We have debt, but we still invest!

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The decision to invest a percentage of our income while digging our way out of debt was kind of a big deal. The Dave Ramseys of the world would be totally against this strategy. Ramsey’s 7 baby steps suggest paying off ALL debt (except for your home) before beginning to invest. We, on the other hand chose to blaze our own path lol. Now, when I came up with our debt payoff plan we did not have any credit card debt YAY! If we had, our plan probably would have looked a little different. Being that we only have student loans, a 401k loan, a car loan and our solar panel payments, we felt this was the way to go. Of the debt we have, the highest interest rate is 6.8% (student loan), and the lowest being 0% (solar panels).

So here’s how our plan will go, we will use the Debt Avalanche method to pay off the above stated debt. In addition to paying down our debt we will also be investing in pre tax and after tax retirement accounts. Through my employer I have a 401k plan where I am currently contributing 10% of my income. This type of retirement account is pre tax, meaning the contributions are taken out of my pay check before taxes are deducted. This type of retirement account also saves on taxes because the amount you contribute is deducted from your income at tax time.

Next we will also be contributing to a Roth IRA (details of Roth IRA to be discussed in a later post). Right now we only have one Roth IRA, for me. I will be doing the $500 savings challenge along with you, my followers, and use that savings to open a Roth IRA for my husband (if I don’t do it, he won’t). If our budget allows I will be maxing out both Roth IRAs for 2019. Currently I’m still trying to reach the maximum contribution for 2018, which was $5500. I have until April 15th of this year to max that account out. Then we will move on to 2019s contributions, which has  increased to $6000 per year (mo money, mo money, mo money).

We chose this plan because, with my husband being 44 years old and myself 39, we need to save and invest as much as we can now. We are not willing to miss out on 6yrs of saving and investing. 6yrs is the amount of time it’s going to take us to pay off all of our debt, including our house. Once those years are gone so is the opportunity to put that years maximum contribution in those accounts, gone forever. Compound interest only works with time and trying to play catch up from lost time is hard. Trust me, I’m doing it now, lost almost 20yrs of saving toward retirement. If we were to over look saving and investing for the next 6 years it would cost us $174,301, yes THAT’S ALOT OF MONEY. I calculated that amount by adding the 10%, I currently contribute to my 401k and the $6000 for both Roth IRAs, together. That’s assuming an 8% average annual return from index fund investing. Gaining 8% interest on our investments is more than the 6.8% student loan interest payment. Can you understand now why this was such an important decision for us to make? Saving and investing is the only way to build true wealth and reach financial independence. We just can not afford to wait any longer.

Getting rid of our debt is definitley the priority. Once it’s all paid off we’ll really rev up our investing. Until then we’ll continue with this strategy. Of course this is a very situation specific topis so please share what you think. In the end your have to do what will sit well in your soul. What approach are you currently taking when it comes to debt payoff and investing? Don’t hesitate to share I would love to hear from you.

Until Next Time,


3 thoughts on “We have debt, but we still invest!

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