When I was still in residency, my financial advisor recommended that I pay off my line of credit as slowly as possible so that I could maximize my investments. From a numbers perspective, his advice made perfect sense: I pay prime (currently 3.2%) on my LOC, and I can earn more than prime from investments, so investing wins. When he made the recommendation, he followed it with the prescient caveat "Assuming that you aren't bothered by the debt".
"Why would I be bothered by the debt?", I wondered. I had been in debt for almost a decade, and I was doing a great job of ignoring it, so why would it be any different when I was an attending? I was a rational person who did not make financial decisions based on emotions. This would be easy.
After finishing training, I initially stuck with the plan. I took the one-year grace period before I had to start paying back my LOC, and I poured every extra penny I had into retirement savings. Then when the repayments started, I paid the monthly minimum with the plan to pay it all off in the required ten years. Everything was on auto-pilot, and everything was great.
Except...every time I logged into my banking account, I had to see the balance on my LOC. And it was big. And ugly. And even though I had achieved a positive net worth, it didn't feel real, because I still had this horrible six-figure debt hanging over me.
At the same time that I was not repaying my debt, I was saving cash in my savings account* for a future down payment on a home, meaning that I was basically throwing away interest on my LOC. Which wasn't a big deal when the down payment was small, but got increasingly painful as the down payment grew. I eventually moved the down payment into an online bank account to earn a bit of interest, but I was still losing money by not using that money to pay off the LOC. And I hated it.
So...I started going against the plan. When my ex and I separated earlier this year, I decided that I would defer buying a home for at least a year, and I took some of the down payment money and put it towards the LOC. Then a few months later I put some more of the down payment money towards my LOC so that I could achieve this:
For about ten minutes, I was ecstatic about my debt being under six figures! I would look at the balance and smile, realizing that I had cut my LOC by more than half from its highest level.
And then I got mad about the fact that I still owed $100,000 to the bank.
I have tried really hard to not hate my debt and to stick with the plan of maximizing my investments, but the reality is that I. Hate. My. Debt. I hate paying almost as much towards my debt every month as I do for rent. I hate that the debt represents bad financial decisions that I made during training. I hate that my really lovely net worth feels meaningless to me when I still have this debt to repay. And I hate that I am making big financial decisions like whether to buy a house based on the debt rather than based on what I most want to do. (Although I would probably still not buy a house right now even if I didn't have the debt.)
So this week, I said fuck it. I am paying off this debt. I am taking every penny I had set aside for a down payment and putting it towards the debt, because realistically I am not going to buy a house until the debt is gone. I have a big end of the year payment coming up, because the university retains part of my income to control for variability in billing, and that is also going towards the debt. In the new year, I am going to continue with my regularly scheduled monthly investments, but everything else is going onto my LOC.
Fuck logic**. I am done with debt.
*This is a terrible idea. Do not do this. Get an online savings account that will at least pay you some interest.
**I apologize to anyone whom I ever silently judged for using the debt snowball method, which always seemed like a ridiculous waste of interest. I totally get it now!