Reply to Single parent in need of debt management/savings advice

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][b]I realize the issue my have been put to bed, but I would like to suggest rethinking the strategy of throwing all your money at the loan balance. [/b]While I understand the emotional significance of getting out from under the debt, I believe your age comes into play here. At 39 you don't have very many years left to be aggressive in the market. I would really plow as much money into retirement and investment (including 529 if you are planning to pay for your child's college - since the window for that is similar and will have to adjust to a more risk averse portfolio in 15 years, if not before).

If you pay off the loan now you can't get that money back and you won't be able to get a personal loan for that interest rate. If you save/invest that money you can always go back and pay off the loan if you need to for some reason. In the past 17 years there have only been three where the average annual return (from that year to now) has been less than 5%. The blended average of those 17 years is 9%, I think research suggest 8% average over time.

Paying off the loan early may make you feel better emotionally, but it is not the most prudent use of the money and will keep you working a few additional years to get to the same financial point. It is your money, your life, but as a single earner the loss of those years of aggressive compounding will be substantial.[/quote]

I agree with this.  Actually, I still would overpay the loan, but not by as much as your most recent budget projects - I'd keep the same total between loan repayment and extra retirement savings, but do a 50-50 split of that total between the two, or maybe 60-40, tilted towards retirement.  Plan on paying off your loan in 10 years, instead of 5, and still load up the savings.  I have made some less-than-optimal long-term financial decisions in the pursuit of becoming debt free, so I get the inclination, but PP is right - you are behing the curve re retirement, and you owe it to yourself to put as much as you can into retirement as soon as possible to allow it the opportunity to grow.  Plus, since you're already maxing out your tax advantaged plans, you can always use that savings in 5 years to knock out your loan, if that's what's best for you then.  Splitting it up gives you more flexibility.  [/quote]

I agree. Every month put some away, every month knock down that debt.[/quote]

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