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- My husband and I paid off $80,000 of student debt during the pandemic, but now I wish we hadn’t (newsbreak.com)
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During the pandemic, my husband and I focused on aggressively paying off his substantial student loan debt, which topped $110,000. We adopted a strict budget influenced by Dave Ramsey’s principles, often declining social outings to allocate funds towards the debt.
By early 2023, we had managed to pay down over $80,000. However, this aggressive repayment lead to some financial insights that changed my view on how we managed our finances.
Although we relieved ourselves of a significant amount of debt, in hindsight, the money could have been more strategically used, especially since the loans weren’t accruating interest.
Here are three things I would do differently if given another chance:
1. **Invest in Real Estate**: The $80,000 could have served as a substantial down payment on an investment property.
We eventually bought our first home during the pandemic using a VA loan, which didn’t require a down payment. This enabled us to save towards purchasing a duplex later.
We now plan to generate passive income by renting out our previous home and one part of the duplex. Although it may seem counterintuitive to acquire more debt, the potential rental income outweighs the costs of the loans in the long term.
2. **Earlier Investments in ETFs and Retirement**: It wasn’t until I was 24 that I began investing, influenced by the book “Smart Women Finish Rich” by David Bach.
Investing in Exchange-Traded Funds (ETFs) was a key strategy, spreading out investment risks across various assets. The returns from these investments, averaging 6% annually, outpaced the interest on the student loans.
Starting these investments sooner could have significantly leveraged the power of compound interest against inflation and taxes.
3. **Separating Net Worth from Self-Worth**: I spent too much energy seeing debt, particularly student loans, in a negative light.
These loans contributed to education and career opportunities for my family, benefits I initially overlooked due to the burden of debt. Realizing that student loans are an investment in future potential rather than a personal failing shifted my perspective.
Proper management of these debts, by making timely payments and not overpaying, ensures they do not have to compromise financial stability.
This reflection originally appeared in Business Insider in July 2023 and offers a lesson in balancing debt management with broader financial growth opportunities.
Read the original article on Business Insider.