Get Out of Debt OR Invest??

There are “experts” that would tell you that paying off all of your debt is the key to financial freedom. These same experts suggest that paying off debt should come before saving for retirement. Let’s think that through…

Let’s assume that you have $50,000 in student loan debt and you’re making payments of $250 per month at an interest rate of 3%. With those numbers, it would take you 23 years to finish paying off the student loan. So are you really going to hold off saving for a home, a child’s college education, retirement - while you pay off ALL of your debt?

Now - payments of $250 per month equal $3,000 per year. In the period between 2011 and 2020, the S&P 500 earned an average of 13%. That means that if you had invested the same amount that you put into student loans during that period, you would have earned around $400,000.

I am not telling you to skip student loan payments. I’m saying that finance isn’t an “all or nothing” decision. You don’t HAVE to choose debt repayments OR saving for retirement. You don’t HAVE to choose saving for college OR buying a home. You DO have to determine your priorities based on YOUR lifestyle. And then you have to hold yourself accountable.

Now if y’all get out here telling the people that I told you not to pay your student loans, we CANNOT be friends anymore...Obviously, the calculations are more complicated with tax implications and inflation, but the POINT is that you can prioritize and plan your finances in a way that benefits YOU, not the student loan servicer.

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