Pay off debt ASAP? Maybe.

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Debt is bad, right? It must be, since so many finance bloggers talk about how you need to pay off debt ASAP. I used to be in this camp too. I used to recommend that doctors should pay off their student loans within 5-10 years max. In fact, I paid off mine within 3 years.

Now, there is nothing wrong with paying off debt quickly. I’ve just come to realize that this strategy does not work for everyone.

And if I may be bold here, it probably isn’t the right move for most women physicians.

Debt isn’t bad

The truth is debt is only bad if you make it mean “bad.” Debt itself is neutral. There are consequences if you don’t pay it off, of course, but having debt isn’t bad in and of itself.

It does make sense that financial experts tell us to get rid of debt. All debt comes with a financial penalty in some form or another (interest rate, etc.). You always end up paying back more money than you owed–and that gets expensive the longer you have it.

Consider all the options

One of the most common questions I get is whether one should pay off debt rapidly or invest instead? The answer isn’t simply all or none. It depends.

Have you considered this? Any additional money you pay towards debt is money you can’t use for other things. I know you know this on some level, but most of us think about spending on things instead of using money to create long-term money-making machines.

Wait, isn’t that the same as investing? Yes, but let’s think beyond traditional investing, which most of us associate with stock market investing (and to generalize even further – index fund investing).

You can certainly invest extra into your retirement accounts, especially the ones you can’t go back to years later to “fill-up” such as a 401(k) or Roth IRA. You will reap the rewards–several years later as compound interest takes a lot of time.

Or, think of this: successful real estate investors deliberately increase their debt load by using it as leverage to invest in real estate. In other words, they take on debt on purpose to create another source of income.

Many of us don’t think about creating multiple streams of income besides our job and stock investments (which will provide income for us in “retirement” so we don’t need to rely on a job).

It’s too risky to invest in real estate or start a new business, right? Well, have you considered that only relying on your job for income is riskier?

Paying off your debt ASAP may not be the best action for you

It’s too easy to take a myopic view on your finances and focus on the action right in front of you. Have you taken a moment to think about your overall goals and the timing of them?

All of us have different ideas of what we want our financial lives to look like. It all depends on a constellation of factors like your current age, your goals for “retirement” vs. your goals now, whether or not you have children, your other financial obligations, and so on.

So hit pause on your debt pay off plan momentarily and think about the bigger picture. You may conclude that paying off debt rapidly is the best action for you. Or maybe it is not.

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Sorry those student loans aren’t going away by themselves

You must have a plan for paying off your student loans (or other debt you may have). Otherwise you’ll end up paying thousands of dollars (if not tens of thousands) in additional interest and fees, simply by not taking the right actions.

Your student loan pay off plan initially comes down to two choices:

Pursuing public student loan forgiveness (PSLF), or
Refinancing high-interest loans if you’re not pursuing PSLF.

Pretty simple, right?

And who should you refinance with? The absolute best bank to refinance with is First Republic Bank–however most people will not qualify due to their strict location & loan requirements, but if you do, you may be able to lock in a rate as low as 1.95% fixed. I jumped at the chance to refinance my student loans with them.

If you don’t meet the location and/or income requirements of First Republic Bank, then you may want to take a look at SoFi. I’ve just negotiated a great deal for my readers with SoFi— you will receive a rate discount of 0.25% through December 15, 2019. This is in addition to the 0.25% rate reduction if you enroll in auto-pay for a total of 0.5% off! For additional loan refinancing options, click here.

Once you refinance those student loans, I encourage you to figure out if paying off debt ASAP is right for you. You could be using your money to create other pillars of income (besides your job) that in turn, you can use to pay off your debt!

In Summary

That idea of debt not being bad is pretty intriguing, right?

Most of us tend to see money through the lens of dollars and cents, so we focus on the math behind our money. However, money is also a mindset. That means the way that we choose to frame our debt can often color many of our money decisions.

After your student loans are paid down, it’s worth examining your debt situation closely. No two people should make the same decision. Just because someone else considers debt to be bad, doesn’t mean that has to be the case for you as well.

Perhaps you’ll decide that paying down debt aggressively is the right answer. Maybe you’ll do a combination of debt paydown and investing. Or perhaps, you’ll choose to leverage your money to see how many other pillars of income you can create. The best answer about paying down debt is the one that fits your situation and your money mindset.

Disclaimer: Please note that some of the links in this post are affiliate links. This means that I may receive a commission if you use products or services through one of my links. I recommend these products & services because they are companies that I have found to be helpful and trustworthy.