3 Pros of Building Up Assets Versus Paying Off Debt

Snowball. Avalanche. Gazelle.
Search engine optimization (SEO) words for the National Geographic, you ask?
Maybe, but they’re also terms for debt-payoff strategies popularized by personal finance commentators. Being debt-free, and getting there as fast as possible, are widely promoted in the personal finance community. This is, of course, a good thing. Having no debt is a great accomplishment and can come with some real emotional benefits. Some people feel less stress just knowing they don’t have debt payments.
With that said, here’s my zag—I think this idea has been over-emphasized.
The general point of a fast debt payoff is to get to a positive net worth, but there’s a reason it’s called a balance sheet. There’s more than one way to get to net positive. Think of it as a scale where zero debt and zero assets on one side equals $50,000 in debt and $50,000 in assets—both give you a net worth of zero.
Even though the net worth is the same, I think the person with $50,000 in assets and debt enjoys more financial flexibility. A question worth asking: Would your debt worry you as much if you had an equal amount in savings?
Of course, not all debts are created equal. Credit-card debt is not to be messed with. Prioritize getting rid of credit-card or other high-interest loans as quickly as possible. On the other hand, debts such as student loans, car loans, and mortgages generally come with lower interest rates. Some savings and asset-building can often be prioritize...

Source: American Speech-Language-Hearing Association (ASHA) Press Releases - February 24, 2020 Category: Speech-Language Pathology Authors: Jacob Parish Tags: Audiology Slider Speech-Language Pathology Professional Development Source Type: blogs