Don't Pay Off Your Debt and Read This Instead

"I invested all my money in debt."
- Hamish Linklater

I recently had a conversation with a relative of mine and was sharing information in regards to my student loan. It turns out that I finally owe less than $2,000 in my student loan and in a few years I will no longer have that loan under my name. 

"If I only owed $2,000 on my student loan," my relative said to me,"I would pay it all off right now and get it over with." Most people would probably say the same to me. The 'peace of mind' that comes after paying off your car loan or your student loan is priceless, right? Well, it's actually not priceless, it cost you the amount of the loan plus interest. 

There's a few reasons why I won't be paying off my student loan this upcoming month. I do have $2,000 in one of my accounts, but that money won't be going anywhere near the Department of Education. Here are my reasons:

My focus is positive cash flow

Throughout my blogs, the theme on positive cash flow is evident (Read Why How Much Money You Make Doesn't Matter). My goal is to pay myself first and then pay 'the man.' For the last few years I have cut down on my expenses and focused on maintaining a positive cash flow every month. I was able to achieve that without having to pay off all of my loans. I currently now pay $78 a month for my student loan. If I pay off the $2,000 of my hard-earned money to the US Department of Education so that I won't have to worry about my loan again, I only increase my monthly cash flow by $78. In my eyes, that's not where I want my money to go. I'd rather put that money to work so that my cash flow increases a lot more with my $2,000 investment. 

If I have $2,000, why would I give it to someone else?

There's a few things that are coming up in my life. One of them has to do with a few investments I have and the other 'thing' is a trip I'm planning. I have three options: Option 1 - add $2,000 to my current investments; Option 2 - use the $2,000 for the trip I'm planning in the fall; Option 3 - pay 'the man.' 

If I pay off my student loan, I will have $2,000 less in my hands. I already have a positive monthly cash flow, so a $78 increase might be nice, but it's not something I have my heart set on. I'd rather pay myself and choose one of the first two options. I don't mind paying $78 for a few more years. I do mind, however, giving $2,000 off-the-bat with very little return.

So when should you pay off your debt entirely? That will be our next discussion.

Don't forget to share this blog so you can encourage others: family, co-workers, friends. Give them something to get motivated! You never know what they might be going through. A few words of encouragement can go a long way.