Because I want to become a money expert, I’m trying to think about finances differently, to consider all problems and solutions from multiple angles; to weigh all options and be certain that I’m doing the right thing. In the case of paying off my loan, there was actually quite a bit to consider:
- How much cash will we have left after paying off this loan? Is that enough to meet our needs?
- What if I lose my job next week? This cash could sustain us for a long time if that were to happen.
- I’m trading cash for a car. A deprecating asset. Is this really wise?
- What’s the interest rate I’m paying on the loan?
- How much is our cash earning for us right now?
- Could I invest the cash and get a greater return?
- Do I know of any near-term future events where this cash would come in handy (like buying a house, having a baby, moving, etc)?
Not quite as simple as “have debt, must pay off.” And my situation is no different than yours. If you have debt that you’re attacking, that’s awesome, but blindly paying it all off just because that’s what financial experts say we should do might not be right for you, right now. There are exceptions to every rule and you need to evaluate your own situation to make certain that you’re making the right decision.
“Mathematics is the poetry of logical ideas” – Einstein
And with that, we’re done paying off debt – it’s time to focus on wealth accumulation! The debt snowball plan becomes the wealth snowball plan. No longer paying interest, we’re making it. And because we’re debt free, all the money we make from here on out is ours to keep.
And that makes me feel more secure than ever before!