re: Pay Off Debt v Invest

Whatever you do, do not put that money on your student loans right now. You are likely to get 10k knocked off if you qualify and its 0% interest through June 2023.

There is always money in the banana stand.

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Do you pay any or all of the debt off?

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7% debt gets zeroed today or refinanced to a lower percentage.

Debt <2.5% isn’t dumb to have if:
1) the payments don’t hurt your cash flow. This can be personal. There are rules of thumb. They don’t take into account individual circumstances very well.

2) you don’t take out any more debt without damn good reason (low interest rate + not affecting cash flow would count)

3) you’re maxing out your retirement accounts

4) you’re investing basically everything that would’ve gone to debt in long-term stock/bond funds, knowing very well that even though the S&P has annually returned 9-10% before inflation per year that you won’t see 9-10% annual returns until you look at something like a 30-year average. You will have to stomach some 30-50% losses, some measly 2-4% gains, and, of course, a few really good years, too. You’ll need to not pay too close attention to how bad it performs some years. You’ll need to not get tempted by whatever tomorrow’s Bitcoin, Tesla, or Gamestop is (which may very well be Bitcoin, Tesla, or gamestop again). If you’re not a disciplined long-term investor in the market, there are still a few reasonable ways to invest. If there’s part of a tiny company that you’re involved with that is offered to you, it wouldn’t necessarily be a bad thing to invest in if you understand the inner workings of it and want to be a part of it. Opportunities like that are generally rare, but I would call them reasonable ways to hold low-interest debt while following the other two principles. And then if you’ve ever wanted to be a landlord, that’s an opportunity to dip your toe in those waters, too.


Congratulations if your theoretical scenario is your reality. You’re doing something right.

What stage are you in the mortgage?

Early stage it’s mostly interest so pay off
Late stage, damage has been done and mostly principal so don’t pay off

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There is absolutely a VALUE to being debt free despite what many folks on this board will tell you. This value is almost always left out of the discussion when it comes to discussions about interest rates, payoffs, etc.

Being debt free is a great stress reducer and freedom expander. It really gives you options in life and being able to have options has value. For example, if everything was always about maximizing $, everyone on this board would be driving used honda civics with 300k miles on them. They dont because there is personal value in driving what they enjoy.

Another example is that if it was always about the $, people would be working at least 2 or 3 jobs and putting in 60 hour work weeks. Why don't they? Because there is a personal value they hold to having that free time at which the extra money doesn't cover the value of the free time. I think we'd all be willing too take pay cuts if it meant working 3 days a week instead of 5, right? But how much of a pay cut would you take? This is where you have to take some time to figure out what that value is for you. It will be different for everyone.

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Very well said.

But for as long as a basic, no-risk, FDIC insured savings account has a higher interest rate than the mortgage/car note, then it's a no brainer to do that rather than pay them off. You can have the best of both worlds in this scenario. Put the entire 200k in a savings account so if you HAVE to get to it and pay your notes, you can.

200k at 3% makes you $6k/year. Either let that interest compound, or take the interest out and use it to make extra payments.

If you lost 100% ability to work tomorrow, how would you pay that 2.5% mortgage?

A paid for home is GREAT peace of mind, but that low rate is great too.

I'd probably take $150,000 and wrap it into something paying higher than 2.5% return that was semi-liquid. Like if you got paralyzed in a car crash, you'd make house payments for 12-18 months, then pay it off when you liquidate the cover.

That said it's probably an early home for you, so where are you in family life? Married, no kids? Are they in the plans soon? If so, you'll be looking to move at some point.

Empty nester? You're probably happy living in that same place for your remaining years.

Depending on the car, I wouldn't pay it off unless you could sell it and buy something comparable that could be paid off or paid off sooner. But I'm not but into status symbol cars, so for me that's not that important.

Student loan, like others have said, ride it as long as the Gov is fricking around with it. I'd personally go join every "FORGIVE THE STUDENT DEBT" rally I could.. paint my hair pink and all. I'd scream and holler with the lefties until my it was zero'd out. Thanks Brandon!

Your house will, hopefully, appreciate at a rate similar to your low interest so that is the best way to not wind up with a fat 0 for a credit score. I did the Dave Ramsey debt free strategy then needed credit for a mortgage and had to pull some tricks. Get out of PMI or any other fees by paying it down to interest alone then keep making your payment. Paying it off only assures that you will earn the appreciation of your real estate value

Thanks OP for this thread as I was literally coming to this board to post a similar question.

nearly same amount in hand as OP but

~ 80K left on mortgage

3 paid for vehicles - casually looking but don't NEED to

no other debts at all

I'd like to move to a more rural setting, but like the vehicles I don't NEED to

Here's my twist: w/o devolving into politics, I'm a firm believer than a hard economic crash is coming - harder than this country has ever seen - that or Wiemar Republic type hyperinflation. That has me thinking physical commodities rather than stocks/bonds, etc.

Between the cash and our equity I could move homes easily enough, but if the economic catastrophe I expect happens then a 800K home could suddenly be worth 200k and the cash used to pay it off would be lost and better used someplace else.

Good God Eugene, if what you are predicting happens. Having a paid off house or extra money on hand will be the least of your concerns. You're talking about a near collapse of entire economy.