Debt often gets a bad rap. But in some cases, it's actually a byproduct of progress—like the student loans that helped launch your career or the business line of credit that allowed you to get a thriving startup off the ground.
At the same time, many people with such obligations—often professionals in their thirties and forties—are juggling past financial choices with a desire to build wealth for the future. You may be contributing to retirement accounts or setting funds aside for your kids' education. Or, you could be exploring niche investment opportunities or building liquidity for a down payment on a second property. Knowing where to focus your resources can be a bit of a tightrope act.
With thoughtful planning and some professional guidance, it's possible to strike the right balance. Here's how to craft a plan that supports both goals.
First, know what you owe
You already know that not all debt is created equal. Some obligations, particularly those with high, variable interest rates, can chip away at your financial health. Other types, like a fixed-rate mortgage or low-interest student loans, may be more manageable—even strategic.
Get an overall picture of your debt exposure by reviewing your obligations across three key factors:
- Interest rate: Debts with higher interest rates generally warrant more timely attention. Even small amounts of high-interest revolving debt can diminish financial efficiency over time.
- Tax implications: Certain debts, like mortgage interest or student loans, may offer tax-deductible benefits.
- Type of asset financed: Debt tied to appreciating assets (like real estate or a business) may warrant a different approach than debt tied to depreciating assets (like a car or lifestyle purchase).
Strategies to support both goals
Below are a few approaches that can help you manage both sides of the balance sheet:
1. Prioritize high-interest and revolving debt
You may not rely on credit to cover large purchases—but if you do carry any high-interest or variable-rate debt, addressing it early can yield immediate benefits. These obligations often come with rates that far outpace what you’d reasonably earn in the market, so repayment is a smart and low-risk “investment.”
A Fulton Private Banker can help you assess whether consolidating or restructuring makes sense and free up liquidity to put toward longer-term goals.
2. Evaluate “good debt” in the context of opportunity cost
In some cases, it might make sense to keep low-interest loans—like a mortgage—on the back burner if it frees up money you can put to work elsewhere. Instead of rushing to pay down a fixed-rate mortgage, consider how you could put those funds to better use, such as building an emergency savings reserve or investing in higher-return opportunities.
3. Use cash flow to create choice
Set up automated monthly transfers to both pay down debt and fund investment accounts. Small contributions to retirement or brokerage accounts can compound over time, especially if you make them regularly. And putting the debt-repayment process on autopilot helps you stay consistent, even when life gets busy or priorities shift.
4. Refinance strategically
If you’ve had a loan for several years, your interest rate may no longer be competitive. Refinancing a mortgage or student loan can lower your monthly payments and reduce your total interest paid.
While the past few years have seen relatively unfavorable interest rates, refinancing can still be worthwhile in certain cases. For instance, shortening a loan term or switching from variable to fixed interest can save you money and boost the predictability of payments. Our private bankers can often access preferred lending rates and help structure refinancing options aligned with your broader financial goals.
5. Leverage tax-advantaged accounts
Prioritize contributions to accounts that offer tax benefits, such as 401(k)s or Health Savings Accounts (HSAs). These vehicles allow you to build wealth more efficiently, even if you’re still carrying some long-term debt.
For high earners, a private banker may also recommend advanced strategies such as backdoor Roth conversions or 529 plans for funding education opportunities.
Integrating Debt and Growth into One Clear Plan
Life’s major milestones often go hand in hand with some degree of debt management. But deciding between paying down past obligations and building a foundation for the future doesn't need to be an either/or choice. With the right guidance, you can turn today’s obligations into tomorrow’s momentum.
A Fulton Private Banker can help you run the numbers on different scenarios such as investing extra cash or using it to pay down your mortgage. They'll also spot refinancing opportunities and suggest consolidation options. In general, consider turning to a professional for help with tasks like:
- Prioritizing which debts to tackle first based on interest rates and tax implications
- Weighing the long-term benefits of maintaining low-interest debt versus reallocating funds toward investments
- Structuring a plan to balance liquidity needs with wealth-building goals like retirement, education, or real estate
No two financial journeys are exactly alike—and neither are the trade-offs they entail. Fulton Private Bank can help you craft a strategy that meets you where you are and supports where you're headed.
Balance growth with responsibility. At Fulton Private Bank, we can help you manage debt while building your future. Get in touch to discuss your goals and what’s next on your financial horizon.
