Interesting. I just started writing a trilogy on these types of topics on
my blog. The article I am currently writing is about this exactly.
I am a big proponent of being debt free. There are lots of pluses to having very low overhead such as being able to save, and IF you lose your investment money you still have low over head and a place to live.
However, look at the math. You are talking about under 3 percent interest for your student loans. Heck, putting that money in a CD would get you 5 percent, you would still make money on it. I personally don’t put much in CDs except for some short term savings to get a higher rate. Average return a year in the stock market over time is 10 percent. So, you lose 7 percent interest if you pay that off.
As to the home loan, I would not pay that off either. Why? First off all, tax ride off. Second, at 6 percent, you are still making more money in the stock market then you are saving by putting it into the house.
Now, math aside, debt of any kind does not make me happy. I don’t like, I don’t want it. However, in your case, I think a happy medium would work well. I would let the student loans ride paying only the minimum (because the payment is so low and the interest is so low, you will make a lot more money investing) and focus on paying off the house by paying say 1.25 percent of your mortgage payment. This will still start getting it paid off faster, you will still get huge ride offs, and you can still invest.
Now, here is the cravat. DON’T SPEND IT. If the choice is pay off the loans faster or buy a boat then you want to pay off the loans. But if you can be strict with yourself and really use that money to invest and build a good portfolio, then I think that you want to focus there.
Just my 2 cents.
Adrienne
