Because the interest rates on my loans range from around 8% to around 7%, I have finally realized that it makes zero sense — as in none, zilch, nil and nada — to be investing money in anything else.
This is for two reasons.
- I’m a lawyer, not a stock market analyst, and whatever you need to do to feel confident about achieving a rate of return of +8% involves skills and time that I haven’t got. By contrast, paying my loans involves a guaranteed rate of return of between 7% and 8%, and involves no special skills other than clicking the “make payment” button.
- My net worth is negative. Investing is something people do when they have money. Not when they are worth -$125,933.50.
Having come to this realization several years later than I should have, I called up Vanguard and sold all my shares in index funds. End result:
Current Debt: $114,351.50. Debt Paid Off: $11,582. BOOM.
This being so satisfying, I began looking for more money to throw at the problem. I consulted with Mr. DebtFree JD.* Upon consultation, it turned out that unbeknownst to each other, we had both been keeping emergency savings of about $10,000. This caused us to reach two conclusions.**
- This is dumb. We don’t need an emergency fund of $20,000. Any emergency that emergent is very unlikely and will probably result in so much crazy that we will barely notice we have less than $20,000 to deal with it.
- Keeping two separate sets of accounts where we don’t know what the other person is doing with their money is also dumb. We’re married. We’re adults (or at least we’re trying). It’s time to act like it.
This led to Step 3: Consolidate our finances into ONE checking account and ONE savings account. This will allow us to throw further money at the problem by reducing our foolishly large emergency fund. It will also allow us to figure out how much we are spending on things. We are nervous about this, because honestly, we have no idea, and we also don’t really want outside supervision on what we’re spending. And by outside supervision, I mean Wife makes fun of Husband for dumb Magic Knight Space Alien Invaders v. Secret Assassins of Most Ancient Civilization Video Game Purchase or Husband makes fun of Wife for extravagant Salon Day with Sparkly Purple Polka Dotted Toe Nail Polish and Soothing Acoustic Bach Music.
So, onwards to Step 3. Hopefully the DebtFreeJD Marriage will survive.***
*Who, it should be noted, has no student loans, but also makes a good chunk less than I do.
**If you have concluded that I think in bullet points, you are right. I’m a lawyer. So sue me.
***I’m not actually worried.