A month or so ago NeilMcIntyre.CA commented that despite being an accountant and dealing with finances every day, his personal finances didn’t reflect his own knowledge in his profession,

Pay off debt, then start saving and investing NeilMcIntyre.CA 30 July 2007

Subconsciously, I held on to the debt in order to keep my asset balances high. Artificially high. [...] I’m an accountant and auditor, I find other people’s mistakes and control weaknesses, and until this weekend I wasn’t even managing my own finances like a pro!

I interesting to read Neil’s post because this month I returned to rigourously tracking my expenditures and tracking it against a monthly budget. I also, this week, reduced my chequing account balance and counted it against next month’s budgeted debt payment in order to benefit more from the time value of the money.

Part of the problem is not applying knowledge and reason to something about which you feel a lot of emotion. Money you make and save and one you spend or debt you bear can have pride or guilt associated with it which can lead us to act in ways that hurt our finances.

I wonder about the choice between paying off more debt or saving for a downpayment for a house. If I expect the house to appreciate in value as housing prices rise and expect to take on a mortgage in the puirchase of a house (which would at that point just be trading debt for debt) then postponing the purchase to pay of other debt earlier would have a net cost.

Generally I would think it would be more beneficial to save for the downpayment and buy the house earlier and still bear the other debt. That could change though if the debt affects the terms of your mortgage.

Anyway, I am going to comment and ask Neil what he thinks.