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If your net worth is negative servicing your debts has a better risk adjusted return than investing in stocks unless the interest rates on your debt are extreme

• kelnos 7y ago
  Yup. If you have a bunch of credit card debt at 20+%, and/or are paying off a car in the high-single-digit percent range, then you really want to pay that off before you consider investments. If all you have is a sub-5% mortgage (though even that's pushing it), or a low-interest student loan, then you should put money toward retirement if you can. On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt (making regular payments, of course), for peace of mind I paid it off as quickly as a could. I think a lot of people are in that boat, or worse, having been taught that all debt is bad for you.
  • nullc 7y ago
    >On the other hand, ~15 years ago I had a 3.5% student loan, and even though rationally I should have carried that debt ( Right, but near or sub inflation rate student loans are mostly a non-existent thing anymore. They're much more likely to be at 8% and because of their special treatment in bankruptcy they're usually better to pay down than other loans at similar rates. As a child I learned how to compute compound interest then shortly after saw a TV advertisement for some kind of predatory loan (not sure if there were payday loan places in the late 80s/1990, but something like that), did the math and for a long time thought all loans were essentially scams (not realizing that the interest rates of payday loans weren't representative). ... it turned out to serve me well: there are worse financial mishaps you could make than avoiding reasonable debt. :)