Paying Off Debt
One question that we receive all the time from clients is: “Should I pay off my debt early”? There are both pros and cons when dealing with this inquiry. It really all depends on your own unique situation in life.
Pros
One pro of paying off debt early is that you can save money on interest. The average American will spend over $270,000 in interest throughout their lifetime. Also, by paying off debt early you can potentially have better credit, hence a better credit score. The biggest pro to us is peace of mind of being debt free. This especially applies to individuals that are getting close to retiring or have just retired.
Cons
There are also cons of paying off debt early. One con of paying this off early is that loan interest could actually be helpful when tax season rolls around. Another con of paying it off early is that you could dry up liquidity. Liquidity is important to have in case of emergency situations. You can help alleviate this by having a savings account. The final con we see from paying off debt early is opportunity costs. We are not suggesting by any means that this applies to everyone, but, it rarely makes sense to take money from a retirement account to pay off debt early.
We Can Help
With all that said, it all boils down to your specific financial plan. We, at Fi Plan Partners, want to help you in this journey of looking at paying off debt early if it applies to you. So, please don’t hesitate to call us with any questions you may have.
Bobby Norman, CFP®, AIF®
Senior Vice President
Wealth Consultant
Email Bobby Norman here
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
Securities and advisory services offered through LPL Financial, Member FINRA/SIPC and a registered investment advisor.
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