I’m not sure if you’ve noticed this about me through my writing but I tend to think a lot, sometimes too much. This blog is limited to personal finance mostly but still, you’ve probably noticed that I go back and forth on concepts and ideas, wavering on the execution and which strategy is best for which time. Which brings me to my current dilemma: should I be investing my money or putting every extra penny into paying down my debt?
I go back and forth on this all the time. I’m already paying extra into my debt to knock it back but still, I feel like I could do more. I look at the $750 a month I spend there and literally drool at the investments and returns I could be making. I already put away $400 a month outside of my 401k, so if I was able to put aside $1150 a month? Now we’re talking. At the same time though, I enjoy putting money into my investments. Watching my $400 a month grow into something is exciting and gives me hope that I just might be doing something right with my money!
When I look at how my net worth has changed over the past year, what I see is that my debt has just slowly, moderately decreased, while my investments in my 401K and Vanguard account have led a massive charge forward. Since I started tracking my net worth like a crazy person, in January of 2012, my debt has decreased by only a total of $7,900 while my investments have risen by $12,500. There is a huge disparity here and while I’m not going to say I dislike it (I do like having more money as opposed to less), I tend to think about the road not traveled.
The thing is, my investments massively outperformed the interest I paid on my stocks. Since January 2012, my investments have paid a return of over 22%, outpacing the weighted average of 5.25% of my debts (not taking into account the tax deduction for student interest). I can look at those two numbers alone and know that my money is being put to better use by investing it. The bigger question now is, now that I have enough savings to feel safe in case something truly awful happens, should I just do it? Should I just go for it, cut my 401k and my investing and just knock away my debt?
I’m honestly not sure about this. On the one hand, I hate debt. I truly loathe it! It’s one of the only things that can keep me up at night and I don’t even have that much of it!! I hope I never have a mortgage, otherwise I’ll never sleep.
On the other hand, I love watching my investment account grow. I love having money as opposed to giving it away. In the end, I’m almost positive that I will take stashing money into a Vanguard account over paying off my debts any day. The more quickly that account grows, the quicker my net worth heads towards positive and the less I will worry about my debt just hiding off to the side, slightly out of view.
Opinions here are appreciated. What do people think? I know a great deal of people choose murdering debt while others would rather build up their cash stash. Let’s hear it, what road should I take?
Photo courtesy of somewheregladlybeyond