Is Debt Really So Bad?

Bagged labeled debt crossed out

Over the past 3 months, I have read and watched hundreds of personal finance articles, forum threads, and YouTube videos.  Now that I think about it, most of these articles and videos have been about becoming debt free and/or living an extremely frugal lifestyle.  Paying off all debts is a noble goal.  Many are unable or unwilling (consciously or subconsciously) to do it.  I talked about applying Dave Ramsey’s baby steps to my life here, simply because, after reading and watching some of his work, I realized that was a path I was already kind of following.  But depending on the debt, how important is paying it off as quickly as possible, and is it worth prioritizing?

A few days ago, I came across a home mortgage payoff goal tracking sheet on the website Making Your Money Matter.  I printed it, filled in the lines with my numbers, along with the month and date I hit those numbers, and colored it in.  Then reality set in.  I have averaged $1500 a month toward my mortgage.  That is a lot of money to me, considering my monthly principal and interest payment has never been over $500, and it is not really including property taxes and insurance.  $1500 is more than I have ever paid when renting.  So where the heck did that money come from?

When I reached 78% loan to value on my mortgage, I got a check back for the money that was in my escrow account.  I think I put that toward the mortgage principal.  The majority of my 2015, 2016, and 2017 tax refunds I believe have gone toward the mortgage.  I have used credit card balance transfers to go toward the mortgage, yet only owe $2900 at 0% on one credit card.  It was the dates on the tracking sheet that really clued me in on how my mortgage balance dropped so fast, and why I did not notice.

At the start of the year that I purchased my home, I was able to get a job that gave me close to a 40% pay increase over the previous job.  My lifestyle did not change much.  I moved to a nicer apartment complex for $150 more a month, but that’s about it.  I was able to save more of my paychecks, which later helped with down payment and closing costs when I eventually bought the house.  It also helped with rebuilding my savings after.  Looking at the dates on the goal sheet, I was not focused on paying off the house early my first 2 years in.  The goal of paying extra back then was to get rid of PMI and escrow.

In 2017, I was able to get another job, again with close to a 40% salary bump.  I did not keep the job a full year, but looking at dates on the tracking sheet, most of that new 40% seems to have gone toward the house, either directly or indirectly, like when I raided my Roth IRA mid-2018 about $100 before my contributions were going to start losing money.  Hindsight, I am glad I took withdrew my contributions.  I would still be negative if I had left the Roth IRA alone.  The experience taught me a good lesson though.  In the future, I am never panic selling again.  Historically, things always work out, and investing in a retirement account is for the long run.  But I digress.

So where am I headed with this?  Well, I would not have been able to pay off so much of my mortgage had I been stuck with lower paying jobs.  And how was I able to get not one, but two significantly higher paying jobs in 3 years?  Investing in myself.  I work with technology.  Things are always changing and I need to keep up.  Putting the time in to watch free videos, attempt to read mostly free books (I am not a reader, but hope to change), use free hands-on resources online, attempt some mostly free online courses, etc., has paid off.  It helps that I enjoy these things and would probably do them anyway, but I cannot stress enough how great the effect has been on my life.  Thanks to the goal tracking sheet, I now see it fully and in color.

Sure, the idea of paying off debt is nice, but when there are opportunities to put time or money into other avenues that potentially offer a higher return, which in turn can help pay off debt, why not do it?  That may be the best option for me.  If I can put $1500 a month toward a mortgage without noticing, it won’t hurt to max out my 401(k), put the remainder of what I can in the Roth IRA for 2018, and max it out for 2019.  I have a brokerage account with Chase You Invest and 95 free trades remaining.  I need to put those to use so I can have a non-retirement portfolio too.  I will continue to pay down my mortgage, but with at least less than half the enthusiasm as before.  Smh… $1500.  I kind of knocked budgeting a little, but maybe I should give it another try.

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