Invest or Pay off truck?

The depreciation is going to happen whether he pays it off now or over the next 47 months.

So your financial advice would be that he spend an extra $400 on the depreciating asset and pay a financial advisor to recommend a fund that will grow $6500 at more than 2%?

You're right.

Don't take financial advice from a truck forum.

$6500 isn't jack to put into any kind of investment plan unless there is an ability to use it as an opener and continue to add funds monthly.

 

And neither you, nor I, nor anybody else know what will happen to it over the next 4 years.

Commodities and precious metals are manipulated just as much as stocks.
Diamonds are the worst, but a lot of people have lost their asses on silver.

 

At most I would only be able to add like $10 a month so its not much.

I think I am going to pay the truck off.. I have no guarantee of a summer job that pays hourly next year (I have a PT job that pays tips only) and no guarantee of a job after school. My credit will go up a little bit as I wont have a bad debt to income ratio.

 

You might be surprised what that amount can do invested at 21 and allowed to percolate for 30+ years with earnings reinvested.

(I'm speaking rhetorically. I know you can do the math. Relax.)

 

Ya, but without continued contributions, it'll barely keep ahead of inflation.

 

mmm....I dunno. Inflation at 1-2% annually, most good investment funds are pulling in at least a 6-7% return annually (my better ones are doing 10 to 12, but some areas of the market are bubbles at the moment).

I think it'd keep ahead and earn some pretty good money on top of that, but you're right, $6500 30 years from now will NOT buy what $6500 buys now. This is the concept I can never seem to get through to the "put in under your mattress the markets are corrupt blah blah blah" people.

 

I see other people's point with investing the money; and I don't necessarily disagree with them
But personally, I always consider paying my honest debts priority #1
I'd put the 6.5k towards your loan

 

Invest. 2% is cheap money, and (assuming you have) gap insurance on your truck, if for some reason it gets totaled while still paying it off, you can walk away from it. If it's payed off, you will get only market value or less, unless you have agreed-upon value. Besides, having zero debt does not necessarily improve your credit rating.

 

i tried so hard to stay out...damn it. those that say $6500 is "nothing" to start with are flat out wrong.

http://investor.gov/tools/calculators/compound-interest-calculator

have fun. also to the trolls, i didn't say "pay a financial adviser". going to guess that base on the options put out by his parents, they have some "financial advice" to dispense. the problem with forums and internet, people see black and white text and leave no room to actually think... good luck young man with whatever you do.

 

Ya... finding a solid investment (without a pro) is the problem. High return generally = high risk. It can go into a super-conservative fund and pull 2-4%, but again, if 'Coma (or 99% of the forum membership) is making the pick...
My buddy is a Sr. VP with SSB. Years ago, I had a Schwab account with a SEP-IRA. Didn't have enough in it to transfer to him (like cmack, he won't even talk to you if you are investing less than $500k), so I just "played the market" and ended up losing much of it.
Our running joke was that I was his best resource for stock tips... if I bought it, he knew it was time to short it

Thing is, some of those losses would have been gains if I had been working a desk job and could execute trades at the right time.
Of course, another problem was Schwab (and many other "DIY" firms) screw you by pulling their own profit off of the ask/bid spread, not executing your trades expediently, and other shenanigans.

 

didn't read the previous 75 posts, but no point in investing unless you have 6 months of emergency money that covers all your bills put away. in my honest opinion.

 

yet again rich comes in with seemingly endless expert advice. i feel like there isnt a thing this guy hasn't done and learned about



but i certainly say pay off the truck and get the monkey off your back, there will be plenty of time to dump chunks of money into investment accounts when you get older and have a higher paying job, right now there are too many unknowns and instabilities to have your money tied up waiting for a gain to even get it back out.

 

Agreed.

And isn't your truck an investment?

 

no

a truck is a depreciating asset

 

Pay it off.

 

I think we're getting sidetracked onto political topics rather than financial ones. Investments work out for people investing hundreds of thousands because they're part of the club and they will hunt down whoever fucks up with their money. The Golden Parachute Society doesn't lose money because they own the game.

For the rest of us mortals, the options really are much more limited. You're not wrong about that. I still think the best move is to get into a fund and let them do the heavy lifting. Yes, you'll pay some fees, but there are ways to minimize that and in the long run the returns will outrun what you pay.

I still say, operating with the assumption that the goal here is to turn that $6500 into as much money as possible, that investing makes more sense over even a 10 year period than the interest saved on the truck. Dump the money in a fund, give the economy a single boom/bust cycle, and he'll likely come out ahead of the payoff.

 

Pay off the truck. The truck is then an asset that can be sold for quick cash if needed. Invest the money you would have paid monthly for the truck loan. Now you are not paying anyone any extra money (interest) and they are paying you interest instead. You may have to wait for a few months to open the IRA or other tool you are thinking about to have the minimum $ needed. Life insurance is generally a good option too. Get whole life while you are young and it accumulates cash value that you can also use as a quick source for cash if needed.

My rule one is never pay for something I'm not getting, interest. #2 have cash for when needed. #3 Pay off all debt, credit cards etc as soon as possible to avoid forgetting or having to pay interest.
You'll accumulate good credit by using loans like the credit card and paying it off quickly. Once you get to the settling down stage in life the mortgage is the big deal.
Pay it off and save immediately. Don't hope to save later.

I'm sure your parents are giving you a good rate for the loan payoff difference back to them. I always give my kids interest free but they better not miss a payment.

 

I remember thinking I wouldn't live to see 30 and I did. Damn it.