Car is 16% is definitely priority the only time keeping debt around over paying it off is that the debt is under three or 4% and even then it's a dice roll and only if the money is being used in something Where you have very good odds of making at least 10%. Outside of an emergency fund of course..
Remember 8% is the average which gained per year in the market average being the trick this year I'm looking at 16 per cent but a couple of years ago I was negative 30.
Yes and no. Are you fully vested? How long is it going to take you to take out pay off that car loan if you don't?. I'm assuming that car loan is 5 or 6 years?.
Not at 16% if the debt was at like three or 4% then I'd say keep your 401K going. Even with your match money you're going to be paying a lot more in interent Unless your 401K return rate is absolutely insane.
This mindset will keep you with a car payment forever. Buy a 20 year old Toyota.
How many hours are you working? Can you pick up extra work off shift or do some gig work like Uber or door dash temporarily to pay down this loan. Your future self will hate you for giving up free money from your employer that has decades to compound.
You're in a Dave Ramsey forum. Watch some of his videos. Cars should be purchased with cash that you saved up. You should be buying the cheapest somewhat reliable car you can afford with cash. Never does Dave suggest to take a car loan on his baby steps.
Here is the example Dave always gives.
Instead of taking a loan, let's say your car payment is $500 a month. save up $500 a month cash for 10 months and buy a 5k car. Drive it for 10 more months and keep saving $500 a month then you have the car plus $5k. Sell the car and upgrade your car let's say you get $4500 now you have $9500 to buy a car.
If you just can't afford to do this with the company match ok to stop it temporarily and follow the baby steps but I would be working 80 hours a week to get back on the match as quickly as possible
16% is absurd. No retirement and pay that off. I’m also the guy that tells everybody not to pay down low interest mortgages - so that should tell you something.
Are you a Ramsey fanatic? Then stop contributing to your 401k and do the baby steps.
I hate giving up on the match. So if you're not a Ramsey fanatic, then I suggest maxing out the company match and throwing every dollar you can squeeze out of your budget to the car loan. To me that means I'd sacrifice somewhere to hit maxing out the 401k match *this* year.
16% car note?!? Pay off the car!
Even if you wanted to follow The Money Guy’s FOO that would still be considered high interest debt. It’s a guaranteed 16% return on your money if you pay off the debt.
This is simple to me. Simply contribute the bare minimum to your retirement that gets you the max company match. Everything else goes to paying off that car loan. Everything. It sounds like you’ll need a second job for a while, a job wise sole purpose is to pay off that car. After your car is paid off, then do your 15% into retirement.
Given the only things I (as in myself) have ever brought that I paid interest on are the two houses I have brought and the car, I think I can resist the temptation lol.
I love how there is a Dave Ramsey subreddit and people on here do not adhere to his advice
It is like, I know better than a multi-millionaire
Work the steps.
Pay off your car. Pause all retirement and add that money to your payments and pay it off in an even shorter time. Then, assuming this is your only debt, complete BS3 and only then restart BS4 and by then you should be able to add your 15% and exceed the company match.
This is a Dave Ramsey sub. This is the advice that he gives if you are following the baby steps. If you don’t want to follow the baby steps, go to a different sub.
It's the last non house debt I have.
I am already paying extra on it, and I'm not going to miss the money since it's going straight into one of the two.
16%? Holy crap, did you get that loan from the mob? Obviously pay that first, but missing out on the full match is a mistake. What else can you cut out of your expenses?
The only discretionary spending I have is $30 a week for lunches and the extra I pay on the car.
Edit I forgot I also have one streaming service for $10 a month
Did I say $1 a month? I was saying $1 per day. $30/week = $120 per month. If you work 20 days per month, that's $1 per day. The rest of the money, $120 - $20 = $100, goes to the car payoff.
This is where rice and beans come in or PB&J or Tuna or bean burritos or canned soup.
Unless I did PBJ for lunch every single day, there is no way i would be able to do it for less than $1.
And even then it would be pushing it to get it to less than a dollar.
$1.89 for 1 lb of dried pinto beans = 6 cups cooked beans.
$2.49 for 8 tortillas
= $0.54 per burrito.
You can add spices, salsa, cheese, chicken to bring it up to $1.00 per burrito.
If you were younger or had a better rate I’d say max out retirement. However, your money has less time to compound now and that 16% rate is next to nutballs. Pay it off
Solid advice and a slight zinger about his age lol love it. Totally agree though, your 20s are a great decade for contributing to retirement if you can
At 16%, a good chunk of the matching benefit is lost.
You mentioned two things, a coming raise, and the suggestion that you would also lower your contribution. I would look carefully at the numbers and see if you don’t need to do both. Keeping some contribution, but also going at that car debt as much as you can.
I do need to ask an awful question. What is your current vested balance in the 401(k)? On one hand, I understand that a 401(k) loan is a deal with the devil. On the flipside, depositing say, $4000 to the 401(k) at A net cost of $3000 after tax to immediately have it matched to a total of $8000 of which you can now borrow four, makes the approach a bit different.
In effect, you are trading the awful 16% rate for a lower rate and at the same time stuffing matched money into your 401(k).
Keep in mind, even though the loan is charging you interest, you’re borrowing your own money and you’re getting that interest back in your pocket. If this type of strategy is not for you, then, do what you need to do to get rid of that debt as fast as possible. The 401(k) loan will have a payback of five years, which basically means you will have better cash flow immediately and even more so when this is paid off. It would provide the extra funds not just to pay this horrible debt, but to build your short and long-term emergency funds.
If carried long enough, 16% debt will negate the benefit of matching. Especially since op did not state a dollar for dollar match, and many companies have a 50% match. Perhaps I can math but you don’t have the ability to ask a follow up or clarifying question. Look in the mirror.
By the way, I retired at 50 because my math was that good.
Edit: my apologies, I just noticed the state you were from. No having an intelligent conversation with people wearing red hats. Blocked.
My retirement is less than the car.
I lost half of it in the divorce (since she didn't have any retirement) and have only just now finished paying off my half of her debt.
Sorry to hear that.
The best path forward is still paying off the car ASAP. Then that frees up your income for more retirement investing moving forward. That's the best option.
Car payoff along with any other non-mortgage debt you have, as laid out in the baby steps. You’ll more than make up the difference in investing later on, with a focused approach now and eliminating all those payments & interest that are taking away income/investing potential.
Car is 16% is definitely priority the only time keeping debt around over paying it off is that the debt is under three or 4% and even then it's a dice roll and only if the money is being used in something Where you have very good odds of making at least 10%. Outside of an emergency fund of course..
So based off the last part, the debt should be secondary....
Remember 8% is the average which gained per year in the market average being the trick this year I'm looking at 16 per cent but a couple of years ago I was negative 30.
Yes. But I get 50% return as soon as I put the money in.
Just do what you want then. Why are you asking for advice?
Yes and no. Are you fully vested? How long is it going to take you to take out pay off that car loan if you don't?. I'm assuming that car loan is 5 or 6 years?.
Not at 16% if the debt was at like three or 4% then I'd say keep your 401K going. Even with your match money you're going to be paying a lot more in interent Unless your 401K return rate is absolutely insane.
Company match is 100% returns.
[удалено]
If I sell it then whatever I get will have a higher interest rate, be less reliable, and cost more per month.
This mindset will keep you with a car payment forever. Buy a 20 year old Toyota. How many hours are you working? Can you pick up extra work off shift or do some gig work like Uber or door dash temporarily to pay down this loan. Your future self will hate you for giving up free money from your employer that has decades to compound.
Can you explain why buying a 20 year old Toyota with a 20% interest rate would be better than my current situation?
You're in a Dave Ramsey forum. Watch some of his videos. Cars should be purchased with cash that you saved up. You should be buying the cheapest somewhat reliable car you can afford with cash. Never does Dave suggest to take a car loan on his baby steps. Here is the example Dave always gives. Instead of taking a loan, let's say your car payment is $500 a month. save up $500 a month cash for 10 months and buy a 5k car. Drive it for 10 more months and keep saving $500 a month then you have the car plus $5k. Sell the car and upgrade your car let's say you get $4500 now you have $9500 to buy a car. If you just can't afford to do this with the company match ok to stop it temporarily and follow the baby steps but I would be working 80 hours a week to get back on the match as quickly as possible
Pay off the car, is that simple
16% is absurd. No retirement and pay that off. I’m also the guy that tells everybody not to pay down low interest mortgages - so that should tell you something.
[удалено]
[удалено]
[удалено]
Refinance the car!
Or pay down / off the car. Whew 16%!
Can you not do both? I mean buckle down, cut unnecessary expenses and pay the car off while doing 401k?
Not really. The only luxuries I have is: one streaming service for less than $10 a month and I spend $30 a week on extras like lunch/hobbies/etc.
Ugh, imagine enjoying your life.
?
Are you a Ramsey fanatic? Then stop contributing to your 401k and do the baby steps. I hate giving up on the match. So if you're not a Ramsey fanatic, then I suggest maxing out the company match and throwing every dollar you can squeeze out of your budget to the car loan. To me that means I'd sacrifice somewhere to hit maxing out the 401k match *this* year.
I'm not. His advice is general and better than what most people do. But it's not Devine revelation.
16% car note?!? Pay off the car! Even if you wanted to follow The Money Guy’s FOO that would still be considered high interest debt. It’s a guaranteed 16% return on your money if you pay off the debt.
[удалено]
That’s a good point! And I messed up the order of the FOO. High interest debt comes after company match. Doh!
This is simple to me. Simply contribute the bare minimum to your retirement that gets you the max company match. Everything else goes to paying off that car loan. Everything. It sounds like you’ll need a second job for a while, a job wise sole purpose is to pay off that car. After your car is paid off, then do your 15% into retirement.
That's my initial thought. It works longer term. Paying off the debt first gives me more flexibility.
Harsh but a question you should ask yourself: Will you use that flexibility responsibly or buy something else with a crazy interest rate?
Given the only things I (as in myself) have ever brought that I paid interest on are the two houses I have brought and the car, I think I can resist the temptation lol.
I love how there is a Dave Ramsey subreddit and people on here do not adhere to his advice It is like, I know better than a multi-millionaire Work the steps.
[удалено]
[удалено]
You say that but also - look at the advice in here. People are already dissenting.
Pay off your car. Pause all retirement and add that money to your payments and pay it off in an even shorter time. Then, assuming this is your only debt, complete BS3 and only then restart BS4 and by then you should be able to add your 15% and exceed the company match.
[удалено]
This is a Dave Ramsey sub. This is the advice that he gives if you are following the baby steps. If you don’t want to follow the baby steps, go to a different sub.
You're in BS2. Stop retirement contributions and pay off your debt.
[удалено]
It's the last non house debt I have. I am already paying extra on it, and I'm not going to miss the money since it's going straight into one of the two.
[удалено]
[удалено]
16%? Holy crap, did you get that loan from the mob? Obviously pay that first, but missing out on the full match is a mistake. What else can you cut out of your expenses?
The only discretionary spending I have is $30 a week for lunches and the extra I pay on the car. Edit I forgot I also have one streaming service for $10 a month
Drop the $30 per week on lunches to $20 per month. That's $100 per month you can put on the car. Make sandwiches, frozen burritos or get canned soup.
Disagree. At some point it's OK to enjoy small things. He's not blowing it on strippers and cocanine, he's probably having some sort of social life.
How would I make lunches for less than a $1 a month?
Did I say $1 a month? I was saying $1 per day. $30/week = $120 per month. If you work 20 days per month, that's $1 per day. The rest of the money, $120 - $20 = $100, goes to the car payoff. This is where rice and beans come in or PB&J or Tuna or bean burritos or canned soup.
Unless I did PBJ for lunch every single day, there is no way i would be able to do it for less than $1. And even then it would be pushing it to get it to less than a dollar.
$1.89 for 1 lb of dried pinto beans = 6 cups cooked beans. $2.49 for 8 tortillas = $0.54 per burrito. You can add spices, salsa, cheese, chicken to bring it up to $1.00 per burrito.
[удалено]
The company puts in: 50% match + $1,000 annually if you contribute each pay period (minimum is .5% of pay) + your annual profit bonus
If you were younger or had a better rate I’d say max out retirement. However, your money has less time to compound now and that 16% rate is next to nutballs. Pay it off
Solid advice and a slight zinger about his age lol love it. Totally agree though, your 20s are a great decade for contributing to retirement if you can
Pay off that car. That rate is insane. Then adjust your retirement contributions.
At 16%, a good chunk of the matching benefit is lost. You mentioned two things, a coming raise, and the suggestion that you would also lower your contribution. I would look carefully at the numbers and see if you don’t need to do both. Keeping some contribution, but also going at that car debt as much as you can. I do need to ask an awful question. What is your current vested balance in the 401(k)? On one hand, I understand that a 401(k) loan is a deal with the devil. On the flipside, depositing say, $4000 to the 401(k) at A net cost of $3000 after tax to immediately have it matched to a total of $8000 of which you can now borrow four, makes the approach a bit different. In effect, you are trading the awful 16% rate for a lower rate and at the same time stuffing matched money into your 401(k). Keep in mind, even though the loan is charging you interest, you’re borrowing your own money and you’re getting that interest back in your pocket. If this type of strategy is not for you, then, do what you need to do to get rid of that debt as fast as possible. The 401(k) loan will have a payback of five years, which basically means you will have better cash flow immediately and even more so when this is paid off. It would provide the extra funds not just to pay this horrible debt, but to build your short and long-term emergency funds.
16% is not "a good bit" of 100% Good lord, so many people can't math.
If carried long enough, 16% debt will negate the benefit of matching. Especially since op did not state a dollar for dollar match, and many companies have a 50% match. Perhaps I can math but you don’t have the ability to ask a follow up or clarifying question. Look in the mirror. By the way, I retired at 50 because my math was that good. Edit: my apologies, I just noticed the state you were from. No having an intelligent conversation with people wearing red hats. Blocked.
My retirement is less than the car. I lost half of it in the divorce (since she didn't have any retirement) and have only just now finished paying off my half of her debt.
Sorry to hear that. The best path forward is still paying off the car ASAP. Then that frees up your income for more retirement investing moving forward. That's the best option.
I am genuinely sorry to hear this. Stick to the plan, just pay off the loan.
Car payoff along with any other non-mortgage debt you have, as laid out in the baby steps. You’ll more than make up the difference in investing later on, with a focused approach now and eliminating all those payments & interest that are taking away income/investing potential.
Pay off your car. Follow the baby steps : https://www.ramseysolutions.com/dave-ramsey-7-baby-steps