A reader asked on my post, The Average Savings Rates By Income, whether I consider paying down debt part of my personal savings rate calculation. My immediate thought was yes, but I realized I haven’t been including debt pay down at all when I discuss my after-tax savings rate of 50%+ in various posts on Financial Samurai.
Here is the outline of today’s 17 minute podcast.
Why I Don’t Include Paying Down Debt In My Personal Savings Rate
1) Be conservative. Don’t rely on anybody or any organization to survive. There are a lot of broken promises out there.
2) You don’t reward yourself for doing something bad. Punish yourself instead.
3) Compartmentalize your money. No co-mingling of funds.
By the time you retire, if your property is paid off and you get social security and your 401k then fantastic. If not, then you’re still OK, because you never expected anything from anyone in the first place.
The only time I would consider including paying down debt as part of my personal savings rate is when I pay extra principal down on my primary mortgage. The extra principal pay down could have been used for other wealth-building activities, so including it should be OK. The thing you want to be careful about is being house rich, and cash poor. There’s a balance you’ve got to carefully work out over the years.
Readers, Do you include paying down debt in your personal savings rate? If so, what are the reasons why?
Speaking notes: I appreciate everybody’s feedback from my first podcast entitled, Genesis. About 60% of you seem to want shorter podcasts, so I’ve decided to produce a much shorter 12 minute podcast and see how it goes. In terms of speed, pitch, and tone it doesn’t look like I have a problem based on your comments. But I’ve sped up my speaking speed in this podcast to test. A couple of you mentioned I should be more enthusiastic in delivery and not be afraid of laughing at my jokes. The style I’d like to emulate are the shows from NPR where no matter how crazy the subject, the speaker stays within his zone. I like NPR’s style, so that’s what I plan to go with for now.
To listen to the podcast, click Play to have it play within the post. You can also download the podcast onto your computer or phone by clicking Download. If you don’t see the options in e-mail, click the title of this post to come to my site.