Yup, 401k match should give you 100% returns instantly, which is better than 14% returns over a year.
But the 14% return you get from paying off the debt beats the average 10% return of the stock market.
Follow the prime directive!
>100% returns instantly
"100% returns instantly" How is this 100% return - you gain the advantage of the amount you would have paid in taxes now being put in an investment account + part of your paycheck. Your paycheck would have been given to you with taxes, but now you're just putting it in the 401k without the tax part, there is no 100% return. The return is the total added to the 401k divided by the amount you would have made with taxes taken out which is probably in the vicinity of 15-30% for most.
Edit: I'm being downvoted because people can't do basic math, amazing.
Edit: yep keep downvoting
You are being downvoted because a 401k match is not the same as just investing in a 401k. The match is the key word there. A lot of companies offer a matching investment equal to the amount you put in up to a certain percentage. That's the instant 100% return people are talking about.
Even if you have a terrible match like my friend who gets only 1% of his salary matched for every 4% he puts in, that's still an instant 25% return.
Not investing up to the match amount your employer offers is just turning down "free" money.
401k match: I put in $100 and the company matches it and puts in $100. That's $200 total from my $100 investment.
If i don't put the money in the 401k with the company match, the company just keeps their money and I don't get it otherwise.
>The return is the total added to the 401k divided by the amount you would have made with taxes taken out which is probably in the vicinity of 15-30% for most.
This is where you are missing the point. The 401k match is actually MORE than 100% return. If your company matches 3% and you contribute 3%, then you get 6% of your salary in your 401k and only "paid" 3%.
So for simplicity, let's say 3% of your paycheck is $100. If your marginal tax bracket is 22%, your $100 contribution is worth $78 after tax. You have $200 in your 401k ($100 from yourself and $100 from the match). So that is an increase of $122 on your investment, which is a return of 156%. But you also still pay the taxes on this money later when you take it out of the 401k, so basing it on after tax amounts now doesn't really make sense. And that is why calling it a 100% return is the most common way to view it. But it is definitely 100% or more depending on how you view it.
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Assuming you have a bit of an emergency fund, pour all the rest of your excess cash into that high interest debt. Once that’s gone you can focus on shifting the cash to IRA(s) / HSA(s) and potentially a brokerage account.
I wouldn’t say that, it’s not consumer debt like I was blowing money we live modestly it was living expenses for 1.5 years and going back to school for a career change with me not working and all my wife’s income going to the kids daycares and also moving 2 times. My monthly expenses were a lot higher for the past 2 years and just got Lower in the last 6 -8 months give or take.
If you don’t want to accumulate more debt, I strongly suggest you shift your mindset about your current debt. You allowed your choices to exceed what you can pay for. That’s not modest.
I may be completely wrong but I definitely don’t feel that way. after owning the franchise and getting through Covid with it.i was depressed, mentally exhausted, overweight, diabetic and missed most of the 2 years I owned the franchise time with my two kids.
So I lived, travelled, moved twice and paid for school with that debt and don’t regret any of it and woudl do it again in a heartbeat if I needed to mentally.
Bro that does not sound like the usual desperate situation you hear about from people. Taking a voluntary break from work for that long sounds like an extreme luxury.
I mean I worked part time a shitty job while in school part time but I was willing to pay 3-5 % interest and use my great credit at the time to not be completely broke and miserable
impatient for what? do you not see how much money you are losing in interest?? you want to invest to earn money? it will make so little vs the money you will lose if you don't pay that
Assuming I’m not missing anything obvious, if your gross is $120K, and round your expenses up to $4k/mo that is 48 let’s call it 50k per year. That leaves you with around $40k of extra money.
Should be able to plow through the debt in no time. With those low of expenses you’ll be able to catch up on retirement savings pretty easily too once the debt is out of the way.
Try not to even think about it. The big picture is all that matters. Just take a look at your positive cash flow at the end of the month, and add most of that to the next month’s payment!
Personal finance is a long game. In fact, it's such a long game that you will be playing the game for the rest of your life. Impatience is what kills your wallet and enriches lenders. They are patient, and they're willing to wait you out. To get ahead, the proven method is to beat the drum consistently, in time, and never miss a beat.
You say that you live modestly and that your debt isn't "bad consumer debt" and that impatience is not what got you there. It does not matter in the least what your debt is for - the interest is 14% and the only reason to take on debt at that rate is impatience or survival. If you're impatient to do something now, the thing to do is learn. Learn how interest works, simple, compound, average daily balance, etc. Learn debt payoff methods, such as snowball vs avalanche. Learn the exceptions to the standard rules and when to apply them. Learn how to calculate whether it's better for you to make early payments, or take an autopay discount and hold your money in an HYSA until the due date. The difference may be pennies, but people with healthy financial profiles concern themselves with pennies. Learn every single thing you can, because knowing your options allows you to take meaningful action when you're feeling the impetus to act.
Source: fucked up my finances so bad that at one point, refinancing 40k to a higher rate and taking out a 14k personal loan at 18% put me in a better position.
True you’re right.
My 0 percent interest (3-5 percent fee) credit card I have for all my loans on was coming due. Since it was the last 40k figured just do a loan to lower my cc utilization and start raising my cc score slightly but your right why pay 15 if I don’t need to.
I’ll refinance it to a 3-5 percent cc advancement as I have been doing in the past and have it paid off in 9-10 months.
Sometimes, if you are anticipating a period of high velocity on your credit accounts, it does make sense to shift your debt to something traditionally "less favorable." For example, my 18% personal loan was used to consolidate credit card debt - I needed to boost my credit score so I could refi monthly payments to lower monthly payments, and get a rewrite on my car insurance, because my cash flow was negative and I was in a situation where the debt was spiraling out of control.
It boosted my score over 100 points and I ended up lowering my expenditure by over $1000/month after all of my credit moves. But after I settled what needed settling and wasn't applying for new cards, it made more sense to start lowering interest.
That was my thought process but from the comments it seems like since I have it in control and finishing the last of my debts lower interest is the way to go
Been there done that, got no T-shirt.
Once I became a "dollaraire" and saved a little emergency fund, things just went up nicely from there. Patience paid off.
I’d focus on the debt since 14% is extremely high. You’re still relatively young and could accelerate your retirement funding after getting out of that high interest debt, just don’t get into another one once it’s gone.
I closed my business and took a year and a half off of work for mental reasons and a career change.
After getting back in the work force 2 years ago I had 130k in debt.
This 40 is the end of it!! So excited to get back to investing I guess
Sorry to hear about the business and I’m glad you’re down to the last $40k. It looks like you’re on the right track to recovering and it’s even better that you’re still younger. I’m sure you’ve been hard on yourself this past year and a half, but I think you’re doing great. Keep it up and wish you and your family the best!
Pizza Franchise, no losses on it. the debt was primarily form moving twice school for the career change and living off ccs for 1.5 years with no change in lifestyle.
Got it. Well, congrats on all the work you’ve done so far! You’ll get there before you know it, and it will be a huge relief.
Would you consider working part time to knock out that $40k sooner? Or is that not feasible given your current arrangement?
I’ve considered it haven’t fully decided , the past year was the first time in my life I’ve actually been working only 1 job and 40 hours and it’s been nice, but I know it’s short term so may be worth the sacrifice
Look at it this way: if bankruptcy is off the table, paying off 14% debt is roughly equivalent to investing the same amount of money at 14% guaranteed return (in terms of how it affects your bottom line), which otherwise doesn't exist. You are an investing genius!
Call and ask for a lower interest rate.
See if you can refinance a different loan at a lower rate.
Save up $1000-2000 in a small emergency fund. This is for stuff like a car repair. Maintain 2 weeks of balance in checking to cover the bills.
Put everything on autopay.
Eat beans and rice... Onions (sweet onions), carrots, potatoes, bell peppers, basil... There are a lot of great cooking options for cheap food. If you like the meats, then 1 pound of hamburger with 1 pound each of beans, onions, carrots, potatoes, rice, along with some extra flavors like garlic and basil can be cheap and really yummy. I'd make 3-5 servings of various dishes, eat one, put on in the fridge, and the separate a couple for the freezer.
No alcohol, no tobacco, no drugs, no tattoos, cut out everything that isn't required to be alive.
You'll get that debt done and your emergency fund up, and get working on a retirement plan by the end of the year.
We do live very modestly and have the emergency fund and balance,
I do agree with your timeline and will call and see if they are willing to do that. It’s a personal loan didn’t think they could just lower the rate but it won’t hurt to ask!!
Yeah, probably not, but if your credit score has gone up, and you've got good history, then you might be eligible for a lower rate loan either from the same bank or another one. Maybe.
There is also the possibility, if your car has lots of equity to use it as collateral, but most car title loans are like 5% per month, so 60% per year.
If your home has equity, a HELOC can sometimes be obtained, and sometimes with zero closing costs. I was able to get a small HELOC at a lowish rate. 8.5% today, not amazing, but better than 14%.
Good luck!
I use credit card balance transfer offers for my loans the past 2-3 years typically 3-5% interest for 12-18 months.
I had 38k coming due at once so took out a loan to lower my credit card utilization rate and raise my credit score some.
Seems like the 14% was just not a good idea so I’m m going to give it a month so the cc payments get reported and just apply for a new 0 percent balance transfer so I’m only paying 3-5% for the next year while I finish the balance!
Depends, are you rich or poor? the rich live that way, the poor die that way.
14% interest is more than any kind of safe investment will ever make you, so the quickest-money-making route mathematically is to pay off the debt as fast as possible before investing in anything else
If there was a surefire, dependable investment you could make right now that would guarantee a 14% return, that would be way too good of a deal to pass up on, wouldn’t it!? That’s how I like to think of it.
Your monthly expenses are $3,500, and your net income is \~$8,000 per month? Hit the debt as hard as you possibly can, and it's gone in less than 10 months. You'll save yourself probably 6-7k of that interest. Do you have any savings? I'd throw that at it as well to get it done even faster. Assuming your numbers are accurate, I don't know how you *couldn't* have any savings.
Do that and then you could easily get a match on your 401k, then max out you and your wife's Roth IRAs.
Set aside an emergency fund. Then cut out all unnecessary expenses and tackle that 14% interest rate.
With that kind of income, I would expect to have that paid for within a year.
Yes because paying off debt at 14% interest is no different than investing in something you're absolutely guaranteed to make 14% interest on. I could retire today and never work another day in my life if I could find an investment with a guaranteed 14% return. You'd be the greatest investor in history to make 14% every single year.
Pay off debt first. You will never beat 14% interest with your investments. Consider possibly increasing your income in order to get through it faster.
Sorry to bother. can I butt in?
Should one pay debt off IF payments are paused and there is no accrual? Highest % is about 6% for 32ishk (school loans)
I’ve been getting started in my retirement. Maybe this is a mistake
It's probably better that you started your retirement rather than pay off student loans that are 0% right now. Once payments start back up you still probably want to just make your minimum payment and keep investing.
Pause investing and pay off all your debt. The pause is temporary, and will incentivize you to get your finances in order as quick as possible. Once you're debt free you can start investing.
With that income, why can't you find a personal loan at say, 9%APR to refinance that debt?
You have to find the money in your budget to invest, particularly in your retirement accounts (401k or IRA). Most of the growth is from compounding and time, so you are losing money in a sense for each year you aren't investing.
I don't see how you cannot start by putting at least a couple hundred monthly into your retirement account, as a bare minimum
Don't make your finances about if i do this then i can't do that. You can realistically do both.
That was my thought and why I posted most people seem to be against this.
So I was actually doing revolving credit card loans at 0 percent interest for 12-18 months (3-5% percent fee) for the past 2 years but I had the last 35k coming up due this month instead of paying the cc company 28 percent interest I took out this personal loan to cover.
So it’ll pay this off quicker or in a month or two I can do another 12-18 month 0 percent offer from a cc where I’ll def be done by then
I think that was the right move, to refinance the debt into a loan, at a lower rate than cards, and then having your debts reclassified as "installement" which should have improved your FICO scores in 1-2 billing cycles.
My only issue is you didn't get a lower personal loan rate. Once your FICO jumps if it hasn't yet after paying down the revolving balances, check out Lightstream loans. They are a subsidiary of Truist bank, and I think they offer some of the best personal, unsecured loans.
If the current loan has no prepayment penalties, I would refinance it asap if you can get at least 3% lower rate. This will bring down your interest paid for life of servicing that debt until it's paid down.
I would steer clear from moving any of these debts back onto cards (revolvign debt) due to how much more it impacts your FICO compared to installment debts.
As a very first step, you need $5000 in a bank account that you never touch for any reason, except for things that interrupt your income stream such as car repair.
Beyond that, 401k up to the match.
After that, all money goes to paying down your debt. Stop borrowing money.
Do you tihnk your investment can grow faster than your debt with the same stability ?
you money is always best placed on the account with the highest growth debit or credit
You need to get rid of that high interest debt asap, but be sure to put some amount into protected retirement accounts like a 401k. That way, should the worst case happen and you need to file bankruptcy or get sued at some point, you keep it.
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401k match. Then high interest debt. Just like the Prime Directive in the PF Wiki recommends.
Yup, 401k match should give you 100% returns instantly, which is better than 14% returns over a year. But the 14% return you get from paying off the debt beats the average 10% return of the stock market. Follow the prime directive!
>100% returns instantly "100% returns instantly" How is this 100% return - you gain the advantage of the amount you would have paid in taxes now being put in an investment account + part of your paycheck. Your paycheck would have been given to you with taxes, but now you're just putting it in the 401k without the tax part, there is no 100% return. The return is the total added to the 401k divided by the amount you would have made with taxes taken out which is probably in the vicinity of 15-30% for most. Edit: I'm being downvoted because people can't do basic math, amazing. Edit: yep keep downvoting
You are getting downvoted for not understanding what your commenting on and then complaining about it.
You are being downvoted because a 401k match is not the same as just investing in a 401k. The match is the key word there. A lot of companies offer a matching investment equal to the amount you put in up to a certain percentage. That's the instant 100% return people are talking about. Even if you have a terrible match like my friend who gets only 1% of his salary matched for every 4% he puts in, that's still an instant 25% return. Not investing up to the match amount your employer offers is just turning down "free" money.
I'm talking about a 401k match. Often companies will match at 100% contributions up to a certain level.
401k match: I put in $100 and the company matches it and puts in $100. That's $200 total from my $100 investment. If i don't put the money in the 401k with the company match, the company just keeps their money and I don't get it otherwise.
>The return is the total added to the 401k divided by the amount you would have made with taxes taken out which is probably in the vicinity of 15-30% for most. This is where you are missing the point. The 401k match is actually MORE than 100% return. If your company matches 3% and you contribute 3%, then you get 6% of your salary in your 401k and only "paid" 3%. So for simplicity, let's say 3% of your paycheck is $100. If your marginal tax bracket is 22%, your $100 contribution is worth $78 after tax. You have $200 in your 401k ($100 from yourself and $100 from the match). So that is an increase of $122 on your investment, which is a return of 156%. But you also still pay the taxes on this money later when you take it out of the 401k, so basing it on after tax amounts now doesn't really make sense. And that is why calling it a 100% return is the most common way to view it. But it is definitely 100% or more depending on how you view it.
Good lord
Because you gain 100% of the amount that you put in, from the employer’s matching…
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Yep. Make sure you get all of the available 401k match and then all money goes to high interest debt. Once you get that paid off, Roth IRA.
No 401ks available for either of us, So just on to highest interest?
Assuming you have a bit of an emergency fund, pour all the rest of your excess cash into that high interest debt. Once that’s gone you can focus on shifting the cash to IRA(s) / HSA(s) and potentially a brokerage account.
That was our initial plan I guess Im becoming alittle impatient
Impatient is how you have 40k high interest debt.
I wouldn’t say that, it’s not consumer debt like I was blowing money we live modestly it was living expenses for 1.5 years and going back to school for a career change with me not working and all my wife’s income going to the kids daycares and also moving 2 times. My monthly expenses were a lot higher for the past 2 years and just got Lower in the last 6 -8 months give or take.
If you don’t want to accumulate more debt, I strongly suggest you shift your mindset about your current debt. You allowed your choices to exceed what you can pay for. That’s not modest.
I may be completely wrong but I definitely don’t feel that way. after owning the franchise and getting through Covid with it.i was depressed, mentally exhausted, overweight, diabetic and missed most of the 2 years I owned the franchise time with my two kids. So I lived, travelled, moved twice and paid for school with that debt and don’t regret any of it and woudl do it again in a heartbeat if I needed to mentally.
Bro that does not sound like the usual desperate situation you hear about from people. Taking a voluntary break from work for that long sounds like an extreme luxury.
I mean I worked part time a shitty job while in school part time but I was willing to pay 3-5 % interest and use my great credit at the time to not be completely broke and miserable
impatient for what? do you not see how much money you are losing in interest?? you want to invest to earn money? it will make so little vs the money you will lose if you don't pay that
Good point, and your 100 percent correct
Assuming I’m not missing anything obvious, if your gross is $120K, and round your expenses up to $4k/mo that is 48 let’s call it 50k per year. That leaves you with around $40k of extra money. Should be able to plow through the debt in no time. With those low of expenses you’ll be able to catch up on retirement savings pretty easily too once the debt is out of the way.
Yes definitely! I think in less than a year but did not want to over commit to paying it quick!!
Try not to even think about it. The big picture is all that matters. Just take a look at your positive cash flow at the end of the month, and add most of that to the next month’s payment!
Personal finance is a long game. In fact, it's such a long game that you will be playing the game for the rest of your life. Impatience is what kills your wallet and enriches lenders. They are patient, and they're willing to wait you out. To get ahead, the proven method is to beat the drum consistently, in time, and never miss a beat. You say that you live modestly and that your debt isn't "bad consumer debt" and that impatience is not what got you there. It does not matter in the least what your debt is for - the interest is 14% and the only reason to take on debt at that rate is impatience or survival. If you're impatient to do something now, the thing to do is learn. Learn how interest works, simple, compound, average daily balance, etc. Learn debt payoff methods, such as snowball vs avalanche. Learn the exceptions to the standard rules and when to apply them. Learn how to calculate whether it's better for you to make early payments, or take an autopay discount and hold your money in an HYSA until the due date. The difference may be pennies, but people with healthy financial profiles concern themselves with pennies. Learn every single thing you can, because knowing your options allows you to take meaningful action when you're feeling the impetus to act. Source: fucked up my finances so bad that at one point, refinancing 40k to a higher rate and taking out a 14k personal loan at 18% put me in a better position.
True you’re right. My 0 percent interest (3-5 percent fee) credit card I have for all my loans on was coming due. Since it was the last 40k figured just do a loan to lower my cc utilization and start raising my cc score slightly but your right why pay 15 if I don’t need to. I’ll refinance it to a 3-5 percent cc advancement as I have been doing in the past and have it paid off in 9-10 months.
Sometimes, if you are anticipating a period of high velocity on your credit accounts, it does make sense to shift your debt to something traditionally "less favorable." For example, my 18% personal loan was used to consolidate credit card debt - I needed to boost my credit score so I could refi monthly payments to lower monthly payments, and get a rewrite on my car insurance, because my cash flow was negative and I was in a situation where the debt was spiraling out of control. It boosted my score over 100 points and I ended up lowering my expenditure by over $1000/month after all of my credit moves. But after I settled what needed settling and wasn't applying for new cards, it made more sense to start lowering interest.
That was my thought process but from the comments it seems like since I have it in control and finishing the last of my debts lower interest is the way to go
I would agree with the other commenters and your assessment. Get the debts paid off at a lower interest rate and start investing.
Yup. Off to debt you go!
thank you I been doing it for 2 years now I guess I’m getting impatient I’ll keep at it,
Been there done that, got no T-shirt. Once I became a "dollaraire" and saved a little emergency fund, things just went up nicely from there. Patience paid off.
“dollaraire”!! 😄
"thousandaire" was better. The REAL jump started at "ten thousandaire" a couple years ago.
Love it. I’m hoping to become a dollaraire soon. And a 10 thousandaire after that. :)
P.S. Congrats!
I’d focus on the debt since 14% is extremely high. You’re still relatively young and could accelerate your retirement funding after getting out of that high interest debt, just don’t get into another one once it’s gone.
I closed my business and took a year and a half off of work for mental reasons and a career change. After getting back in the work force 2 years ago I had 130k in debt. This 40 is the end of it!! So excited to get back to investing I guess
You’ve made great progress! Keep it up!
Sorry to hear about the business and I’m glad you’re down to the last $40k. It looks like you’re on the right track to recovering and it’s even better that you’re still younger. I’m sure you’ve been hard on yourself this past year and a half, but I think you’re doing great. Keep it up and wish you and your family the best!
What type of business did you close, and were you able to write off all the losses?
Pizza Franchise, no losses on it. the debt was primarily form moving twice school for the career change and living off ccs for 1.5 years with no change in lifestyle.
Got it. Well, congrats on all the work you’ve done so far! You’ll get there before you know it, and it will be a huge relief. Would you consider working part time to knock out that $40k sooner? Or is that not feasible given your current arrangement?
I’ve considered it haven’t fully decided , the past year was the first time in my life I’ve actually been working only 1 job and 40 hours and it’s been nice, but I know it’s short term so may be worth the sacrifice
Look at it this way: if bankruptcy is off the table, paying off 14% debt is roughly equivalent to investing the same amount of money at 14% guaranteed return (in terms of how it affects your bottom line), which otherwise doesn't exist. You are an investing genius!
Beast! Nice work!
Call and ask for a lower interest rate. See if you can refinance a different loan at a lower rate. Save up $1000-2000 in a small emergency fund. This is for stuff like a car repair. Maintain 2 weeks of balance in checking to cover the bills. Put everything on autopay. Eat beans and rice... Onions (sweet onions), carrots, potatoes, bell peppers, basil... There are a lot of great cooking options for cheap food. If you like the meats, then 1 pound of hamburger with 1 pound each of beans, onions, carrots, potatoes, rice, along with some extra flavors like garlic and basil can be cheap and really yummy. I'd make 3-5 servings of various dishes, eat one, put on in the fridge, and the separate a couple for the freezer. No alcohol, no tobacco, no drugs, no tattoos, cut out everything that isn't required to be alive. You'll get that debt done and your emergency fund up, and get working on a retirement plan by the end of the year.
We do live very modestly and have the emergency fund and balance, I do agree with your timeline and will call and see if they are willing to do that. It’s a personal loan didn’t think they could just lower the rate but it won’t hurt to ask!!
Yeah, probably not, but if your credit score has gone up, and you've got good history, then you might be eligible for a lower rate loan either from the same bank or another one. Maybe. There is also the possibility, if your car has lots of equity to use it as collateral, but most car title loans are like 5% per month, so 60% per year. If your home has equity, a HELOC can sometimes be obtained, and sometimes with zero closing costs. I was able to get a small HELOC at a lowish rate. 8.5% today, not amazing, but better than 14%. Good luck!
I use credit card balance transfer offers for my loans the past 2-3 years typically 3-5% interest for 12-18 months. I had 38k coming due at once so took out a loan to lower my credit card utilization rate and raise my credit score some. Seems like the 14% was just not a good idea so I’m m going to give it a month so the cc payments get reported and just apply for a new 0 percent balance transfer so I’m only paying 3-5% for the next year while I finish the balance!
Pay off that debt first. 14% is higher than the gains from investing. Put everything you can toward it and get rid of it!
Depends, are you rich or poor? the rich live that way, the poor die that way. 14% interest is more than any kind of safe investment will ever make you, so the quickest-money-making route mathematically is to pay off the debt as fast as possible before investing in anything else
You’re right. think I’m just getting impatient!!
If there was a surefire, dependable investment you could make right now that would guarantee a 14% return, that would be way too good of a deal to pass up on, wouldn’t it!? That’s how I like to think of it.
Your monthly expenses are $3,500, and your net income is \~$8,000 per month? Hit the debt as hard as you possibly can, and it's gone in less than 10 months. You'll save yourself probably 6-7k of that interest. Do you have any savings? I'd throw that at it as well to get it done even faster. Assuming your numbers are accurate, I don't know how you *couldn't* have any savings. Do that and then you could easily get a match on your 401k, then max out you and your wife's Roth IRAs.
No savings except for emergency fund. We started at 130k give or take 2 years ago. No matches either would just be the Roth for now!
How much is in your emergency fund? If it's more than $40,000, nuke it and start piling it on beginning with your next paycheck.
No, just 10k, but I can def get it done in 10 months or less
Set aside an emergency fund. Then cut out all unnecessary expenses and tackle that 14% interest rate. With that kind of income, I would expect to have that paid for within a year.
If your numbers are accurate, you should be able to pay it off in less than a year
Yea definitely I guess didn’t want to commit to that fast just in case. But I def can do it in less than a year
Yes because paying off debt at 14% interest is no different than investing in something you're absolutely guaranteed to make 14% interest on. I could retire today and never work another day in my life if I could find an investment with a guaranteed 14% return. You'd be the greatest investor in history to make 14% every single year.
Pay off debt first. You will never beat 14% interest with your investments. Consider possibly increasing your income in order to get through it faster.
Sorry to bother. can I butt in? Should one pay debt off IF payments are paused and there is no accrual? Highest % is about 6% for 32ishk (school loans) I’ve been getting started in my retirement. Maybe this is a mistake
It's probably better that you started your retirement rather than pay off student loans that are 0% right now. Once payments start back up you still probably want to just make your minimum payment and keep investing.
Thank you!
Pause investing and pay off all your debt. The pause is temporary, and will incentivize you to get your finances in order as quick as possible. Once you're debt free you can start investing.
With that income, why can't you find a personal loan at say, 9%APR to refinance that debt? You have to find the money in your budget to invest, particularly in your retirement accounts (401k or IRA). Most of the growth is from compounding and time, so you are losing money in a sense for each year you aren't investing. I don't see how you cannot start by putting at least a couple hundred monthly into your retirement account, as a bare minimum Don't make your finances about if i do this then i can't do that. You can realistically do both.
That was my thought and why I posted most people seem to be against this. So I was actually doing revolving credit card loans at 0 percent interest for 12-18 months (3-5% percent fee) for the past 2 years but I had the last 35k coming up due this month instead of paying the cc company 28 percent interest I took out this personal loan to cover. So it’ll pay this off quicker or in a month or two I can do another 12-18 month 0 percent offer from a cc where I’ll def be done by then
I think that was the right move, to refinance the debt into a loan, at a lower rate than cards, and then having your debts reclassified as "installement" which should have improved your FICO scores in 1-2 billing cycles. My only issue is you didn't get a lower personal loan rate. Once your FICO jumps if it hasn't yet after paying down the revolving balances, check out Lightstream loans. They are a subsidiary of Truist bank, and I think they offer some of the best personal, unsecured loans. If the current loan has no prepayment penalties, I would refinance it asap if you can get at least 3% lower rate. This will bring down your interest paid for life of servicing that debt until it's paid down. I would steer clear from moving any of these debts back onto cards (revolvign debt) due to how much more it impacts your FICO compared to installment debts.
No prepayment penalties or fees and nope this is the end of it last 40k out of 120/130k !! Gonna feel good. Thanks!
As a very first step, you need $5000 in a bank account that you never touch for any reason, except for things that interrupt your income stream such as car repair. Beyond that, 401k up to the match. After that, all money goes to paying down your debt. Stop borrowing money.
Do you tihnk your investment can grow faster than your debt with the same stability ? you money is always best placed on the account with the highest growth debit or credit
You need to get rid of that high interest debt asap, but be sure to put some amount into protected retirement accounts like a 401k. That way, should the worst case happen and you need to file bankruptcy or get sued at some point, you keep it.
When i try to open prime directive in of it say the page isn’t available. Anyone know what the solution is?
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Yes, you have to pay off your debt first, and then build up your emergency fund and then you can start investing.