Hi Money Minder,
I’ve got a bit of student loan debt, around 25k. I also have a nice emergency fund in a High-Yield Savings Account (HYSA) with a 4.5% interest rate. Should I start throwing all my extra cash towards paying off those loans instead of saving? The interest rates aren’t too high, around 3-5%, but I have a feeling I could tackle them in a couple of years if I really focused on it.
Cheers,
Debt Crusher
Response from THE MONEY MINDER:
Hello There,
Congratulations on having a solid emergency fund in place and being proactive about managing your finances! It’s great that you’re considering whether to prioritize paying off your student loans or building up your savings further. Given that your interest rates are in the 3-5% range, it’s a reasonable option to focus on paying down your student loans, especially since you feel confident about being able to knock them out in a couple of years.
By concentrating on eliminating your student loan debt, you could potentially save on the overall interest you would pay over time. It’s important to strike a balance between paying off debt and saving, especially if you feel like you could achieve debt freedom relatively quickly. Remember, debt-free living provides a level of financial security that can be incredibly liberating.
Consider creating a detailed plan that outlines how much extra you can comfortably allocate towards your student loans each month while ensuring you still have a buffer for unexpected expenses. By staying disciplined and consistent with your payments, you could significantly reduce your debt burden and free up resources for other financial goals in the future.
Ultimately, the decision to focus on debt repayment or saving more aggressively depends on your individual financial priorities and comfort level. Whichever path you choose, stay committed to your plan and make adjustments as needed along the way. All the best from THE MONEY MINDER as you work towards your financial goals!
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