What is the ideal way to pay off law school debt?

[JustHereNotStaying]

Getting it to zero is the best. But I’m trying to get opinions on what percentage you should spend towards paying down debt, what percent you should keep in your bank account for a rainy day and finally what percent you should use for investments. Let’s say 100k is the debt and yearly salary is 60k (after taxes). Living costs maybe 20k?(Bunking with rents but overshoot costs just in case one has to move out). What is the sweet spot where you’re not living hand to mouth because everything goes towards debt. I’m curious to see what others did and what to watch out for? Thanks in advance and please add resources one can watch (and also help others who come across this in the future!) 

 

 

[CleanHands]

1 minute ago, JustHereNotStaying said:

Let’s say 100k is the debt and yearly salary is 60k (after taxes).

If that's your situation you aren't going to have anything to put into investments.

[Lawstudents20202020]

I mean that's going to depend heavily you personally. There's no objective sweet spot. 

[Rashabon]

The past is irrelevant because debt was free. With high interest rates and a down market, you want to pay down your student loan debt (that's interest bearing) because that's an immediate return. You're unlikely to beat that in the market for the near term.

[Jaggers]

Assuming your marginal rate is just above 30% (which gets you to $60K annual income), you'd need a pretty sweet return on those investments to get to an equal after tax return vs paying off your loans. You do want an emergency fund, of course, but if you're young and recently out of law school you probably have enough options that it doesn't have to be huge. Maybe 3 months of expenses?

The choice between paying off loans and living a somewhat better life is harder to quantify. The choice between paying off loans and investing right now comes down to the rate on your loans, and I'd think the choice is pretty easy in most cases.

[JustHereNotStaying]

I think if I invest it would be small for now (small tfsa with some stocks,maybe GIC) but not rolling the dice with an investment property. I never actually thought about savings based on months and took a monetary amount instead. 
 

this is great advice thank you all! I think I’m going to create a little nest egg and aim towards aggressively paying off of my debt. Maybe when the market turns, my debt isn’t as great and the sky is no longer falling, then  I’ll start looking towards investments.

[BlockedQuebecois]

51 minutes ago, JustHereNotStaying said:

Maybe when the market turns, my debt isn’t as great and the sky is no longer falling, then  I’ll start looking towards investments.

I agree with the advice above in relation to your specific situation (with the caveat that depending on the province your student loans are from, you may want to pay those as slowly as possible). But it’s worth noting that only investing during times when the market is doing well is a poor investment strategy. You want to invest consistently over the course of years. 

[Jaggers]

The sky isn't really falling right now. It's fairly certain that next year's return overall will be better than this year's. How much... no one really knows. Which is why a guaranteed return of the rate on your loans plus 30% (or more if you end up making more) is fairly attractive right now.

But I love guarantees. Some people prefer to take their chances, and it often works out.