Should millennials invest or deal with their debt?
Updated: Oct 9
Original article by:
Neil Jonatan
MORNINGSTAR
October 4, 2019
📰 Read the FULL ARTICLE here.
I spoke with Morningstar about whether millennials should invest or focus on paying down debt first. Here are the highlights and my contributions.
Key Takeaways
Being debt-free as soon as possible isn't always the best plan; under the right conditions, investing can build wealth faster than paying off debt.
High-interest consumer and credit card debt should be the top priority, since it hurts your cash flow, your ability to save and your credit score.
Investing makes more sense when loan rates are low and cash flow is manageable, once you've assessed your risk tolerance and time horizon.
For millennials with less stable or gig-economy income, paying down a mortgage faster may offer more financial flexibility.
Low-interest student loans are often the lowest priority to pay off, since you can't regain access to that credit once it's repaid.
My Perspective
A mortgage is a big, long-term commitment, but waiting until it's paid off to start investing means giving up years of potential growth.
"If you're going to wait 30 years before you even start saving, you're missing out on a lot of potential investment growth."
That matters even more if your goal is to buy a second property to build equity. You'll need cash for the down payment, and putting every spare dollar toward your first mortgage slows that down.
"You focus all your energy on [paying down your first mortgage], it's going to take you forever to save up for that down payment."
For millennials who want to move out sooner, investing first is often the better choice. Once you pay off a loan, you lose access to that credit, while investing frees up capital for a down payment and related costs.
Originally published in Morningstar by Neil Jonatan on October 4, 2019. Use the link at the top of this post to read the full article.
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