In these unprecedented times, would you rather have zero debt, or a mix of debt and investments?

NOTE: I don't really mean for this thread to be an in-depth discussion of the financial markets or investing; just kind of mulling over a broad philosophical question. 

Anyone else rethinking their financials in the midst of the chaos we're currently experiencing in the world?

In general, I'm doing pretty well financially. I'm gainfully employed (at the moment). I have a mortgage out on a home at about 55% LTV, I owe a few grand on a HELOC we've used to do some remodeling, have a loan out on a Mk7 GTI that's starting to piss me off, and have some subsidized student loans that I've been chipping away at with the goal of aggressively repaying once the other, higher interest debts are paid.

I'm not hurting for money, have a decent mix of investments, all of my balances are managed well, no CC debt, etc. I'm doing pretty well and in any other period, I wouldn't even think about changing things up.  But as the stock market continues its ridiculous cruise upward in the middle of a pandemic and period of significant social upheaval, I find myself considering a lot of things that I wouldn't have a year ago. 

There is a growing voice of anxiety within me that is telling me I should pull every post-tax contribution I've made to Roth accounts in the past decade, immediately zero the debt on the HELOC and VW, dump the VW for the nicest appliance Prius I can find this side of $5k, and then plow every spare dollar I have into eradicating my student loans. Why? I don't know. To not have the psychological burden? I can't really put my finger on it, to be honest.

I probably won't do it. Conventional wisdom, "stay the course," investment ROI is higher than the debt cost, etc. But I've never thought about it as seriously as I am right now. I feel like I'm going through a weird philosophical shift from "playing the game" to "being uncomfortable with the game and wanting the fewest liabilities possible."

Am I losing my mind or is anyone else mulling over this kind of thing right now?

Zero debt, the market is currently being propped up by measures that aren't sustainable, you don't want your money to be at risk when the Weekend At Bernie's act comes to an end.

I'm not the most knowledgeable investor, but DW and I are on solid footing mostly due to keeping spending well below income as a way of life.

I'm firmly in the "debt is a tool to keep in the box, but avoid using" camp.  It must be largely psychological for me because in similar, more detailed discussions here, smart people have shown me logically that I could be better off carrying more debt, but I am much happier minimizing my liabilities.

I am not a cash-only Ramsey disciple, because since my very early 20s I have had little problem managing my spending and debt load.  But I'm happier when things are paid off.

Security is good. It may not be financially optimal, but getting to a point where you don't owe anybody anything (except perhaps a mortgage) is empowering. With that security, you can sleep easier at night, but also be free to take more risks, or look for opportunities that you might not otherwise be able to chase with the new cash flow. And it sure dampens the shock from life's potholes too.

This clip has NSFW language, but it's a succinct viewpoint:

The main reason for "stay the course" is that most people don't necessarily have a plan to replenish their savings as quickly as possible when they use them to extinguish debt. The other issue is that you're losing the growth during the period of replenishment.

One thing to keep in mind that the stock market has been more volatile recently (although as you mentioned, the trajectory is a bit mystifying at the moment[1]) and volatilty is usually your friend when it comes to investing.

A couple of alternative ways to look for the answers to your questions:

• If you just paid of the GTI, how long would it take you to replenish the money?
• If you paid off the other debts, how long would it take you to get back to where you are now? Keep in mind that you probably don't want to to this at the Roth replenishment rate if we're talking Roth IRA, so suddenly some of the money you put aside is going to taxable when it wasn't before. That alone usually would have me stop considering that part of the idea.

One way to have a smaller cake and still eat it may be to dial down the contributions a bit and use the extra to pay down the loans faster?

Ive had decent "investments" i could liquidate for cash if needed, but i had debt too. In about 2 months i should be debt free except for the mortgage. Not cutting big credit card payments every month sounds happier to me than having more stuff at this time in my life. 

I wouldn't be afraid of a reasonable mortgage and car payment.  More relevant is do you have sufficient cash/savings to make those payments for at least six months if you suddenly found yourself without an income?

I don't think I would cash out investments to get rid of debit. Not right now. 

I would be more inclined to dump the car payment in favor of a paid for vehicle, take that payment and double down on the HELOC until that's gone. Then take both those payments and triple down on the school debit until it's gone. Then take all of those payments and knock out the house payment. 

From there, I'd stay out of debit, but that's just me. 

I'd rather have a third choice, zero debt and investments.  My retirement account has already more than recovered from the crash in late March (and it's not all that aggressive, either.)  Anyone who cashed out in the meantime made a bad decision.

I currently only have my loan on my N as my only debt, I am also at the point where I can just take it to CarMax and walk away debt free. I also don't have to make a car payment until July of next year.  So until something changes I am keeping my investments and retirement like they are and paying off my car loan at my 3x-4x my payment rate. Bought it at the end of November last year and slated to pay it off in 12-18 months.

I would at max dump the VW for something cheap like a Prius or Camry or Avalon.

Even though things SEEM different right now, remember that you never know the future, and anything can happen in the short run. 

So now is an ok time (just like always) to think about your overall strategy, but generally I think it's a bad move to change strategy because you think you can predict something in the short term.  

In reply to GameboyRMH :

That has been my sentiment for quite a while. And while I am an advocate of zero debt and have practiced that religion  my whole life, it seems that the public's willingness to pour tax dollars into the markets knows no bounds and is likely to stay that way for the foreseeable future. Zombie industry (aka corporate welfare) is here to stay , so dive on in.

zero debt.  

I could pay off all debts tomorrow if I wanted, but I choose not to.  Does that answer the question?

NOHOME said:

In reply to GameboyRMH :

That has been my sentiment for quite a while. And while I am an advocate of zero debt and have practiced that religion  my whole life, it seems that the public's willingness to pour tax dollars into the markets knows no bounds and is likely to stay that way for the foreseeable future. Zombie industry (aka corporate welfare) is here to stay , so dive on in.

I think the problem has escalated significantly a number of times in the last few years, most significantly since the beginning of the COVID19 outbreak...soon the issue could be not just the public willingness to prop up the markets, but the means.

I have no debt. I like having no debt. I'd keep it that way if I could, but i need a garage. And maybe a house. 

I have historically felt that inflation is overdue. Historically America has dealt with high debt by inflation. 
What I feel is different this time is traditionally high debt follows investment.  Since much of American manufacturing has left to foreign    countries  and the foreign labor costs plus transportation and import tariffs now are at or above American labor costs yet there is no concurring American investments in facilities. 
My gut feeling is we will not have  any follow on inflation.  
Lacking a way to deal with our debt  any future growth is more like speculation than sound logic. 
I'm following the lead of Warren Buffit who is surprising deep in ready cash. 

In reply to ProDarwin :

That makes sense assuming the interest rate on that debt is at or lower than inflation. 

If you have a reasonable strategy, there would be no reason to change it at this time.  Unless you are planning on retiring within the next few years, the current situation should have no effect on your strategy.

Dept, as mentioned, is a tool.  If you don't need it, and don't use it, don't get it.  Dept can be very useful to generate future profit / growth, such as starting up a business, or getting into a house that will appreciate in value and can actually save you money or make you more money (vs not taking on the debt) if used appropriately.

Debts kind of like a giant wing on a Honda.  If you have a track car that hits 120 on the straights, it's can be useful.  But if you commute and tool around town in it, it just creates drag and only serves to hurt your mileage, top speed and reduce you rear visibility.  Plus, some people will thing of you as a bit of a fool (if that matters).

I like what toyman01 said.  Payoff.  No debt.  

Aside from a credit card that I owe all of $300ish on, I am debt free.  Cars, boats, and house are paid for.  In these uncertain times, considering I have been out of work since March 16 and have no idea when I will be called back, I am thankfull for not owing money.

I already have zero debt because I'm too poor to buy things I can't afford.

Paying interest is almost always a bad idea, the only time it isn't is when you make even more than you pay, like a business loan (but if your business fails??), or a student loan (where the degree is worth something.. :)  or a mortgage that saves you from rent (or house values going up, but what if they crash?)

You do need some cash on hand for emergency.   

One thing is certain:   Cash returns you zero.   The fed makes sure of it, that is there only job, make sure cash is worth less and less.  1 cent candy, 20 cents gasoline.

Stock market is peaking, I'd take advantage of this run up and sell off anything there. It will crash when dumpf loses, that is almost a given, just WHEN is the question, aug, sep, oct, nov, dec ?   but rest assured it will crash eventually, so not a good long term bet right now.  

I would recommend you buy all the cars you wanted, and pay for a place to store them, because you only live once, and who doesn't want to have a Tercel in their stable?  

Works for me...

https://www.youtube.com/watch?v=BXWvKDSwvls

I listened to Ramsey for a while, and although I'm not a cash-only, every budget down to the penny follower, we avoid debt, have both cars paid for, and have a nice little pile in the bank for a rainy day.

Stay the course. The best investing book ever written was the tortoise and the hare.

Now, I invest in stocks using the Cash app. Instead of having to fork out hundreds for one stock, I can drop whatever I can spare on a fraction of one. I've got almost 100 bucks invested in a bunch of different stocks, and my portfolio is doing great. I don't put anything in there I can't lose.

Another Ramseyism. "Investing is like a roller coaster. It goes up, it goes down, and the only people who get hurt are the ones who jump off."

Start by educating yourself by reading / listening go a variety of people in the financial field.  Read Rich Dad, Poor Dad to start.  Read / listen to Wes Moss, Allworth Financial (podcast), Annex Wealth Management (podcast), Dave Ramsey, etc.  Don’t rely on a bunch of car stuff forum people to be your guide on something as important as this.