I often struggle with a fundamental question that drives my financial future: Is Debt a Part of Life? It is a question that I struggle with. Even though I loathe debt and believe there is no such thing as good debt I often wonder if debt is a permanent part of life or at least it is a permanent part of life in your formidable working years. I mean think about it. The most common way to pay for a mortgage is a 30 year conventional loan. That will take you through a good chunk of your working life, assuming you stay in the same house the entire time and you never re-finance. The average car loan now is 74 months. By the time you pay it off at 74 months your car probably isn’t worth much and you might want to buy a new one. The average student loan debt is on the rise and with new payment plans you could spend over 20 years to pay off your student loans. Take that all together and it seems like debt will be a part of your life forever.
I guess what prompts this post is my current situation. I am proud that I have paid off $40000 in debt over the past couple of years. However, I still have over $233000 to go. It seems like such a daunting task that it will never get done. You look up at the hole that you have dug for yourself and it is almost self-defeating. So why even try?
I thought about that this morning as I was driving in the car to meet my little brother from the Big Brother Big Sister program. When I have long drives I let my mind float to do different things I need to do or things I would like to have done. As I was sitting there I thought to myself why I am killing myself so much to pay down debt if it is always going to be a part of you. Why waste my time? Why not enjoy my life? Isn’t life too short as it is.
Now before you go thinking that I was getting off the debt paying train let me assure you that this was merely a temporary lapse in judgement. I still have plans to pay off 10% of my debt this year. I still want to pay off our 2nd mortgage, get our original mortgage down to $150000 and begin chunking even further on my student loans.
Ultimately, I think this does come down too math vs. emotion. On the math part it is, in some respects, foolish to pay our mortgage debt. I mean we get a tax deduction. The longer we own the home the less that deduction becomes and there are things we would like to fix on the house (e.g. our little electrical surprise earlier last month). We could use the extra money to save for re-doing the third floor, putting in new appliances, etc. Moreover, the debt that I have is at such a low-interest rate (2.39% (2nd mortgage); 3.75% (mortgage); 4.5% (student loans). If I invest wisely I generally will be able to beat those interest rates pretty easily by investing in the market.
At the same time that debt hangs over me like a black cloud. Not necessarily the mortgage debt because I don’t have an issue with that. Rather it is the consumer and student loan debt that Mrs. ROB and I have combined that bothers me so much. The consumer debt is about $30000 if you combine our car loan and 2nd mortgage/personal loan.
Considering that hopefully we will have an addition added to our family (we hope) in the next couple of years I want this debt gone to give us more flexibility, which only adds to my desire to pay off the debt. At the same time, I see the numbers and I realize this is a fantastic time to invest in the stock market because it has gone down. I buy more shares with investments which will pay off big time in the next 10-20 years as I look to retire and enjoy life.
This conundrum about debt does come down to the age old question of paying off debt vs. savings and something I struggled with at the beginning of this year about this very issue. I haven’t done anything yet. I have basically stuck with what I have been doing the past few months, which is maximizing savings and then whatever little extra stuff I pick up I throw it at the debt.
I certainly met my debt payoff goals in 2015. However, studies also demonstrate that if you really want to accomplish a goal you need to focus, focus, focus. The problem is I am trying to do too many things at once. I need to focus, but I can’t decide. And then I have these moments when it seems like debt is just a part of life so I might as well just get used to it.
Welcome to another post about my financial thought process out loud. So what do you think is debt a part of life? Should I not worry about the debt as much? What would you do if you were me? My goals are to pay off debt and save? I wish I could do both, but by doing both I might actually doing more harm to myself than good.