I wrote this in 2014 while sharing housing with roommates in a high CoL city, and struggling to pay off student loans that were nearly 3x my annual income. Now, I’m exploring the world debt-free with my husband. You can do it! Stay the course!
Today’s inspiration comes from a post on reddit about how to spend some extra money:
I am 31 and starting a new job and going to make 4-5x my last year’s salary. I have 140k @ 6.8% in student loans, and next to no retirement investments. I can pay my student loans off in about 3 years, and I’m planning on maxing out my 403b this year. My question is, should I put additional money into a 457b this year (making up for the previous few years that I haven’t been investing) and extend payments on my student loan by about a year, or just focus on the student loans? Thanks for your advice.
This question comes up all the time, whether you’re a student with credit cards, starting a new job, or navigating your career later in life. The specifics are almost always different, but the fundamental question stays the same. “Is it worth it to pay my debt off early?”
For a moment, let’s forget about things like ROI, taxes, and investment gains. We already know those things are important. We get all that.
But paying off debt feels different. We’re not setting aside money for ourselves; we’re paying it to someone else. Shouldn’t my money be working for me?
I have way too many bills. Every month I am responsible for no less than 8 different payments before I spend a single dollar (is that high or low?). Rent, utilities, debt – each one with a payment. If I were to lose my job tomorrow, I am still responsible for those 8 payments even if I don’t spend anything else.
Debt represents 3 of my 8 payments. These 8 payments mandate how much money I have to make at my job and how much money I have leftover for myself. More importantly, these payments represent how much I have to work for other people before I get to enjoy myself. The higher my monthly payments, the less freedom I have to pursue what makes me happy or how much risk I can afford to take with a new job opportunity. So long as these payments exist, every financial decision I make has to start by answering “will I be able to pay my bills?”
Imagine that you could do whatever you wanted and it would pay all the money you would ever need. What would you do first?
Of the 8 payments I make every month, some are unavoidable. I will always need a place to live, and electricity to flow through it. But I will not always have debt.
Debt is the reason I don’t live in a nicer house. Debt is the reason I have not bought a house. Debt is the boogey man in the back of my mind telling me I have to make $XX dollars to get by.
Debt shapes my life. Debt determines how much fun I have. Debt is in control. I hate debt.
I hope you hate your debts.
I hope they drive you nuts and you are doing everything you can to get rid of them.
One day you’ll make your final payment and be free … and be so thrilled with the extra money that you finance a car, or a new work wardrobe, or a cruise, or your wedding, or….
Or you will stop the cycle. You will save your money. You will buy things in cash. You will invest for retirement like never before. You will give back to society. You will spoil friends and relatives with gifts. You will take that lower-paying job you always wanted, or start your own business, or just take a break from work altogether and explore the world.
You will have enough money that you won’t have to worry, because you will need very little money. You will live the life you want, and not the life that you need in order to pay for things.
But you can’t do any of that until you are free. One day my debt will be gone and I will have more freedom than ever before to enjoy myself.
Getting to that day is my priority.
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