5. Pay off any debt that is not mortgage or student related. The key here is to pay off the higher interest rate loans first. A mortgage and student loans are considered "good debt".
Apply the same principle of paying off highest interest rates first to your HELOC, Auto loans, or any other lines of credit. I am making an assumption that any lines of credit you may be using have lower interest rates than any of your credit cards. If this is not true you should pay off whichever has the higher rate first.
Let's move on to "Good Debt". Good debt is any loan used to purchase an asset that you could not pay for up front. i.e. A first mortgage or student loan. To get rid of bad debt we limit savings. That way we pay it off quicker. Good debt should be carried while striving towards many other financial goals. If you are making all of your financial goals, Emergency fund, Roth IRA, 401k, 529. Then you can start accelerating your payment of good debt. If you are in that position I suggest paying off any student loans first. Student loans tend to be less flexible if you need to refinance. Also student loan debt can not be discharged in bankruptcy.
I agree that as a life decision student loans are "good debt". But the interest rates can still be killer and I was paranoid/pissed off about having my debt sold over and over to different companies over which I had no control or information. So, if you're in the position I also suggest paying off student loan debt. That last payment is very satisfying. I used these student loan and amortization calculators for motivation.
ReplyDeletehttp://cgi.money.cnn.com/tools/studentloan/studentloan.html
http://www.amortization-calc.com/
Organizing debt by interest rate helps in this regard. Paying off the highest rate first. Making your 7.99% Visa take minimums while you pay off your 10% student loan is logical.
DeleteI am looking at debt as a problem that is solved incrementally. But If you have the means, git rid of all your debt as fast as possible. In the end is any debt really "Good"?