How Important Is it That We Pay Down Our Debts as Quickly as Possible?

This year, I started putting 20 percent of my pre-tax income towards debt repayment. It’s my goal to be debt-free by the end of 2016, although I feel like I should modify that with “temporarily” or “currently,” because I’ve been debt-free before and it would be extraordinarily hubristic to assume that I will be debt-free for the rest of my life.

There are months, of course, where I’ve thought “What if I only put 10 percent of my income towards my debt? It’d take a little more than twice as long to pay it off, but I’d have all that extra cash that I could put towards savings, or pad out my checking account so I wouldn’t feel broke at the end of every month!” There are a lot of reasons why I’m not doing this—the biggest one being that the majority of my debt is in the form of a no-interest loan from my parents, and I am hugely incentivized to pay that down as quickly as possible—but you had better believe that I have done the math on “would it be better to have a little more money in my pocket now, or a lot more money once the debt is paid off?”

That’s the question that Friend of The Billfold Helaine Olen writes about in Slate, after sharing the story of Sean Cooper, a Canadian financial analyst with a $255,000 mortgage who solved his debt problem by renting out his home and living in the basement, working two extra jobs to bring in extra cash, and eating a lot of Kraft Dinner. He paid off the mortgage in three years, and now fully owns his home at age 30.

In the literature of personal finance, stories like Cooper’s can be read as secular homilies. We don’t have to follow them literally. Instead, they’re meant to inspire us to improve our present behavior. Surely you too have a luxury you can give up so you can pay down your mortgage or save more for retirement. This is the so-called Latte Factor, the idea that we’re frittering away money on small luxuries that could be put to better use elsewhere. We encounter these tales everywhere — when an elderly relative tells us how she survived the Great Depression or when a talk-show host like Dave Ramsey tells listeners to eat “beans and rice, rice and beans” until they pay off their credit card bills.

But this time, many readers and viewers of Cooper’s quest didn’t want to hear it. True, Cooper didn’t succumb to lifestyle inflation, that bugaboo of personal-finance gurus everywhere. But how could he? As commenters were quick to point out, he didn’t have much of a life at all.

On the surface, there’s absolutely nothing wrong with this strategy: to work as hard as you can between the ages of 27 and 30, living in your basement and eating the cheapest food you can find, so you can pay off an enormous debt.

But three years is a long time. Especially the three years between 27 and 30.

I feel differently about Cooper’s story than I feel about Robert Langellier’s decision to spend his first year out of college working as a long-haul trucker so he could pay off his student loans—which he wrote about beautifully for Esquire—because your first year out of college is generally a crapshoot in terms of jobs anyway, and if you can figure out how to find something that pays enough to allow you to pay down your debt and save for the future, you should grab that steering wheel and start driving.

But the years between 27 and 30… those are the networking years. The career hustle years. The “find a partner and start thinking seriously about children” years, for a lot of us. That’s about the time when I went back into debt, for networking and career purposes and for relationships. It would have been better to do all of that without the debt, but it would have been worse to not do it at all.

What do you think? Should we all sit quietly in our basements with plates of processed cheese, waiting for the day in which we can emerge victorious and debt-free? Did I actually make the right choice when I told myself I would take out the debt I needed to get where I wanted, and then pay it back when I had the cash? Are the years between 27 and 30 any more crucial than any other years?

And do you do the math on whether it would be better to have a little more money in your pocket now, or a lot more money once your debts are paid?

(This is, by the way, assuming that your income stays constant after your debts are paid off, which is another extraordinarily hubristic assumption. In many ways it is just as prudent to pay less against your debt and stack more savings—but that becomes a very complicated algebra problem with a lot of unknown variables, and at this point I’ll stop speculating and ask you what you think.)

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