Did you do a double-take when you read this title? Considering a lot of my readers are personal finance bloggers, I’m guessing yes; especially since the majority of personal finance bloggers see debt as an unnecessary evil.
A few years ago I was faced with a personal dilemma: should I pay off my student loans or invest my excess funds? With the cost of my loans averaging 4% I decided to hold onto my debt and use my monies elsewhere. Seeing that the money I chose to invest returned roughly 38%, I sleep well at night knowing that I made the right move.
I was having a conversation last week that brought a similar decision-analysis into my mind. I foresee myself purchasing a home within the next 2 years. My exact thought was: “How cool would it be to save aggressively over this time so that I could purchase the home in cash?” Living a mortgage-less life has got to have some positive side effects but is pouring 200k into an illiquid asset the best use of your funds?
I don’t know but I don’t think so.
(If there was an option to open a fixed-rate HELOC that I could draw from for 30 years, I would consider it; but to my knowledge this doesn’t exist.)
There are a lot of people that would love to see a 4% risk-free return right now, but I’m not one of them. I am confident that investing will produce (on average) better returns than this. Whether that’s investing in stocks, bonds, OR myself – I’m not sure – but having the flexibility to make these investments is appealing to me.
My feelings may change as interest rates and the cost of borrowing start to rise, but for now money is cheap.
Use it wisely.