4 Times Logic Doesn’t Apply to Money

Logic is great, but it doesn't always apply to money management. Here are 4 times where it might pay to ignore logic and pursue a different alternative.

In the personal finance world, logic and emotion often battle it out. While some people like to think certain issues are cut and dry, there are a lot of times when logic doesn’t apply to money.

For example, is there a right or wrong answer on how to pay off your debt? Whether you should pay off your debt before you start saving? Where does investing fall into that?

Speaking of paying off your debt, is it worth paying off your mortgage quickly, or are you better off investing your money?

These are just a few instances in which you might feel conflicted about the path to take. I know it’s happened to me many times, which has caused me to change plans throughout the years.

It can be difficult to ignore the advice of financial gurus who stand firmly on one side of the issue or the other, but at the end of the day, you have to do what’s right for you. No one knows your situation better than you do.

The best way to figure out what to do when you’re unsure of who to listen to is to be informed enough to make a well-educated decision. Logic may not always apply to money, but that doesn’t mean you can’t reason your way through matters.

How Should You Pay Off Debt?


If you’re an avid reader of personal finance literature, then you know there’s two well-known ways to pay off debt: the debt avalanche method, and the debt snowball method.

Those in favor of the debt avalanche method like how the numbers play out. It’s the mathematically sound decision to paying off debt. That’s because you’re killing off your highest interest debt first, therefore saving yourself more money in the long run.

Those who prefer the debt snowball method are quick to argue that paying off debt, is an emotional thing. People can’t simply base their decision off of math. They think it makes more sense to start paying off your debt with the lowest balance first to gain momentum.

As you can see, this is a classic example of when logic doesn’t apply to money. While it might be enticing to save thousands over the years by paying off high interest debt, it can be a challenge to overcome such an intimidating balance.

Most people aren’t thrilled at the prospect of paying off $50,000 or $100,000 for the next 10 years. Chaining small wins together by paying off smaller debts in quick succession propels you forward more than consistently paying down one large debt.

So, what should you do if you’re trying to create a debt payoff plan? Take a look at your situation first. For example, in my case, I have two student loans – the one with the higher interest rate happened to be the one with the lower balance. My decision was made based on that fact alone (I had it easy).

If your situation is more complicated, then ask yourself what motivates you more: saving money on interest or paying off a few debts quickly? You might decide as you get into it that you need to find a way to lower a high interest rate on one of your debts. If that’s the case, look for sensible options, like Credible, to help you lower your rate. When you’re just starting out, going with the path of least resistance tends to be better. If you find one method isn’t working as well as you thought, change it up! 

How do You Decide Between Saving, Debt Payoff and Investing for Retirement?


This is a tricky one most of us will face at some point or another if we want to focus on financial success.

As I mentioned, I have student loan debt, but I didn’t prioritize paying it off right out of college. Instead, I focused on building my savings. I wanted a big emergency fund so I could sleep better at night.

After about two years, I started paying extra on my student loan debt. Then I left my job to begin freelancing, which required me to go into bare-bones budget mode. I was trying to cut costs and still save.

As much as I love saving, it’s been difficult for me to fit saving for retirement into this plan. I increased my contributions last year, but it’s not where I’d like it to be. That’s why I’ve vowed to switch my focus after my student loans are paid off later this year.

Obviously, it’s extremely difficult to balance all three of these priorities when there’s only so much money to go around. How do you know which goal to prioritize?

The best way to look at it is this: there’s always going to be an opportunity cost. If you’re saving money, then you’re not getting a “guaranteed return” by paying off your debt, and you’re missing out on compound interest in the stock market.

If you’re paying off debt, then you’re at risk of going further into the hole should an emergency arise and you can’t cover the cost. You can’t let debt hold you back from living your life forever, either.

Figure out which opportunity cost you’re most okay with incurring, and go from there.

What About Saving or Investing With Long-Term Debt?


What if your debt is going to take longer to pay off? Most student loan debt is on a 10 year repayment plan…yet, mortgages are on 15 or 30 year terms. Yikes!

This is why so many people are conflicted about paying off their mortgage versus investing, particularly if they’re aiming for early retirement or financial independence.

Some people are more comfortable going into retirement completely debt free. They don’t want any balances hanging over their head, and they want to know their money is theirs to keep.

Others disagree, stating that if your mortgage interest rate is low enough, you should prioritize investing. Your money is going to work more in your favor if it’s in the market versus being “invested” into your home.

On the other hand, not having a mortgage payment to worry about in retirement can be a relief. My parents moved when they retired, and they were able to fully purchase the house they live in with the money they got from their last house. Their mortgage was the biggest stressor they had prior to moving.

Again, it comes down to the math versus the emotions. Are you okay with having debt in retirement, even if it’s just your mortgage? Or does your definition of financial independence exclude debt of any kind? Figure out what your tolerance for debt is and what kind of difference paying off your mortgage would make in your retirement plans.

Which Investment Strategy Should You Use?


I can’t exactly speak to this on a personal level, but there’s a bit of a divide in the personal finance community when it comes to what the best overall, big picture investment strategy is.

Many people are fans of buy and hold because it’s the easiest way to put your money to work for you. Invest for the long-term, diversify, rebalance throughout the year, and don’t let market swings influence you to the point of exiting the market completely. It’s a very passive approach to building wealth, and it works for most people.

However, there are others who are fans of active investment strategies, which involve picking individual stocks, bonds and commodities to invest in. This requires more knowledge about investing in the stock market than most people have time to learn. Yet, it can be a great alternative for those looking to exploit a weakness in the market if they’re capable of spotting one.

Proponents of buy and hold don’t want to take the chance of “gambling” on an investment like this, and for the beginner and average investor, buy and hold is usually enough to get ahead.

Besides that, buy and hold largely takes the emotion out of investing. You’re not buying and selling based on hype in the news, you’re doing so on the basis of what has had a stable return in the past. Chasing gains can cause you to lose money quickly, and it takes you on an emotional rollercoaster ride. If all of this still feels too overwhelming to manage yourself, a robo-advisor like Betterment can help you manage your investments a little easier and in less time.

Logic is great, but it doesn't always apply to money management. Here are 4 times where it might pay to ignore logic and pursue a different alternative.

The Cliche is True: Personal Finance is Personal


I know it’s horribly cliche, but it’s also true. There’s no one-size-fits-all strategy when it comes to the nitty gritty of personal finance. Of course, people should strive to save, be debt free, and have a secure retirement, but the path everyone takes to get there is different.

All that matters is that you get there in a way that makes you happy! Carefully consider your options and figure out what works for you – regardless of the majority opinion.

Where do you stand on these issues? How have you paid off debt? Did you prioritize savings, debt payoff or retirement? How did you decide on which to prioritize? Did you listen to financial gurus for advice?  What investing questions do you have?

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Erin M. is a personal finance freelance writer passionate about helping others take control over their financial situation. She shares her thoughts on money on her blog Journey to Saving.


  • Michael says:

    I paid of my student debt of $27K within three years of graduation. I had full scholarship as a student but lived like a king. I learned my personal finance lesson when I graduated. Then, when I started working, I lived like a student for 3 years and paid it off.

    As for mortgage payments on a home, if you are 20+ years away from retirement, and the mortgage interest rate is 3%, then I see no value in paying it off early. Inflation has historically been around 3%. So, basically somebody loaned you the money for free.

    When it comes to investing, I believe in having a portfolio of passively managed market index tracking stocks and bond ETFs with low expense ratios. You need to have your asset allocation in order (stocks vs. bonds) and then re-balance your portfolio once a quarter to maximize returns. If you don’t want to go through all this pain, then use a robo advisor like Betterment or Wealthfront.

    • Erin M says:

      Nice thoughts, Michael! Congrats on paying off your student loans so quickly. I agree with you on the mortgage, though I do understand some people wanting to be debt free before retirement. It’s a peace of mind thing, which I can relate to as far as savings goes.

      Also agree with you on investing. People make it much more complicated than it needs to be. It’s better to get started the easy way!

  • Ramona says:

    I paid off debt 4 years ago, after losing my job and being in a pretty tight spot. The solution: build a small web design business. This allowed me to earn times more than my previous salary would pay, thus crushing debt and also being able to enjoy life.

    • Erin M says:

      Taking control of your earning power like that is awesome. That’s one of the reasons I’m so glad I started freelancing. If you’re not earning enough to make progress on your financial goals, you have to make changes somewhere!

  • Mrs Groovy says:

    We ditched the debt first. Getting rid of the mortgage led to more savings and accelerated retirement. We were facing unknown circumstances with a relocation. A mortgage would have been a monkey on our backs.

    • Erin M says:

      This is a great example of having to evaluate your situation and not going with conventional advice! A mortgage can be an enormous burden for some people.

  • This is exactly the reason I think it’s important for individuals to realize that topics like these are strictly pertaining to “personal” finance. It’s easy for anyone to spout off their beliefs about how it should be done, but each unique situation requires different handling. This is important for one to know so they won’t feel compelled to make a decision because “finance guru Dani” says it’s the right thing to do. What suits one individual will not fit everyone.

    • Erin M says:

      Exactly, Latoya! It’s great to listen to experts and take action, but the right way to do it is to listen to a number of people and then think about what path is right for you. It’s not the best idea to take what one person says as the end-all-be-all of personal finance.

  • Erin, I am a fan of debt avalanche method. I often apply this method because it saves much money from paying those debts with highest interest rates. I believe in this mode of payment priority is really important and this may suit my needs, but actually it’s really dependent on someones needs and situation.

    • Erin M. says:

      Exactly Jayson, it’s very dependent upon the individual. When I first started paying off my debt, I was all for the avalanche method. However, after several years of paying it off, I began to see why some people prefer the snowball method.

  • David says:

    I used a combination of the snowball and avalanche methods when I was getting out of debt. I had six or seven debts under $3,000 and three over $10,000. Eight months of the snowball method got rid of the smaller debts. With them out of the way I switched to the avalanche method.
    My mortgage situation was better than most people’s. I only financed $23,000 when I bought my house. The loan officer at the bank asked me how much I wanted to pay per month and tailored a loan to fit. I ended up with a six year mortgage that the bank didn’t sell because it didn’t fit the FannieMae or FreddyMac standards.

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