Inevitably, the leveraged investors will quickly point out that you can make more money in the stock market or with (further) leveraged real estate investments.
Well, I’m here to say that the correct answer for one person may not be the right solution for another. After all, personal finance is personal. I’ll also point out that there is very little risk in paying off debt.
I chose to pay off all my debts when I was financially independent. Dr. James Turner has come up with the following list of five reasons why someone might want to focus on paying down debts rather than investing that money.
Once our student loans and two car payments were paid off, it freed up more than $7,000 in monthly fixed expenses. That amount of money each month provides a lot of options.
At this point, I was (and still am not) required to work full-time. We can meet our annual savings goal even if I go part-time. In fact, I could easily swing working 75-80% of a Full-time Equivalent (FTE).
Lowering those fixed expenses through paying off our debt doesn’t just provide freedom. It also provides a lot of cash flow, which has some very real benefits, too.
Whenever an unexpected expense came up, it was always stressful. This even included events that we knew we could count on costing money – like the holidays.