Another student loan repayment story here with a twist.

[igap]

My story is pretty simple. I finished my plastic surgery residency and fellowship a few years back. I graduated with 225K in student debt, and 75K mortgage debt.

I had/have all of the usual expenses, including kids, cars (though they are paid for), living in an expensive city. In my third year of practice I had an opportunity to take extra call at a busy trauma center for about 15 days per month. This call was by myself with no resident support, and no other help. I did this call in addition to my normal call load and was basically taking 20-22 days of call per month all the while running a busy practice.

I did this for about a year and made was able to set aside about 300K after taxes, before my family life nearly crumbled. I also physically was reaching my breaking point. So, after that one year I dropped the extra call, and went back to a normal life.

So.... 300K. Sitting in a bank account. What to do with it? Pay off my 300K debt? Well, after some basic analysis I decided to use the money to invest in securities for the long-term. My student debt was consolidated long ago at about 3%, and my mortgage is also at 3.3%. I am a self-taught investor who has been a stock investor since the 5th grade, so I constructed a dividend aristocrat portfolio that had a starting yield of 3.4%, and put the entire 300K into that. After the last few years of annual dividend increases and dividend reinvestment, my annual dividends being reinvested now exceed my loan payments. Arbitrage at its simplest.

So that's my story. I make my monthly payments on my loans that will take me another 20 or so years to pay off, but by that time that 300K I made that year will have grown into a 7 figure amount yielding a 5 figure annual dividend. Or so that's the plan. Just another way to deploy one's capital.

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[ThoracicGuy]

My story is pretty simple. I finished my plastic surgery residency and fellowship a few years back. I graduated with 225K in student debt, and 75K mortgage debt.

I had/have all of the usual expenses, including kids, cars (though they are paid for), living in an expensive city. In my third year of practice I had an opportunity to take extra call at a busy trauma center for about 15 days per month. This call was by myself with no resident support, and no other help. I did this call in addition to my normal call load and was basically taking 20-22 days of call per month all the while running a busy practice.

I did this for about a year and made was able to set aside about 300K after taxes, before my family life nearly crumbled. I also physically was reaching my breaking point. So, after that one year I dropped the extra call, and went back to a normal life.

So.... 300K. Sitting in a bank account. What to do with it? Pay off my 300K debt? Well, after some basic analysis I decided to use the money to invest in securities for the long-term. My student debt was consolidated long ago at about 3%, and my mortgage is also at 3.3%. I am a self-taught investor who has been a stock investor since the 5th grade, so I constructed a dividend aristocrat portfolio that had a starting yield of 3.4%, and put the entire 300K into that. After the last few years of annual dividend increases and dividend reinvestment, my annual dividends being reinvested now exceed my loan payments. Arbitrage at its simplest.

So that's my story. I make my monthly payments on my loans that will take me another 20 or so years to pay off, but by that time that 300K I made that year will have grown into a 7 figure amount yielding a 5 figure annual dividend. Or so that's the plan. Just another way to deploy one's capital.

Your loans are low, but the student loan will still cost you some money over time. I have mine at 3.375% and I'm working to get them paid off within the next 4 years or so. This will give me some security should my job change that I don't have to worry about those payments anymore. If its less than 4% interest rate, investing isn't a bad deal along with the regular payment schedule.

 

[igap]

ThoracicGuy,

The difference between what I have earned on my investment in the stock market, and what the balance of my loan payments and the loans are is significant. I could sell enough stocks to pay off the remainder of my loans and still have a 6 figure portfolio. I happened to invest in the market at a historically good time. Luck I suppose. However, even without capital gains, the long-term arbitrage benefit of what I am doing with annual dividends that are raised every year and reinvested, is favorable. I probably could have just as easily put the money in say Vanguard ETFs and done nearly as well to this point, but I think that my strategy will outperform broad market ETFs over a long time frame (20-30 years).

Good luck with your investing. The important thing is to have clear goals, so that you can make a good plan. Carrying debt doesn't bother me if I am able to leverage it and increase my long-term gains. But I do understand the emotional pull of wanting to be debt-free.

 

[The White Coat Investor]

Leverage certainly works.

 

[sweetlenovo88]

ThoracicGuy,

The difference between what I have earned on my investment in the stock market, and what the balance of my loan payments and the loans are is significant. I could sell enough stocks to pay off the remainder of my loans and still have a 6 figure portfolio. I happened to invest in the market at a historically good time. Luck I suppose. However, even without capital gains, the long-term arbitrage benefit of what I am doing with annual dividends that are raised every year and reinvested, is favorable. I probably could have just as easily put the money in say Vanguard ETFs and done nearly as well to this point, but I think that my strategy will outperform broad market ETFs over a long time frame (20-30 years).

Good luck with your investing. The important thing is to have clear goals, so that you can make a good plan. Carrying debt doesn't bother me if I am able to leverage it and increase my long-term gains. But I do understand the emotional pull of wanting to be debt-free.

Good job, debt free is the name of the game for me. I just graduated two months ago and started paying loans back about a year ago which were either 6.8 or 8.5%. Can't refinance them. The S&P 500 is down 4.5% year to date so I'm quite pleased with my decision. Close to 200k paid off

 

[Plastikos]

Good job, debt free is the name of the game for me. I just graduated two months ago and started paying loans back about a year ago which were either 6.8 or 8.5%. Can't refinance them. The S&P 500 is down 4.5% year to date so I'm quite pleased with my decision. Close to 200k paid off

Why cant you refinance them? If that were truly the case then at those rates it makes sense to get ride of them.

However, the performance of the market this particular year really means nothing, other than any reinvested dividends and gains would be buying in at similar or lower prices, which is a good thing in the long run. What matters is what that is in 30 or 50 years from now. Your loan would be gone no matter what, however any money socked away into a retirement account would still be churning out compounded growth and if you were entirely average at 30 years it would be around 1000% and 50 years 10,000%. This would be in addition to the more powerful use of lump sum vs. inflation of making the money work for you.

In the end its personal and there are other very valid reasons to be debt free, sleeping well, flexibility, etc..etc...

 

[sweetlenovo88]

Why cant you refinance them? If that were truly the case then at those rates it makes sense to get ride of them.

However, the performance of the market this particular year really means nothing, other than any reinvested dividends and gains would be buying in at similar or lower prices, which is a good thing in the long run. What matters is what that is in 30 or 50 years from now. Your loan would be gone no matter what, however any money socked away into a retirement account would still be churning out compounded growth and if you were entirely average at 30 years it would be around 1000% and 50 years 10,000%. This would be in addition to the more powerful use of lump sum vs. inflation of making the money work for you.

In the end its personal and there are other very valid reasons to be debt free, sleeping well, flexibility, etc..etc...

Can't refinance because of poor credit due to ex. It is 3 years until everything drops off. luckily no kids and no money is/was due to her. At this point I have 70k left at 6.8%, 65k at 5.8%, 9k at 5% and 15k at 2.3%. Paying them off in order. About 6-7 months left I assume. With the ~200k I paid I made a guaranteed 7.x% of return that is not taxed with capital gains. That is better than the market and mitigates risk. I would have to make a 9% or so return in the market to equal that. When loans are paid off, I will then have compound interest work in my favor instead of against me on the back end. If I cannot get a 3% (inflation rate) 15 year mortgage with 20% down or close to that rate with my credit or ask my parents to use their credit, I will pay cash for the house/condo. Reason is rent is unavoidable and a complete waste.

Why debt free? Ask Dave Ramsey, a big part of inspiration in all this.

 

[Plastikos]

You're not Dave Ramsey nor should you be his target audience once learning the basics. Most people that need that advice dont have nearly guaranteed 6 figure incomes for the foreseeable future. Your job is what sets you apart and your intelligence and determination should help you do whats smartest, not what feels right because some guy who shamelessly plugs costly advisors and promises people unrealistic returns says. This is math, thats it. Its one of the main reasons engineers are such over accumulators of wealth compared to physicians even though we have multiples higher income. Ask Dave Ramsey is a terrible argument, means nothing. I could say ask Jeff Bezos, debt is great! What are your goals in life and how are your actions today paving the way to make those realities?

I agree your current loans are high, I just disagree they have to stay that way (any discussion of invest/payoff is premised on that). Your rate of return calculations are simplistic and gloss over the fact your loans are finite and compounding for retirement is not, and you will be exposed to banner years here and there and given the much longer term available...will greatly exceed any "return" you get from paying down the loan. You do not have 200k @ 7%, more than half your loans are below that and the weighted average is therefore much lower and your required rate of return is also much lower. Paying off your loans now is with dollars that are inflation adjusted the most valuable dollars you will ever earn, thats important to remember. You know the exact cost of each of your loans, are they more than even a below average market return in 25, 30, 50 years? Run a monte carlo and see for yourself, idk, i didnt do that because the answer is almost always no.

First, you need to really investigate and learn about credit and how its calculated. It should not be hard to repair your credit vastly from where it stands today. Dont care what your ex did, and if it was anything that you can get removed get at it. I had terrible credit when I graduated, now its amazing. Credit is a formula, thats the basics. Learn exactly the pieces to the puzzle and start attacking the ones you can. Its likely you can push it above the threshold level of passing a refi screen. Things matter a whole lot less after much sooner than the events fall off your report. Its simple, 35% payments history (late 1-2x is not a deal breaker either), 30% amount utilized vs. available, and then the smaller bits like types and age of lines. Thats it. Usually you cant do jack about an old missed payment but you can do something about your utilization ratio. My credit went up nearly triple digits in the span of a few months after figuring these things out and acting accordingly. Usually for the utilization ratio the easiest thing to do is to open up new lines of credit to raise the roof (and the denominator) and simultaneously pay down your old cards (decrease the numerator). Do not close any accounts as this will take away from the denominator. Its a game, learn it.

There seems to be a super uptight and almost cult like love on the finweb about being debt free and the greater good of it all. Thats cool and I cant wait for that, but debt, like money is a tool and can be used to your advantage. There is no moral judgement to it, unless your a creditor trying to get a payment. This usually discounts the cost of such a lifestyle, and once again, should not directed towards doctors. Its very important not to make dumb money mistakes, etc...but I gather you're already at that stage now. If you have a good stable job, some emergency cash, enough insurance etc...run these things out on a spreadsheet and see if they make sense in the long term. 200k is a very small overall debt load in the grand scheme of it all, you shouldnt have to choose between retirement or payoff, etc...

I've made far more mistakes early on than yourself and have more than double your debt, and lost lots of sleep wondering howd we'd make it and pay them off. Your income grows, you dont overspend, and things get easier. I've chosen to do things much like the original poster, because the math makes sense and accumulating assets is just better off long term. At some point in a few years my net worth will go from super negative, to zero, to super positive in the span of 3 months. Once you just drop 200k off on your debt you can start building up your assets, but its easier to do it all at the same time. There is not only one way to do this, nor are any of them right, not mine, wcis, ramseys etc...it has to match lots of different factors some I touched on.

 

[sweetlenovo88]

The 200k I paid off already would have been at 7.x percent if I had not paid it off. The remaining debt is at the lower rates. I don't need to be educated on how FICO scores work or how to repair credit. I could write a book about about statue of limitations, FDCPA and junk debt buyers. My only "mistakes" was letting my ex use my credit and helping to pay for her school. We are not going to agree here on what Dave Ramsey is or our feelings about carrying debt, or "simplistic" ROR calculations so I will not continue to debate with you. If you have a different plan that is great.

Concerning my plan. I will be debt free in about 6-7 months. Around 365k paid off total. But I was busting my ass for the last year moonlighting paying this off as well. That's less than a year after graduating residency with no help but my own efforts

I work as a contractor and make about 75% more than average salary in my field. I also optimize my taxes through savings in my s-corp. I can put 54k in a 401k a year and more with a defined benefits plan. I plan to invest at LEAST 150k a year after that in the market. That would be 850k net worth in 5 years and and above 2 million or so in 10. Will probably get a 3% 15 year mortgage in there somewhere. I have not taken account my fiancée income as of yet.

 

[Plastikos]

No need to get defensive. Like I said theres no wrong way to do it, we're just throwing ideas out so its no debate at all. You have a plan you like that is exceedingly reasonable, no big deal. Dave Ramsey is fine, and a lot of his methods are good, but you can essentially graduate from that is all. I already conceded at the start that if those were totally unalterable rates paying them first was obviously the right thing to do. Im sorry you had such a terrible experience with your ex, I also have a hole to climb out of from my first marriage as most of the student loans were due to her being an uncontrolled spender and totally irresponsible, so I get that. It is a painful learning experience.

Being a contractor is probably your biggest hurdle for refinancing since almost all require at a minimum 2 years of income tax returns to verify income as I also had that problem and couldnt refi until this year. Same issue with buying a house, everything is a hassle until you have two years taxes, and then one will be a half year and they may average down your income severely as well. I tried and went to great pains to work with anyone who gave an inkling of hope, but none worked out until I hit the standard timeline. Good thing is that all of this is temporary and unfortunately time flies. However, as you mentioned I think the benefits of a 1099 by far out weigh the downsides, theres just no comparison to how much you can toss away each year.

 

[ferning]

The best passive investment anyone makes is limiting their household tax liability. Maximizing your tax deductible retirement, HSA. For those investments a mutual fund that invests solely in ur home states tax deductible bonds. No state or fed taxes on the dividends and any cap gain tax can be offset.

The stock market is going to die in our lifetimes, the dollar too when actual inflation is reflected. Tangible goods and property are what have utilization value. They are depreciable business investments and deductible exepnses as well, something psych contractor work lacks. And anyone who is an employee.

If you have money left over after paying your loans, rental income losses to 25k a year can be deducted from income as physician. If MAGI<75k I think. Mix use buildings diversify ur investment in commercial and residential. Worst comes to worse u can live and work in vacancies. More than that you can provide affordable and stable housing to people who don't have capital.

Although I think tax deductions like this are a way to trick people into not just going off the books totally for this investment. Also to ensure people use banks to finance housing because its tax deductible. Putting their business at an advantage over any other method to own housing or rent to others. Not to mention they earn the majority of municipal bonds tax free yield, which your real estate taxes fund. As well as all the other punitive income from a town, parking violations, negligible moving violations, all the fines and fees that along with owning a car or business in their limits. And the outstanding bonds are worth way more than the towns property available to sell off. I wish I was a native American to live on tribal lands, be free of this nonsense

Getting married also makes your household tax liability worse if ur wife earns, 2 heads of household would have saved more. The dependents can be any family u support with housing or supplemental income. If they have min or no tax liability from social security or whatever they should help limit urs. adjusting tax exposure between households and families is really the only option at a point. All other commercial and social activities are heavily regulated to ensure maximum tax burden and compliance

 

[Plastikos]

Statements like the above are dangerous and irresponsible to anyone who may be receptive to hyperbole and paranoia. It is highly unlikely the stock market would "die". If it did, another market would pop up in its place, as did the first one. These are bottom up economic phenomenons.

The dollar is and always has been losing money relative to inflation, thats the whole point of investing, the risk free rate, risk premiums, and real rates. Probabilistically anyone taking that advice to its logical end would end up much worse off for it.

 

[sweetlenovo88]

Market is not going anywhere, the majority of US companies would have to go bankrupt. And we would have bigger problems if that happens.

And optimizing your taxes is key.

 

[Mad Jack]

Your loans are low, but the student loan will still cost you some money over time. I have mine at 3.375% and I'm working to get them paid off within the next 4 years or so. This will give me some security should my job change that I don't have to worry about those payments anymore. If its less than 4% interest rate, investing isn't a bad deal along with the regular payment schedule.

Overall though, his strategy is very sound. If anything, he should have invested more aggressively so that his 300k would balloon substantially faster than his debt.

In the coming days of unsubsidized, high interest loans, such a strategy tweaked riskier investments and may not pan out as well.

 

[bc65]

Your rate of return calculations are simplistic and gloss over the fact your loans are finite and compounding for retirement is not, and you will be exposed to banner years here and there and given the much longer term available...will greatly exceed any "return" you get from paying down the loan.

I don't follow the logic here. I'm not saying you're wrong, but this does't make sense to me. His loans are compounding as long as he doesn't pay them off. As far as I can tell, paying off a 7% loan will yield the same as investing in the market at a 7% total return ( with dividends). No one knows the future, but I keep seeing projections of total market returns of 7% for the next few decades. I wouldn't try to arbitrage a 7% loan against the market, but that's just me. Personally, if I could buy treasuries at 7% right now, I would put half of my retirement money in them, and this is coming from someone who doesn't have any bonds, and plans on having no bonds in retirement ( I plan on living of the dividends of my Total Market Fund).

Where I think we would agree is that no one should be holding bonds now, or buying them, if they have loans at rates higher than the bonds are paying.

 

[Plastikos]

At 7% I would agree thats too risky (and near term returns are thought to be 0-2%), however that is not what they have to be. My highest rate loans I literally consolidated/refinanced last month is now 3.29% variable and has a 7.5 year term. That they are still at that rate is their choice not what has to be. I wasnt saying dont pay them, I just wouldnt overpay them. Inflation will be your friend in this situation.

The point is on any loan, no matter the term it has an end date. You know up front how much interest you will pay for the life of the loan, it is available in all truth in lending disclosures or any calculator. Thats it, the cost of the loan. However, your "term" for investing is open ended and can in the extreme sense be trans generational. That is what I mean, your investment never stops growing until/if you draw it down. It is highly unlikely/near impossible that the cost of a reasonable or refinanced loan could ever match a long term investment, it just doesnt make mathematical sense whatsoever. That may not help you sleep at night, or give you the freedom in life you're looking for, everyones different, so you have to do what is best for your situation. In fact, for any doctor over a long career time span one decent year of gains in their investment portfolio should be greater than the total principal of their loans, its the magic of compounding the difference being term length. There will be no calculator that tells you with the rates available today that you will be better off financially, by paying down loans over investing. You do have to invest it though.

I however just look at it in the totality of net worth and net present value, future value of that money. No matter how you do it, your net worth is changing for the better by the same amount, its just in what accounts the changes occur that differ. Im fine with inflation and time making an end to my loans as I stuff the investment side with any extra that would go to loan pay down. You may get out of that loan and all the fringe benefits that come with that, but I'd rather have appreciating assets and grow myself out of it.

I hope that made sense, i can ramble. If not, say so, and I'll try harder to be clearer next time.

 

[sweetlenovo88]

You're right that's it's very dependent on a person's life plan. I need my debt paid off so I can pursue my dreams of entrepreneurship and use my physician income towards that end. I will be putting money 50-60k a year or more into retirement but hope that when I retire I won't need it. I see it as an insurance policy for myself.

Also to refinance you need excellent credit to get those rates. Average or poor credit will get you around 5%. So far paying them is moving quite rapidly. I have another 30k at 6.8% then the average is at 5.2 or so. I should be there before the year ends.

At 7% I would agree thats too risky (and near term returns are thought to be 0-2%), however that is not what they have to be. My highest rate loans I literally consolidated/refinanced last month is now 3.29% variable and has a 7.5 year term. That they are still at that rate is their choice not what has to be. I wasnt saying dont pay them, I just wouldnt overpay them. Inflation will be your friend in this situation.

The point is on any loan, no matter the term it has an end date. You know up front how much interest you will pay for the life of the loan, it is available in all truth in lending disclosures or any calculator. Thats it, the cost of the loan. However, your "term" for investing is open ended and can in the extreme sense be trans generational. That is what I mean, your investment never stops growing until/if you draw it down. It is highly unlikely/near impossible that the cost of a reasonable or refinanced loan could ever match a long term investment, it just doesnt make mathematical sense whatsoever. That may not help you sleep at night, or give you the freedom in life you're looking for, everyones different, so you have to do what is best for your situation. In fact, for any doctor over a long career time span one decent year of gains in their investment portfolio should be greater than the total principal of their loans, its the magic of compounding the difference being term length. There will be no calculator that tells you with the rates available today that you will be better off financially, by paying down loans over investing. You do have to invest it though.

I however just look at it in the totality of net worth and net present value, future value of that money. No matter how you do it, your net worth is changing for the better by the same amount, its just in what accounts the changes occur that differ. Im fine with inflation and time making an end to my loans as I stuff the investment side with any extra that would go to loan pay down. You may get out of that loan and all the fringe benefits that come with that, but I'd rather have appreciating assets and grow myself out of it.

I hope that made sense, i can ramble. If not, say so, and I'll try harder to be clearer next time.

 

[dpmd]

I don't follow the logic here. I'm not saying you're wrong, but this does't make sense to me. His loans are compounding as long as he doesn't pay them off. As far as I can tell, paying off a 7% loan will yield the same as investing in the market at a 7% total return ( with dividends). No one knows the future, but I keep seeing projections of total market returns of 7% for the next few decades. I wouldn't try to arbitrage a 7% loan against the market, but that's just me. Personally, if I could buy treasuries at 7% right now, I would put half of my retirement money in them, and this is coming from someone who doesn't have any bonds, and plans on having no bonds in retirement ( I plan on living of the dividends of my Total Market Fund).

Where I think we would agree is that no one should be holding bonds now, or buying them, if they have loans at rates higher than the bonds are paying.

Student loan interest is simple not compound with the exception of an initial capitalization of interest unpaid at the end of the grace period when you get out of school and if you use any periods of forbearance any interest unpaid each year of forbearance. Once you stay on a repayment plan any unpaid interest is not compounded. Not saying it is unreasonable to pay down a 7% loan, just you can't say it is equivalent to a 7% compound investment.

 

[FirstNobleTruth]

Apologies for the thread bump.

@The White Coat Investor

Dr. Dahle, wondering if we could get some more input here. Typical recent EM grad, 1st-year out making a good attending salary, with typical 200-300k in loans at 7%. Say you can refinance those to 4-6%. What do you think of the ideas presented above about investing rather than paying off loans? Specifically what @Plastikos was explaining (and quite well). I can see good arguments for both sides, but also acknowledge that my financial acumen is lower than everyone else posting (although I'm working on it).

 

[The White Coat Investor]

At 4-6% guaranteed, I'd probably pay off the loans. If nothing else, having paid off loans reduces the need for monthly cash flow. My "loans" were paid off after 4 years of military service. I look around at people who finished residency with me 10 years ago who still have loans and am grateful I do not. That said, I am investing instead of paying off my mortgage with an after-tax rate of about 1.6%. Of course, thus far (4-5 months into it) I would have been better off paying off the loans instead! More info here:

http://whitecoatinvestor.com/student-loans-vs-investing/

The main problem, of course, is behavioral. People with low interest rate loans don't actually invest the difference, they spend it. Far better to pay off 2-3% loans than to buy a boat with the money.

 

[Plastikos]

Lets just bump this to now look a couple years later at the differences in paying down vs. investing. I think the OP is significantly far better off than anyone who paid down their loans instead out of a fear that seems to stem from misunderstanding simple vs. compound, "loan cost", and time value of money.

One day into the future the OPs investment will start throwing off more money each year than his loans were cumulatively. You have to think big picture long term. Also, its not as if you burn any bridges by investing (taxable), and if you change your mind you just pull out and pay the loans off. That doesnt work in reverse when you realize you didnt get much for that trade.

 

[Mman]

The stock market is going to die in our lifetimes, the dollar too when actual inflation is reflected. Tangible goods and property are what have utilization value.

I only regret that I did not get to see this post back when it was made. Too funny. A stock market can't "die" in the sense that it is nothing more than ownership of valuable companies. The odds of there not being publicly available ownership interest in companies (aka stock) that you can buy/sell when you see fit (aka market) in the US in the future is about as close to zero as you can get.

 

[Plastikos]

[QUOTE="ferning, post: 17049064, member: 555261"
The stock market is going to die in our lifetimes, the dollar too when actual inflation is reflected. Tangible goods and property are what have utilization value.

I only regret that I did not get to see this post back when it was made. Too funny. A stock market can't "die" in the sense that it is nothing more than ownership of valuable companies. The odds of there not being publicly available ownership interest in companies (aka stock) that you can buy/sell when you see fit (aka market) in the US in the future is about as close to zero as you can get.[/QUOTE]

Yes, and like any of these choices would matter if that was the case. Always find that rhetoric entertaining.

 

[igap]

OP here with an update since there seems to be some interest in it. Operation Dividend Freedom is progressing well. Not to inject politics into it, but when Trump got elected my portfolio increased by nearly 20% over the following couple of months. The dividends keep flowing though, and with full dividend reinvestment, my dividend income has increased by slightly more than 9 % per annum, or about 0.78% per month. I have invested more over the last year and a half (not all in dividend paying stocks) and my dividend income now exceeds my monthly loan payment by a good bit. Overall, I am sleeping very well at night.

 

[Plastikos]

OP here with an update since there seems to be some interest in it. Operation Dividend Freedom is progressing well. Not to inject politics into it, but when Trump got elected my portfolio increased by nearly 20% over the following couple of months. The dividends keep flowing though, and with full dividend reinvestment, my dividend income has increased by slightly more than 9 % per annum, or about 0.78% per month. I have invested more over the last year and a half (not all in dividend paying stocks) and my dividend income now exceeds my monthly loan payment by a good bit. Overall, I am sleeping very well at night.

Which is why I bumped it, it always sounds scary at first, but give it a few years and it will more than pay for itself. I do the same, though not with dividend stocks as in a taxable account they are too much of a drag at our income levels. In another 10-20 years you will have a year that appreciates a nominal amount that is larger than your original loans were. The dividends will still be there pumping out cash as well. You dont have an issue with tax drag on your account? Thats going to slow down the pace of your gains on an after tax real basis.

Its not a choice you'll regret, besides you have a choice still as you can decide whenever to just pay it off with the invested monies. Once you put money into an extra loan payment its just gone and there is no cash flow benefit until its fully paid off.

Im putting all my extra money into taxable as well. The idea that no one will invest their extra money is illogical as if that were true why would the same person with no self control put the extra money towards loans? Im glad someone else is taking the long and math sensible approach. Great job!

 

[igap]

OP here with yet another update. Portfolio up another 15% (including reinvested divvies) since earlier in the year. Divvies up 18% YOY with some additional investment. Taxes do kind of suck, but I pay them knowing that the more divvy tax I pay, the more divvies I earn. The dividend strategy I picked allows me to not worry about the price of stocks, and instead feel secure knowing that every month my passive income grows. I also have non-dividend stocks as well, but not as many. I also started to put some cash into ETFs earlier this year. QQQ is my main ETF, with 3 others. I make very few changes to my portfolio so I don't spend nearly as much time on it as I once did. Instead I now am devoting time to other activities, some financial others personal.

 

[ThoracicGuy]

OP here with yet another update. Portfolio up another 15% (including reinvested divvies) since earlier in the year. Divvies up 18% YOY with some additional investment. Taxes do kind of suck, but I pay them knowing that the more divvy tax I pay, the more divvies I earn. The dividend strategy I picked allows me to not worry about the price of stocks, and instead feel secure knowing that every month my passive income grows. I also have non-dividend stocks as well, but not as many. I also started to put some cash into ETFs earlier this year. QQQ is my main ETF, with 3 others. I make very few changes to my portfolio so I don't spend nearly as much time on it as I once did. Instead I now am devoting time to other activities, some financial others personal.

The ER of QQQ is 0.20. While this is low, you can do better. Why'd you decide on QQQ?

 

[dpmd]

The ER of QQQ is 0.20. While this is low, you can do better. Why'd you decide on QQQ?

Cool ticker symbol? I admit to putting some of my portfolio in stuff that just has a good name.