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The most common financial goals are; retirement savings, paying for college, paying off consumer debt, paying off a mortgage, establishing a strong emergency fund. Secondary goals for major purchases, such as a second home, may be on the list too.

So is it better to knock them off one at a time or make a little progress towards each? As with all financial challenges, it depends. Here are two examples.

Timing of Paying off a Mortgage

Mortgage payments are normally the biggest budget item so eliminating this payment can significantly improve cash flow. But to eliminate a mortgage requires restriction in current cash flow. The decision may come down to when the mortgage can be completed.

Completely eliminating it before start of college for a child or retirement may be beneficial. In the case of college, the eliminated payment may make paying tuition from current wages possible. In the case of retirement, eliminating the need for a continued payment will reduce demand on a portfolio.

On the other hand, if the mortgage cannot be completely eliminated, then it may be better to save and invest the extra principle payments to avoid student borrowing or a high rate of withdrawal from retirement savings.

Consumer Debt verses Retirement Savings

The high interest rates in consumer debt make their rapid elimination a high priority. The 100% return of participating in a 401k (up to the employer match) makes this really hard to pass up. This trade-off may be driven by reforming behavior and length of time. If staying out of the 401k allows for a very short repayment period and reforms habits, this may be a good course of action. If staying out lingers for years, this may be simply passing up too much money.


Personal finance is always about trade-offs. The first step in selecting which side of the trade to land on is understanding what is gained and what opportunity is passed. This fundamental truth is why simple rules can never completely lead to an answer. Financial professional can help with these issues by taking a dispassionate view, coupled with experience in the specific trade-offs. If you are currently struggling with a trade-off, please contact us.