We’ve spoken to several financial planners and investment advisers over the years and unequivocally, they’ve recommended investing funds on hand rather than reducing essential debts like mortgages and student loans. Certainly, the math behind this makes sense because good return on investment is based on two things – time and compound interest. The logic goes like this. If you pay off your debt on hand, then begin to invest, you lose those years of compound interest on your investments. For many years we thought this was a wise way to go.
Over the last few years though, we’ve come to see things differently. As our lives become simpler, so our ideas about finances. Our entire western culture is built on a desire to better one’s life in ways that generally allow one to accumulate more stuff. Our education is geared around preparing our children for this pursuit. We make sure they get an adequate education that will prepare them for pursuing the amount of material comforts they’ll need or desire. Once they begin working a job, they begin to prepare to maintain this status until the end of their days.
To us, this seems rather silly. Is not life about more than working a job and having stuff? We’ve come to see that his is an empty pursuit that robs people and families of their essential well-being. It drives families into debt, which results in more work to service their debt. Truly, “the borrower is servant to the lender”.
Once we began to see that money is an illusory carrot dangled in front of the masses of society in exchange for servitude, we began to change our minds about debt. No longer are we concerned about how many thousands of dollars we’ll have when we reach 65. Rather, what kind of people will we be at 65? What kind of lives will we have lived? Will our resources have been used for good, or to line the pockets of the super-wealthy? What will our children be like and what will the experiences of their lives be? Without exception, for us being debt free as soon as possible provides more enjoyable answers to those questions. Are we saying investing is bad? No! But for us, we’ve come to see investing in debt reduction to have far more value to our lives than investing those same funds to get “more”.
Being debt free truly brings freedom. Does freedom have a price? Debt brings a lack of freedom as one is contractually bound to pay back their debt, therefore must gather the resources to pay their debt. This means choosing a job and schedule that gives one the resources to pay this debt. At the same time, we’re living in a culture that encourages more debt. Don’t believe us? Our entire economy is based on this premise. Debt IS currency in the USA. Not sure about that? Do some research on fractional reserve banking sometime.
Being debt free allows people and families to choose to spend their time doing what they enjoy, where they desire to do so, and with whom they desire to do it with. Does that mean NO work? Not usually – but it does give one the freedom to enjoy more trivial work that provides only what is needed. If we were debt free, we could invest a much smaller amount of time outside of our home and interests than we do now. To us, that has far more intrinsic value than any gains we could experience by investing our resources elsewhere.
So get out of debt or invest? Which is it? We would say getting out of debt is investing – and perhaps the best investment one could ever make.
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