The Rules Of Personal Finance Blogging Essay
There 's No Reason to Accelerate Repayment on Low-Interest, Tax-Deductible Debt
Just because I 'm willing to carry some debt doesn 't mean I 'm comfortable with all debt. I don 't advocate running up balances on credit cards with high-interest rates and only paying the minimum for years and years. The kind of debt I 'm willing to keep around for 25 or 30 years is the low-interest, tax-deductible variety.
Back when I had a mortgage, I had no intention of paying it off early. After I refinanced to a low-interest rate (and a 30-year term), I was able to free up $300 extra dollars a month. That 's money that I could invest. Over the last 10 years, my annualized returns on my investments have been right around six to seven percent. I 'd rather put that extra $300 a month to work earning interest than paying off a loan with an interest rate of less than four percent. Plus, mortgage interest is tax deductible when you itemize (and I do). That means that the money is even cheaper. Put that extra $300 in a tax-advantaged account, like my HSA or my husband 's employer-sponsored plan, and it 's even more efficient.
I follow this same logic…