Ahhhh, the good old “pay off debt vs. save for X” debate. Gets me teary eyed every time ;) Got an email from a reader, and thought it would be better to hear from all of you rather than just me – esp. since I’m sorta anti-home owning at the present time. Well, kinda, but not really…
Anyways, here’s what Mrs. Debater asks:
“I am debating on whether to save up $$ toward a down payment on buying a home or paying off my student loans first. Currently, my student loans are the only loans I have and has a balance of $5500 (one for $2000 @ 6.8% and another for $3500 @ 5.6%) but I’m only in my 1st year. Thankfully, my employer is going to contribute generously from here on out though I’m going to have to put some cash down each semester myself. I really want to buy a house in the next few years but I hate the student loan cloud over me. Would you pay off the debt or save for a house down payment first?”
Personally, I think both goals are admirable. If you pay off the debt, your mind is free’er and you can concentrate more on the house down payment (awesome), and if you start saving for the house first you’ll be that much closer to owning (awesome again!). They’re both great for your finances and it’s pretty much a win-win situation. So that’s good!
If I personally had to choose, I’d probably go w/ the saving for a down payment route. Not at all because homes are “good investments” or anything, but just because having a crap ton of cash saved up is wonderful! It’s like having a giant Emergency Fund before you spend it :) Another thing to consider is that you could always use this cash anytime to pay off whatever you like. So if your saving is going well and you want to throw a couple hundred towards the loans, you can do it! Rather than the opposite of paying them down first, and then taking it out and using the money for something else. Once that cash is gone, you ain’t getting it back.
I think it really comes down to your own preferences. If cutting out your debt means you’re a happier person, then by all means go for it :) Especially if you’ve already got a decent Emergency Fund. Paying interest on loans, or anything for that matter, blows, so anything you can do to alleviate yourself from it is a good idea. But let’s see what our readers say – How would YOU GUYS handle this?
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!