Broker Check


June 06, 2019
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I got a funny message from a client about a month ago. It went like this:

“Message I sent my husband. What’s your opinion? I have an extra $20K in checking.

  1. Pay off student load with 5.8% interest rate
  2. Give to Paul for long term savings
  3. $100 roulette table”

While not everyone has extra money on a regular basis, we want to maximize the efficiency of our decisions. And quite frankly, I told her to pay off the student loan. If she was just starting in her practice, and she hadn’t achieved a great deal of financial objectives already, I would have told her to save the extra money for now. But she already had quite a bit of liquidity (she owns her own practice, so she needs liquidity), and she had already protected her income against factors beyond her control to best of her ability and to the extent she felt comfortable. Those two objectives, in many cases, come before eliminating long term debt aggressively.

Let’s say she didn’t have the savings and liquidity she had, and she eliminated the student loan first. Who’s to say the lack of liquidity wouldn’t cause more debt? And if she hadn’t protected her income to the extent that she felt comfortable, if something ill had happened to her, she passes on $20K less in a debt, and nothing else – no extra assets, no income, no meaningful estate.

I think most everyone wants makes the best decisions possible. Paying off debt and saving money can definitely be two good decisions. Roulette, on the other hand, could go either way.