Should I save/invest money or payoff my debt? I have been thinking about this over the last few weeks. You could look at the numbers and work which is best option but for me I favour clearing debt first before investing.
Good or bad credit (debt) affects many of us. If you are head over heels in bad debt the interest rate and money you pay back will be higher than your saving returns so the debt wipes out any savings you have. The obvious answer is to pay off any bad debt.
I’m happy with my good saving habits, I’ve watch it start at £0 and grow fast thanks to my extra business income. I’m also happy with my new found budgeting skills and can keep expenses down. I’m no financial expert but I have a plan and that is the most important thing. And when you have a plan you can adjust your plan to your needs as required.
From here I’m now going to suspend and slow down on my savings plan and focus on clearing off my student loan. I’m re-evaluating my master plan and my debt eats into my net worth big style. While it’s comforting having savings and I’m happy with the amounts saved but it hit me hard that my debt beats my savings down. I want my debt gone so the big push is to get all debt cleared faster.
Although you don’t start repaying any student loans until you graduate and hit the minimum income threshold. At the end of the road the student debt you amass needs to be paid back and interest is mounting from day one.
Making the minimum or slower student loan repayments will cost you more in the long term. Unless your plan is to wait for the debt to be written off in your 50’s or to put it bleakly you die before its all paid off. You may even die of fright when you look at a student loans financial figures in real terms.
I think my motivation to save isn’t as great as the new motivation to pay off debt. I did wonder if I should use my saving to pay some of the debt off. Then I kicked that thought out of my head because it would undone all my good saving habits.
Whatever choice you make it will affect your net worth. Anything that gets us closer to faster retirement is a good thing and been debt free will grant us freedom. When you make that last payment you’ll feel happier and debtless. Which is great.
