A great SNL skit featuring Steve Martin that really simplifies the truth of the matter with people who are in debt and don’t know how to get out.
SOARING ON THE WINGS OF SELFISH PRIDE, I FLEW TOO HIGH, AND LIKE ICARUS I COLLIDE
Since the stock market has looked so unstable recently, a lot of people have been asking me what they can invest in safely. There’s a case to be made for international bonds and undervalued real estate, but most of those who ask can get very high returns without doing any work.
Many people can get a 50% return on their money by doing something very simple:
Paying Down Debt
Credit cards typically have an interest rate of 20%. In an ideal world with no income taxes, paying down credit cards would be equivalent to investing the money with a 20% rate of return. I can’t picture myself getting a return like that by buying stocks and bonds.
But this 20% return is deceptively low. The effective return is much higher because income taxes are so high.
If you’re living in California, your marginal tax rate is probably 32% (25% federal times 9.3% state).
You can’t write off credit card interest on your taxes. That means for every $20 of credit card interest you pay down, you have to earn about $30.
By using the $30 to pay down your credit card, you save $10/year in interest.
If you were to invest the money instead, taxes would reduce your profit by 32%.
To achieve a $10 return on $30 after paying your 32% taxes in the stock market or by flipping houses, you’d actually have to make $15 pre-tax on your $30. $15 is 50% of $30.
That’s right: When you invest your money short-term (less than one year), you’re double taxed: once when you earn the money at your job and again when your investment turns a profit.
On the other hand, you’re only taxed once when you pay your credit card down, since there’s technically no profit made by lowering your interest payments, and you can’t write credit card interest off on your tax return.
I think my math is correct here: Paying down credit card debt with interest of 20% is equivalent to investing the money at a 50% rate of return.
Paying down debt is also important right before a recession, since a lot of people will be denied raises or lose their jobs altogether.
Those who have money will find that with their debt paid down, they’ll have more available to purchase undervalued investments in the middle of the recession when the prices have bottomed out. They can then wait for prices to go back up during the recovery period.
I’m not offering professional advice to you, so you may want to verify all this with your CPA before doing anything. 
So steal my heart and take the pain
and wash the feet and cleanse my pride
take the selfish, take the weak,
and all the things I cannot hide
take the beauty, take my tears
the sin-soaked heart and make it Yours
take my world all apart