Pay off debt vs saving for down payment

[Jim Stevenson]

Hey everyone, I know this question has probably been posed a lot but I wanted to see if I could get some feedback on my situation. Back in September I started the uphill battle of paying off mine and my wife's $55k worth of consumer debt and student loans. I wish I had this shift in mindset about personal finance a few years ago so I wouldn't have to deal with this but it is what it is. Our debt consists of: 26k car loan at 3.9% ($479 monthly payment) 7k student loans at 5.3% ($274 monthly payment) 9k credit cards at 0% (transferred it to two 0% APR cards, $118 monthly payment) I'm currently down to 42k overall after throwing 2000-3500 per month at it. If I continue with a $3500 monthly payment everything will be paid off by April 2018. My goal after paying it off is to start saving $3500 per month for a down payment and reserves for my first rental property. I'm thinking though that it might make more sense to keep my debt payments at the minimum and save the rest towards the down payment. I know I could potentially use the cash flow to help with the debt. I think it would just "feel better" to get rid of the debt before I start this journey but I know I can get better returns than the interest rates I have now from investments. What do you guys think? Any feedback would be greatly appreciated!

[Joe Splitrock]

@Jim Stevenson

1. Pay off the student loan. Not because it is the highest interest, but because it is permanent debt, meaning bankrupcy cannot get rid of it. For that reason I always recommend getting rid of student loans first.

2. Pay off the car. Not because it is the second highest, but because it is secured debt against the car. Better advice would be to sell it as @Steve Vaughan suggested and I would buy a $10-15K reliable used car, but if you are keeping it then pay it off.

3. Pay the credit cards. They are low rate today but you can only juggle 0% cards so much. Best to get rid of the credit card debt. In the future either exercise self control or cut them up if you cannot control your spending.

The reason you need to pay off your debt is to train yourself monetary discipline and spending control. Rental properties are hard work and take money to operate. BP has a way of glamorizing rental properties, but it really doesn't work out great for everyone. It is best to enter the business in good financial shape or you risk your families financial security. 

As @Marcus Johnson pointed out, we are only talking one year to be rid of this debt. In the grand scheme of your investing career, that is nothing. You will get an amazing feeling of self accomplishment and financial confidence by paying off this debt. Often the people who recommend not paying off debt are in debt themselves. It is like asking a fat guy how to lose weight.