save yourself a lot of grief. (I did that on one particular thing, and I think I avoided a calamity because of the feedback I got)

 

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[BePhenomenal]

sure thing. Best of luck to you!

When you do decide what you want to do, post about it in here and get feedback. You'll save yourself a lot of grief. (I did that on one particular thing, and I think I avoided a calamity because of the feedback I got)

Sweet, will do! Thanks for the guidance

 

[contract]

I've yet to see one guru answer this question directly.

Regardless of book, podcast, etc.

It's quite interesting..

 

[H. Palmer]

Debt is only a problem if the terms and conditions of the loan are bad.

Like 20 percent interest, payment due anytime the lender wants the money back.

Those are bad terms and conditions.

Most scholarship debts are like 1 percent interest payable over 30 years only when the borrower has a job or something like that.

If that sounds familiar (check your loan conditions) I wouldn't worry about paying off the debt anytime soon.

 

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[BePhenomenal]

Debt is only a problem if the terms and conditions of the loan are bad.

Like 20 percent interest, payment due anytime the lender wants the money back.

Those are bad terms and conditions.

Most scholarship debts are like 1 percent interest payable over 30 years only when the borrower has a job or something like that.

If that sounds familiar (check your loan conditions) I wouldn't worry about paying off the debt anytime soon.

Hmm yeah I did a bit more research about how repayments work (something I probably should have known about...)
If I earned about 50k, I'd have to put 4% of my income towards repayments that year (the debt has no interest, but is indexed) - at 100k, it's 10% of income to repayments
I'm thinking that it isn't that much in the scheme of things, especially if I'm smart about my money and make voluntary payments. I guess though, unless I have some incredible idea, I'll just be smart about this and pay off those fees while I can.