Do you think paying down debt should count as part of your personal savings rate? This question popped up on my blog, and it made me think. Initially, I was inclined to say yes, since paying off debt seems like a good financial move. However, I realized I’ve never included debt repayment in my own savings calculations, even though I aim for a savings rate of over 50% after taxes.
In today’s 17-minute podcast, I dive into why I don’t include debt repayment in my personal savings rate. Here’s a brief rundown of my thoughts:
1. I prefer a conservative approach to finances. Don’t count on others or institutions; be self-reliant as promises can break.
2. Paying off debt shouldn’t be rewarded; it’s more about rectifying past spending mistakes.
3. Keep your finances clear and separate. Mixing funds can complicate your financial clarity.
For example, if you retire with your property paid off and receive social security, that’s great. But if not, you should still be okay since you’ve planned without expecting too much from others. I might consider including extra payments toward my primary home mortgage in my personal savings rate since this money could otherwise go into other investments. However, be cautious of becoming too property-rich and cash-poor. It’s all about finding the right balance over the years.
What about you? Do you include debt repayment in your personal savings calculations? Why or why not?
In response to feedback from my first podcast, I’ve decided to make my next one just 12 minutes long and more energetic. Many of you prefer shorter podcasts, which I’ll keep in mind going forward. To listen, you can play it directly from the post or download it to your device. If you’re into podcasts, you can subscribe to Financial Samurai on iTunes, where I keep the five most recent episodes.
Also, check out my new page where I’ve listed all my podcast episodes along with links to related posts. It’s a great resource if you want to explore more content or revisit older episodes.
Lastly, managing your finances well is crucial for achieving financial independence. Tools like Personal Capital can help by providing a comprehensive view of your finances, including investments, and even simulating future financial scenarios. It’s a valuable resource for anyone serious about their financial health.
I’m committed to continuing the Financial Samurai podcast, aiming to release a new episode monthly. Whether you’re new to managing your money or looking to deepen your financial knowledge, I hope you find these discussions helpful.
