Am I the only one who thinks paying off debt fast isn't always the best move?

I had a conversation with my buddy Dave last year at a coffee shop in Portland. He was dead set on throwing every extra dollar at his student loans, like $800 a month over the minimum. I told him I was doing the opposite, putting that cash into a low cost index fund instead. He said I was being dumb and that debt is an emergency you kill fast. But I showed him my math, how my investments were earning 7% while his loans were at 4.5%. He still thought I was wrong. Has anyone else chosen to invest instead of aggressively paying down low interest debt?

2 comments

2 Comments

wyattmitchell11d agoMost Upvoted

I had a 3.2% car loan a few years back and my buddy Tim said I was financially irresponsible for not paying it off in six months. I pointed out my savings account was earning 4.5% at the time and he just stared at me like I was speaking a different language. Some folks get real religious about debt and math doesn't seem to matter.

davis.diana10d ago

it's wild how people get so caught up in the "debt is bad" mindset without actually running the numbers lol. I read this article a while back that talked about how a 4.5% savings rate beats a 3.2% loan rate every time, but some folks just can't wrap their heads around it. @wyattmitchell you're not wrong, that's literally free money you'd be losing by paying it off early. Tim needs to take a math class or something lmao.