Monday, August 25, 2008

Risk Management

I saw an article today dealing with the decisions recent college grads make on whether to pay off student loans or put their money towards a down payment for a house. Read the article HERE.

My advice would be somewhat different. First, don't do debt for college. If it's too late for that, then I would advise paying off the Student Loans first. From a common sense perspective it should be a no brainer. Just look at all the foreclosures that have resulted from people who got in over their heads. Here's how I hear the question: We have these big hairy college debts. Should we take on more debt and buy a house? Will our lives be better off if we increase our debt load?

I know its a buyers market out there. But there are always good deals to be had if you shop well. And the simple rule is, the more debt the greater the problem if something goes wrong financially.

I would not recommend buying the house until the school loans are paid off. Get radical and throw everything at the debt, get rid of it and put everything possible into saving for the Down Payment. You will sleep better at night and you'll also have money at the end of the month.


Snobound said...

Point well made. Student loans have a way of sticking with you for ten, twenty, even thirty years; and even though the payments may be manageable now, adding more debt on top of it can easily make that manageable payment unmanageable. Buying a house is never a simple or inexpensive thing, so having as much cash in reserve when you do it is the smartest way to go!