Debt snowball while investing?

[James_Fletcher]

Looking at my Salary for next year and loosely extrapolating that going forward. I can make my student debt payments and be paid off in 7 years. I can do that while also putting roughly 1-1.2k a mo into retirement. To get to my 25x # I think I need 22-23 years at 1k a month.

Being that it grows faster later when the balance is higher, is it prudent to start now? I’m just not sure the extra 1k from debt payoff would actually catch me up for waiting 3~ years to start.

Does that make sense?

If I can afford both… why not make my payments while building the foundation of my retirement accounts to grow on?

[dgurgan (Dustin)]

Hey James! There is the constant debate and struggle of looking at the “low-interest” loans and looking at the “high-interest” market and thinking Why shouldn’t I just invest?. Paying off debt isn’t as sexy as a potential market return of 10%. But paying off debt is a consistent return on investment. How much faster could you grow your net worth if you just tackled your student debt at first, then took the debt payments and started investing those? Being debt-free is a great place to start the rest of your life.

See this post from Jeremy

[tblank78 (Tyler)]

I agree with Dustin, and the guaranteed return on investment (fixed interest rate on your student loans) is something to really consider. Something else I would like to point out is that getting out of debt is also the foundation of your retirement, as it is decreasing the amount of “minuses” on your net worth calculation. I guess paying off loans with guaranteed interest rates could be looked at no-risk investing!

Check out Jeremy’s article on Net Worth

[Jeremy (Jeremy Schneider)]

Hey @James_Fletcher!

In addition to the great advice from @dgurgan and @tblank78 I would point you to this post, that breaks down some more reasons I would go after the debt first:

My friend messaged me the attached question on "investing when in debt" based on one of your insta posts. What is the best advice to give them?

Hey @gteee! Yeah, I would definitely pay off the non-mortgage debt first. Here’s some reasons: Guaranteed vs potential: Even if the interest rate on the debt is lower than the potential gain from investing, you are DEFINITELY on the hook for paying the interest, whereas gains from investing are only POTENTIAL gains and will include a lot of volatility. That opens you up to risk. i.e. imagine borrowing $1 million at 5% then dumping it all in the market. Hopefully that makes your stomach turn,…