It seems that some readers may have come away with the notion yesterday that when I said “debt” that I meant credit card debt.
I’ve never carried a balance on a credit card in the 18 years I’ve been using them. And of course I use them all the time in lieu of cash and for paying bills online so that I can earn points/miles, participate in the purchase protection programs, have an electronic copy of my spending habits, etc.
No, the debt I was talking about was housing, cars, and student loans.
The main point that inspired the post, the one that I completely failed to make, was the fact that the “paying off debt vs. doing something else” calculation changes completely based on whether that “something else” is investing or saving. At least in my mind. Investing is about return. Saving is about safety.
Extra credit question: Which maximizes your NPV? Putting $10,000 into a 4.5% CD or paying $10,000 toward your student loans (4.25% interest rate) or paying $10,000 toward your mortgage (6% interest rate)?