I graduated college at the age of 22. I had just gotten married and walked into the real world with 55k in student loan debt and a car loan of somewhere in the 12k range. I wanted to pay off the debt as fast as possible. My wife and I aggressively saved each month but I never once paid extra on a monthly basis unless I could pay it down to zero. I’d save up a lump sum and then pay off the balance in one foul swoop. I know everyone, even some of the most popular personal finance people today, seems to promote paying a little bit every month goes a long way.
I just couldn’t pull myself to do it. I always felt comfortable with cash in the bank. I learned, very early on, that cash is king. Paying off an extra $200 on my student loans didn’t mean anything if my tire went flat and I needed it replaced. It didn’t mean anything if an unexpected expense came up. Most importantly, however, it didn’t mean anything if I had an opportunity to invest in myself, my relationships or another area of life that would be more valuable than a slightly lower debt balance.
I am fully aware the math doesn’t add up. I was clearly losing money each month on interest. By not paying as aggressively as possible every single month I was costing myself money. However, the peace of mind I had from knowing I had significant cash in the bank in case something happened was far more important than the $3.22 I was losing to interest.
Creating wealth in life is about that peace of mind. By creating wealth in my health I know that I’m doing my best to live a long and happy life. By creating wealth in my finances I’m doing my best to not have to worry about them in the future. Creating wealth in all areas of life is what leads to true happiness. Its not about spending every last thing on today’s wants but saving them up so you know you’ll be ok in a time of need. Having cash on hand for emergencies and opportunities gives me peace of mind.
Currently I’m sitting on roughly 8 months of expenses in cash. I’m currently looking for an opportunity to invest.