Returns in the stock market are by no means guaranteed and the returns on paying down my loan were guaranteed. Paying off my loans means that now I don't have to worry about maintaining a job that pays enough to also cover my monthly payments to my student loans. Sure, I could have 100k or so in taxable accounts right now and 70k in student loans, but I made the choice to exchange money for freedom. I do fully acknowledge that there was emotion at play when paying off my loans after refinancing down to 3.5%. What it boils down to for me is that I used my money to make me happier and more free and for me that is the purpose of MMM. You can make different choices and that is ok too.
Exactly. Dave Ramsey (who I don't follow, but know about) uses the "snowball" approach to paying off debts, which is paying off the lowest balances first, regardless of interest rate, to notch small "victories" as one works up to paying the larger debts. And it works -- for a LOT of people. I personally wouldn't take that approach, but the point is, psychology is a huge factor in these decisions, and often what might seem like the "optimal" choice ignores basic human psychology. So better to use an approach that actually works for the specific individual than the "better" route that might not. The same argument gets hashed out in the "pay off mortgage vs. not paying it off" debate all the time.
Suit, it sounds like paying those things off, no matter the method, lifted a large albatross off your neck that has left you feeling much more optimistic about the future. You can't put a price on that kind of peace of mind.
I don't disagree that emotions are a large part in all of our lives. Part of being a Mustachian is to remove the emotions and do the correct thing. Emotions are excuses. As you mentioned the same argument is used in the payoff the mortgage or invest argument. The math shows that you should not liquidate assets to pay off your sub 4% 30 year fixed rate mortgage. Yet people do it on this board and celebrate it as a victory. Those people are hurting their quest to FI. We give them a pass because they are not blowing it on SUV's, trips around the world, drugs, etc. Then others see that hurting your balance sheet is celebrated, and they jump on the bandwagon of doing something that is not positive for their long term financial quest. I am good with people doing what they want, but I think part of this community is educated people on the pros and the cons.
Lots of people think of debt as terrible thing, where I believe debt is a tool to get something that you want. If you are buying future cash flows at a bargain rate, then debt is great. If you are running it up on 18% credits cards to buy a fishing boat than not so much.
I hear people saying that smoking calms their nerves, that eating fast food helps them deal with stress, driving a Hummer makes them feel safe, that liquidating a 3.5% loan with their stock portfolio makes them feel good. I think most on this board would give lots of arguments on why those are bad decisions on 3 out of 4 of those concepts.
For the most part, people who pay off their low rate fixed rate mortgages, start off with, "I know it is not optimal to do this, but I am going to do it because...." I don't think many would tell someone who is stressed to light up cigarette to help their nerves. Yet we do give a person a pass for liquidating investments or deferring investing to pay off low interest rate mortgages or student loans.
I think by educating people on the pros/cons of these types of decisions then emotion because minimized because facts and logic are utilized. Our gut reaction is to pay off a 3.5% debt even if we are sacrificing a 7% yield on investments. Facts and logic show that is not the case. Facts and logic get people emotional and excited by having a 3.5% loan. I love low interest rate debt!!! I hope others see low interest rate debt as the godsend that it is in the quest for FI!