Paying off debt or savings?

[Prairie Stash]

Ignoring math, lets get emotional. Is your first instinct to save cash or pay off debt (mortgage, student loans etc.)? I need to force myself to follow the math, sometimes it's hard. I'd rather just do what I want; am I alone in suffering? I'm not asking what you actually end up doing, I'm curious what your preferred choice would be.

Lol, I know this is a first world Mustachians problem. Please don't mock me, the poor fellow who can't decide between savings and debt payments, such a hard life it is.

[arebelspy]

I know you said ignore the math, but the math is what dictates the emotions for me.  Debt at 12% I'd get great satisfaction paying off.

But it pains me to see my student loans at 3.x% being paid off (as I pay the minimums).  I get much more satisfaction out of saving investing than I do paying that down/off.

It's hard for me to go against the math, it feels good to invest optimally.

I may be ending up with lots of paid off houses, and not getting debt on them for the sake of lower risk - it pains me to leave money on the table though.

[Cheddar Stacker]

I voted savings. Good question.

I know I shouldn't watch the market, or get excited when it jumps 1%, but I do both. If you have $100K invested and it increases in value by 1% on any given day, your net worth just increased by $1,000 while you did nothing. You can't really obtain the same effect with debt reduction, so I don't get the same emotional high that I do with saving/investing.

I realize this means stocks become more expensive, and I realize they could just as easily decrease like they did yesterday, but I like the risk and the reward of investing more than I do the slow grind of debt reduction.

[Rural]

Huh. I don't know.

[hoodedfalcon]

So I was going to answer this question with "Both" or "I don't know" or "I hate debt but I love when my money makes me money" and then I realized that I have unintentionally directed exactly the same amount ($1200) to both savings/investing and to debt payments....

Indecision for the win!

[Thegoblinchief]

I'm with arebelspy here. It's all about the math.

[payitoff]

both here. i just cant feel at ease having all my extra money go to the bank while i get stuck with zero, whatever happens tomorrow, its not like my paid down debt will bail me out. im ok to pay more interest to feel more secure having some good stash building. it's a risk either way.

[BlueHouse]

I need to force myself to follow the math, sometimes it's hard.

Fear drives just about every decision I make but I'm also trying hard to follow the math. I just don't want to be homeless!  Although I still payoff a significant portion of my principal residence in extra payments each month, I force the math part for my rental. I take every penny from rent and put it in a Schwab account. Every other investment dollar I invest is in vanguard or work 401k. Keeping the Schwab acct separate helps me see the math advantage more clearly. I know to the month when I will have saved enough to payoff the rental if I put the 1600/ month rent toward principal. Instead I stick that 1600 into Schwab  and watch it. When that account equals more than the payoff amount, then I have given myself permission to pay off the mortgage. If that happens before eight years, then I know math won and making a logical choice may become easier. It will also be difficult emotionally to withdraw 200k and "spend it" on a payoff. My thought is that the tangible aspect will help me follow logic instead of emotion. We'll see what happens in 8 years.  Either way, I'm ahead of the game because I'm saving and not just on autopilot. 
Back to the initial question:  preferred choice is to eliminate ALL debt 

[Prairie Stash]

Thank you for the input. Cheddar stacker, you have a great outlook. My problem is I love seeing debt reduce, surprisingly I don't care how much is really in the bank. When I hit 100k I didn't notice (I'm still not sure when it happened) although its a lot it's not enough to retire. Perhaps I should try to adopt your approach, get excited over the free money gains.

Math is a great tool. My problem is factoring in risks; job loss, housing crash, illness, potential rate hikes etc. The risks tend to give me a reason to justify (to myself) debt pay downs.

[exranger06]

I am VERY debt-averse. (I'm currently debt-free and loving it!) If I ever went into debt again I would pay it off as fast as possible and not put anything into savings until I'm debt free again.

[NinetyFour]

I voted for pay off debt, but I'm really torn.  I have a big mortgage ($222K) and another loan of $39K.  I really want to pay them down aggressively, but I have recently been convinced to not pay down the mortgage and invest instead.  To that end, I have just filled out the paperwork to defer additional salary dollars (pre-tax) to retirement funds.  That way, I avoid tax on that income now, plus I continue to get the significant mortgage interest deduction on my big mortgage.

[simonsez]

"How much higher, if at all, would the expected return on investments have to be compared to the fixed rate interest on a debt for you to invest your marginal dollars?"

>2%.  I based this off the fact that I would (and do) still pay down my 6.55% student loans before investing (~7% real) right now and probably would unless the student loan interest rate was below 5%.

[superheropunk]

Debt.

[gobius]

"How much higher, if at all, would the expected return on investments have to be compared to the fixed rate interest on a debt for you to invest your marginal dollars?"

>2%.  I based this off the fact that I would (and do) still pay down my 6.55% student loans before investing (~7% real) right now and probably would unless the student loan interest rate was below 5%.

Good rule of thumb.