Why is paying off debt always the biggest priority to advisors?

I have been an active follower of this site and have been around enough financial professionals in my time. One thing I always see and hear is advisors recommending that their clients pay off their debts above all else. Paying off debt seems to be advised over investing, saving, acquiring a loan, a home purchase, etc. Why is it that advisors and professionals are so firm on paying off debts before other options, is there a specific reason? I get that paying off one's debts is crucial, but feel there are other options that should at least be considered as a primary goal for an individual's finances. Are there any advisors who have a similar mindset to mine?

Debt, Personal Finance
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March 2017
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There may be a failure to communicate here. When I discuss goals with clients, we talk about things in their lives that they would like to achieve. These may include goals such as a comfortable retirement, or intermediate goals like home ownership, or paying for college.

Debt is one of those things that obstruct or interfere with the attainment of those goals. If the debt is large enough and the cost of that debt is high enough, it can make those goals unattainable. Think of debt and debt service as the inverse of saving and investing. If debt service is high, such as the interest rate on credit card debt (often in the 20% range), paying off that debt is like getting a 20% return on the amount you are indebted.

Without debt, you are not experiencing the “drag” that is the cost of servicing that debt which is interfering with the attainment of your financial goals. That does not mean that people can’t save, invest, and accumulate assets before they have paid off all their debts. They may want a home because they need a place to live, and take out a mortgage because they can’t pay cash. They may buy a car and take out an auto loan because they need transportation.  Credit card debt is one of the most common types of debt, and the worst, because the cost of that kind of debt is so high. It may well be an indication that people are living beyond their means. Credit cards should be used as a convenience, not as a way of living large.

As those debts build up and servicing those debts takes a larger portion of your income, it makes it much harder to accumulate wealth.

Does that make sense?

March 2017
March 2017
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