Pay Off Debt Or Not?

[austinp]

My brokerage account has grown to the point that its now slightly surpassed the amount of all of my debts. 3 mortgages, 2 car loans, and a Heloc. Would it be smart to sell the stocks and pay them off or keep paying the loans? This account is separate from my retirement accounts. Ive never minded borrowing inexpensive money but the idea of being debt free sounds pretty good as well.



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[brandrea]

You’re going to get a lot of varying opinions (which is a good thing).

IMO, it’s never a bad idea to pay off debt. Being totally debt free is a wonderful feeling.

[Art 1]

I would pay it off. You’ll feel great if you do.

[SpeakWithMichael]

People are talking about a major recession coming.

[Old Geezer]

Not all debt is created equal. Obviously your money has grown so your investments are performing well. If you are doing better than the cost of covering your debt why rush to pay debt. You can do that at any time. Yes, being debt free provides a huge measure of peace of mind but so does watching your money grow. I’m debt free but did it over a period of years by balancing what I put towards debt versus what I saved instead of doing it in one fell swoop from savings.

[Pw92676]

I’m usually a fan of eliminating debt but way too many undisclosed variables here to give a solid opinion. Try searching Bogleheads for similar questions or post your own situation there.

[SeikoBake]

I’d go debt free or at least get your vehicles and heloc paid off

[avidflyer]

In my mind money at the current rate is cheap....If I’m making better returns then the debt who cares. That said, this is based on two ideas, one knowing I can pay the debt off at any time, 2 if it does get bad (economy) I have plenty of cash to get through it. Granted my business is 100 percent economy based

[pickettt]

Originally Posted by SpeakWithMichael

People are talking about a major recession coming.

In my mind, that makes it even a harder question to answer.

[nick c]

I never liked payments On cars or mortgages.

[fusionstorm]

Depends on interest rate for each of those obligations. Primary mortgage interest is still deductible up to the max limit, so that’s the last one that should be paid off.

[Fat_ninja]

No

[uscmatt99]

I dislike debt as does my wife, so we are looking to be debt free in the next 5-7 years, just in time for kids to start college if they choose to do so. My biz is a bit more resilient in an economic downturn, fortunately.

[Knappo 1307]

Pay it off.

[returntorolex]

I haven’t seen taxes mentioned, other than one mentioning deductions.

If 25%+ is going to the tax man, I would avoid liquidating for that reason alone. Unless a substantial portion of the portfolio is already in cash.

However, I do believe in having the ability to take advantage of opportunities as they arise. If you’re already 50% cash in this account (this presumably having taken profits already), I would look at eliminating one or two of the mortgages.

Real estate can be a good hedge for any downturns in the economy and could position you well for further acquisition of additional real estate if that asset class moves down and creates opportunity.

Best of luck in your decisions.

[kirksingleton]

I don’t like debt and I do like the market returns. that said, why don’t you sell 1/2, pay off your heloc and make a principal payment on your home and leave the other 1/2 to grow! I would leave the car loans alone as most people trade them in every few years.

[superdog]

Def pay off debt imho.

Your investments are good now. What if there is a 20% correction.

You also now save on all interest with that debt. Build the investments back up. Paying off debt imho is priceless and gives you a peace of mind that can’t be had with anything hanging over your head.

With zero debt I’ve personally been able to enjoy a lifestyle I’d never have if I had monthly payments. Think of all you can save now, with these payments gone.

And then if the economy does turn, you still don’t have any payments. Sure, you might be able to keep this up as long as the economy stays strong. But once it turns, you’ve lost the opportunity. You might be leaving something on the table. But there is a price to everything. Economy turns and you lose those gains, the payments remain.

I’ve probably left a lot on the table over the years. But I believe that my lack of debt has allowed me to act in certain ways that have allowed for greater gains.

Profits aren’t profits until you take them off the table. One in the hand, imo, is definitely worth two in the bush.

[Tools]

Do the math.

Pay off high interest debt first; low interest rates may be favorable. If you are making net profit on income interest/dividends vs. interest paid, things get complicated.

If you have loans that most of the interest has been paid already (interest is paid first on most loans), there is little point in emptying your account to pay principle.

Is an investment account part of your retirement plans.

I don't see a simple answer unless your current debt load is causing issues.

[MSchu]

loan yourself the money and payoff all debt... why depend on a bank to loan you money, unless its negative interest

[daveo5]

I paid cash for my car, for my home, I pay off credit cards in full. I have no debt and I own everything. Great feeling.


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[THC]

bird in hand, currently.. pay off the debt. You will have fun doing it all again.

[GB-man]

I would but that’s me. I would consult a financial planner as many things to account for.

[CamSLC]

This is a pretty interesting topic to discuss and understand both sides. The mathematical approach is logical and historically proven, debt is cheap, returns are swell. You are doing what every financial institution in the world economy has ever done. Make a spread. This can be clicked into a calculator.

The emotional risk and return of security is entirely incalculable. This can only be clicked into a personality.

Without bringing all the other variables into consideration, it's really difficult to check which box to live in.

[CoffeeandSD43]

In my opinion it is just as freeing knowing youre capable paying off your debts from one day to the next, which in your position I wouldnt consider them debts at this point anymore. Let the investments grow.

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[bobernet]

Assuming you’re not doing something crazy, money is cheap now, and TVM tells you to leverage today and pay off with cheaper future dollars.

There is a mental/emotional benefit to living debt-free that might beat the math for you. It generally (but not always) does for me.

[bayerische]

Cash out now.

[Chewbacca]

Speak to your accountant and ask for an overall financial review with best worst case analysis. It’s with the $500 or so.

The emotional feeling of being ‘debt free’ isn’t always good where math is math. Bad debt should be avoided. Not all debt. And emotions should have nothing to do with personal finance where wealth creation is a goal.

[Burlington]

I would also be in the pay it off camp, but you really need to analyse the situation and decide what works for you.

[mobster600]

If you can make more in the market then your yield your paying on your debt, then keep the debt.

Honestly I wouldn’t keep any debt higher then 4%. I’d pay off some debt.

[SMD]

Leverage is a two way street. Works great in a bull market. Less so when it’s not. Personally, I would keep some emergency funds, six to twelve months expenses, and then use what’s left to pay off highest rate loans first. I have not had any debt personal or business in many decades and it works for me.