Use all extra income to pay off debt or save/invest some of it?

[Newptstudent88]

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What do you guys think? Is it smarter to use all your disposable income to pay off debt or should you stash some away in a savings account?

Say you have 120k in student loan debt.

 

[deleted480308]

1. Normal debt payments
2. Max all matching retirement offers with work
3. Rainy day fund of about 30days expenses
4. Extra payments until debt is gone
5. Once debt is gone, get to maxing out retirement investments

 

[noyceguy]

1. Normal debt payments
2. Max all matching retirement offers with work
3. Rainy day fund of about 30days expenses
4. Extra payments until debt is gone
5. Once debt is gone, get to maxing out retirement investments

What do you guys think? Is it smarter to use all your disposable income to pay off debt or should you stash some away in a savings account?

Say you have 120k in student loan debt.

This is good advice.

Savings account earns at most 1%, students loans are ~7%+ interest, if you have a good emergency fund then start paying off debt.

 

[K2SO]

This is good advice.

Savings account earns at most 1%, students loans are ~7%+ interest, if you have a good emergency fund then start paying off debt.

Yep. Agreed. As others have said, locking away spare cash in savings when you have loans / debts isn't a great idea. In fact, according to most posts it's one of the biggest mistakes you can make 😛 You'll never earn as much as much in interest on your savings as you pay in interest on your debts. Sucks, but it's the truth.

This doesn't necessarily mean you should throw everything at it. Keep an emergency fund close at hand so that you can cover anything life tends to throw at you - car repairs and the like - and then pump everything else you've got into those loans. It'll take some discipline, but it's doable. Best of luck!