This thread has given me a lot to chew on over the past several days.
Fundamentally, my dad advocates a sort of interest rate arbitrage, where if you have a debt at a low fixed interest rate with manageable payments (for example, my student loan), you should pay the minimums, stretch it out as long as possible, and invest the difference in the stock market. Over time, one would expect to come out ahead in this strategy assuming the market averages better than your cost of debt over the long haul.
I can see a lot of truth in my dad's position, and I believe I am able to put that strategy into place over a long period of years. I think my dad's approach would result in greater wealth over the long haul if followed consistently.
As a result of applying that strategy to the greatest degree to which I am able, I have recently been somewhat liquidity constrained -- I've got plenty in savings, plenty in income, but as soon as money rolls into my accounts, I ship it back out to my 401(k), my kids' college, or my taxable savings account. And that has been stressing me out a little.
While I don't think Dave's approach is the greatest wealth-building approach, what I do see is that it can bring a lot more, for lack of a better term, peace. The arbitrage approach is more complicated because you have more accounts, more payments, and there's always that potential lurking in the background of not being able to make the payment (although my payments are very reasonable and I've never missed a payment on anything in over 20 years).
Dave's thing is "Financial Peace University", my dad's would be "Financial Wealth University", and to a certain degree I think the two are incompatible in the journey suggested (I think one would end up largely in a similar spot at the end).
It is a big step for me to stop following my father's advice on something like this.
...
As far as baby step 2 goes, here's an update:
1. I didn't make it very clear that she and I don't borrow or lend to each other. What happens is that, for example, she'll take our son to the doctor's office, and there's a $5 copay. Because it's a medical expense, we have to split it. Instead of having her pay $2 to the doctor and me pay $3 to the doctor, she'll pay the $5 to the doctor to save them the complication. Similarly, I'll pay for something else that she'll owe me for. We keep track of this and every six months or so we'll clear it to $0 by having one of us write a check to the other.
So I updated the tab, and as of this coming Friday she'll owe me $25.33, so I'm going to let it slide.
2. I decided to pay down the credit card by $300. Between that and my monthly rebate from PenFed, I now owe only $141.43. I discovered one can pay online at PenFed now, which is really nice; I didn't know you could do that. I've also decided that I'll only use the PenFed card at the pump and use my debit cards for everything else. I know, not quite the Ramsey plan, but closer.
3. Taking the advice of everyone here and ignoring this one.
4. Student loan. I forgot to include some information on this one originally. I took it out for my Master's degree a few years ago because the rate on my mortgage was 7% and the student loan was at 3.5%. I then paid down my mortgage by a roughly equal amount. So I think I decided a while ago that because of that history, I could consider my student loan to be a part of my mortgage. What do you think?
Finally, I have decided that I am going to go out of order and build up my emergency fund further because that is what is bothering me the most. After that I have my goals lined up in an order I like and will focus on them in turn.
Comments welcome.
2Cor521
