Financially Wise
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Anonymous
I am a big fan of paying off debt, but I think it depends on what interest rate you are getting. If you have very low fixed interest rate then it can make sense to save even while you have mortgage or student loans, not least for tax reasons. |
Anonymous
True and I agree with you. As long the income/benefits are higher than 1) interest paid, 2) money "lost" by inflation 3) 401k/fund management fees on an annual basis, you're good. Here's an interesting tidbit. Say you've managed to accumulate $300k in your 401k. Being conservative, 2% inflation and 2% management fees and given a year with market being flat, you'd need to add another $12k to your account just to stay even/maintain your 401k at $300k..... |
Anonymous
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What interest rate do you pay for your student loans? If it is low (3-4% range), I would keep the loans. I know a lot of people will disagree with me, but I would keep the loans, keep the 20K as an emergency fund, and invest your monthly surplus.
I realize paying off the loans offers a psychological benefit about not having debt but I don't think it makes sense financially. I would definitely open a roth IRA if your company doesn't offer a 401K and put as much into the Roth as you possibly can. You should google a financial calculator and look at the compounding effect of the investment in a Roth. If you put 4,000 a year into a Roth and say a conservative 7% return. If you're 21, you'll have 50 years of compounding. Use the same formula, but let's say you decide to payoff student loans first and let's say it takes 15 years at 4,000/year to pay off. Run the same calculation, but use 35 years of compounding and look at the difference. Just my 2 cents. Good luck to you! |
Anonymous
Open Roth Ira at a discount brokerage. |
Anonymous
Please don't listen to this person. |
Anonymous
Why? Could you please elaborate? |
Anonymous
I'm assuming the poster meant that by paying mortgage off first, the amount one would have set aside for retirement is used to pay extra down on the mortgage and hence pay it if earlier or? |
Anonymous
It's not a psychological benefit. It's a real benefit. What is very likely to happen is OP will move onto get some credit card debt, then a mortgage, in between will be marriage, a kid or two and possibly the student loan debt of the spouse then throw in that monthly student loan payment, you end up sucking away money towards that loan that could have went to things for your family. Pay the student loan off now. You have many, many years to accumulate even more debt and you will. |
Anonymous
+100 |
Anonymous
| I would work to pay off the student loan if the interest rate is high; however, the $20,000 savings is an emergency fund that should be preserved intact. |
Anonymous
+1 Save for retirement FIRST. |
Anonymous
+2 |
Anonymous
+3 |
Anonymous
| I'm 28 and found the retirement advice I got soooo not relevant when I was 21 and right out of school. But I dutifully put away my tiny amount of money and things accumulated and I have 50k in there. I feel so proud. It's so tempting to go out all the time, and have fun, but I wish I truly understood the flexibility money gives you--paying for a wedding, a trip, being able to tell your parents to screw off when they are holding cash hostage over your head....not like I am that much older then you, but just FYI your responsible habits pay off FAST. Good luck! |
Anonymous
| Don't use your money to accumulate stuff, but rather to accumulate experiences.... |