Asked on Reddit: Should I pay off loans or save?

The investing information provided on this page is for educational purposes only NerdWallet Inc does not offer advisory or brokerage services nor does it recommend or advise investors to buy or sell particular stocks securities or other investments Over on Reddit someone lately appealed for help deciding whether or not to pay off participant loans early Should they get rid of the relatively low interest rate loans or keep paying the minimums and stay on an aggressive path to saving for the down payment on a house Related Articles Missing establishment input unlikely to sway Federal Reserve from rate-cut path Moore Deposit insurance for billionaires No thanks Lawsuit aims to block SNAP suspension OpenAI may move forward with new business structure partnership with Microsoft regulators say Elon Musk launches Grokipedia to compete with online encyclopedia Wikipedia Respondents largely urged the poster to put the money into savings or investments where they are likely to earn a return greater than the cost of interest on the aspirant loans The attendee loan interest rates in question ranged from to while interest rates for a -year mortgage at present hover just above Meanwhile the average annual stock field return is around not accounting for inflation as measured by the S P index Still respondents also acknowledged that the decision is largely a personal one and can vary based on the specific situation and available rates We requested a meager financial professionals for their take on the question Pay off loans or save Before anything else create an urgency fund Experts turned the question around Can you pay your bills if you get in a bind Creating an crisis fund for unexpected expenses is one of the the bulk vital parts of financial planning says Zack Gutches a certified financial planner and founder of True Riches Financial Planning in Denver As a upshot he suggests focusing on building up at least several months worth of expenses before paying off debt or considering long-term savings goals That crisis fund is the foundation of your financial house he says A couple with only one earner or a single person might even want to strive for up to six months worth of expenses Gutches adds You ll want to be able to cover the big expenses like mortgage or rent car payments utilities and other non-negotiables Start by saving an amount that works for your budget and aim to build up a larger emergency fund over time Make sure you stay up-to-date on your learner loan payments and any other debts while you save Neglecting those can conclusion in loan default Balance short-term savings against other goals The next priority is to evaluate savings goals for expenses in the next three years such as a home purchase or a new car Gutches says The Reddit poster commented they had been aggressively saving for a house and were concerned that dealing with the loan would delay that goal To reach short-term goals you may want to prioritize funneling any extra cash into dedicated high-yield savings accounts instead of paying off low-interest debt including novice loan debt Gutches says One exception to that rule is if the debt is weighing down your mental wellbeing Gutches adds If it s causing anxiety and worry you might want to prioritize paying it off Pay off debt before increasing spending There are other reasons to tackle what you ve borrowed before prioritizing a new financial goal Paying off debt early can keep you from spending what you should save but maybe won t says Jessica Smith CFP and co-founder of Vitality Wealth in the Boise Idaho area If you re just going to spend it then the more optimal thing is to pay off the debt she says Similarly Smith says if you re carrying high-interest credit card debt that s another reason to put the money toward paying off the debt early Try to do a little bit of both How about a middle ground Ideally you can try to put chosen money toward paying off the debt and specific toward savings so you re working toward both financial goals at the same time Often we think of the decision as black and white but for a lot of folks you can do both Gutches says This could involve dividing the amount you can save each month in two Put one half into a high-yield savings account and the other toward outstanding debt for example The decision is individual and unique to each person There s no right or wrong answer Gutches adds It could make perfect sense for one person to put their savings into an account earmarked for a future house down payment while another applies the cash to outstanding debt In both cases they are achieving their individual goals Reddit is an online forum where users share their thoughts in threads on various topics The popular site includes plenty of discussion on financial subjects like financial priorities so we sifted through Reddit forums to get a pulse check People post anonymously so we cannot confirm their individual experiences or circumstances More From NerdWallet Content Blackout Leaves Fed Guessing Ahead of Rate Decision Are Air Traffic Controllers the Key to Ending the Shutdown Paychecks on Pause Lessons Everyone Can Learn From the Shutdown Kimberly Palmer writes for NerdWallet Email kpalmer nerdwallet com Twitter kimberlypalmer The article Urged on Reddit Should I Pay Off Loans or Save originally appeared on NerdWallet