Question. I am a new attending for a private employer and owe a lot of money. I have the following debts:
- $400,000 5/1 adjustable-rate mortgage at 3.5 percent
- $60,000 student loan at 7.9 percent fixed
- $80,000 student loan at 6.8 percent fixed
- $40,000 student loan at 5.4 percent fixed
- $20,000 student loan at 4.5 percent variable
- $20,000 seven-year car loan at 5 percent fixed
- $11,000 on a credit card at 11 percent
- $8,000 on a credit card at 15 percent
I would also like to get started investing. My employer offers a pretty standard 401(k) and will match the first $6,000 that I invest. My stay-at-home spouse and I are also excited about starting backdoor Roth IRAs. How can we decide when to pay back loans and when to invest?
A. This is a complex problem and one to which there is no definite right answer. The correct answer for you will depend on a lot of factors, such as current interest rates, total debt in relation to your income, expected return on investments, the fixed versus variable nature of your loans, job security, your tax situation, your asset protection plan, and your comfort level with debt. There are, however, some guiding principles you can apply when making such decisions.