Friday, March 24, 2017

Invest or Pay Down Debt?

As a financial planner in the Chicago suburbs I've sat down with many new clients who are unsure about how to balance student loans with investing for their future. The ask me whether they should be investing now or waiting and start by paying off their loans. Of course, each person has a unique situation and that will certainly play a role in my advice but more often than not my answer is you should do both.
I understand my advice may sound a little counter intuitive at first but if you take a step back and look at the question from another angle it's quite logical. As we know, and I've discussed many times before, time is your most valuable asset when it comes to your investments. When you elect to forgo investing early on you're squandering the benefits of compound interest when they matter most. I've given many examples in the past depicting the astounding differences of investing early or waiting until your late 20's or early 30's and the results speak for themselves. It's for this reason that I always recommend my younger clients begin investing as early as possible but still pay down their student loans along the way.

I can already hear the groans and excuses now, "But I don't have enough coming in to be able to do both". Of course you do, but you're choosing to do other things with your money instead. Far too many people would rather go out to dinner 3-5 times a week, buy a new outfit or waste their money partying with friends. One night out or a new outfit can easily cost you $100 and that's being modest. If you're not willing to give up one night of going out or one new outfit, then you're going to face the harsh reality later in life that you wasted the most important years for compounding all because you considered these material things a higher priority.

Look at your student loans and investment contributions as a tax placed on you by the government. If the government placed this tax on you, you'd moan, you'd groan and you would complain but inevitably you would pay it because you have to. Set up automatic payments for your loans and automatic deposits into your investment account so that you never see the money sitting in your bank or have the opportunity to spend it. I'd venture to guess that your lifestyle won't change all too much because you'll get creative and find alternative ways to continue doing the things you enjoy. I promise a little discipline and self-control now will pay huge dividends in the future, pun intended!

Would you like to discuss this idea further or find the best places to invest your money while you're paying off those student loans? Click below to schedule a phone call, in person or virtual meeting with me so we can determine what solution works best for you!

I'm giving my blog readers exclusive access to my 5 Point Financial Plan completely FREE. The concepts in this plan are one's that I utilize in every new client meeting and set the foundation for proper financial planning. It's loaded with value and not something you'll want to pass up on. Click below to get  your own PDF version!

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