Pay off debt or keep savings

Thats fine, you are on top of your game. Nice to have no truck payment AND a new RZR. Nobody said you were at 5k per month, thats my burden.. Your question cracks me up tho. How could you possibly know what you don't know yet? I hope you don't find out, but sooner or later we all do. I have found out over the years and Murphy's law applies. I won't make you a list because there is no way to make it fit on this thread.(it's endless) Good luck and I really hope all works out with you.

 

here i go rambling about misreadings then i misread a post on here. damnit! lol. i know things can happen that are unexpected, but i've been preparing and saving a lot for the "future", so if i figured i'd make a financial move to better my present.

 

Either move is good. you got your shit together! GL!

 

The bottom line is anything CAN happen. You make decisions based on the best information you have. I don't get the "you might need the money" crew on here. Might need it for what? If something comes up that is that crucial to life AND he has exhausted his 3 month buffer, AND sold his razr, AND depleted his 401K AND ran up his credit cards, having 10k in cash upfront was not the answer to his problems cuz guess what, the rzr payment would still be due.

By that logic, we should all take out as much of a loan as we can, run up our credit cards and put that money in a savings account and then make payments on the money we borrowed.

Cash is king which doesn't mean just cash in the bank it means the things you have are not on loan, it means you own them, so keeping cash in the bank when you have things you could pay off is just retarded.

The you might need cash crowd fails to realize he is not depleting his life's savings to pay off the rzr he still has cash and other sources of money and without a rzr payment he will have even MORE cash coming in for savings each month. In essence he would be giving himself a pay raise every month equivalent to the rzr payment.

 

You're right Rob... should have taken the time to read up before opining. That's actually not typical for me and I deserve the criticism. Now, back on topic.

 

Another one. hahaha,
you mean he has to still pay his rzr payments after he sells it? It's smart to draw off the 401k? It's good to run up the credit cards? How much did he just lose doing that?
I am feeling like you are not used to having a big chunk of cash on hand. It's a truly wonderful feeling.

 

Meter... A vehicle is the worst investment. Don't take all the money out of the bank. This is what you should consider. Pay 1yr of payments. Now that will lower the interest, you will still have money in the bank. Keep that as your cushion (they recommend to have 1yr. of you salary in the bank if you were to lose your job) you can't touch your 401K with out paying a penalty (your to young) then just make your regular payments monthly and put the rest in the bank.

 

You need to learn to read, or comprehend what your reading. Nothing you stated is anything I wrote. Maybe try a plastidip thread or something.

 

? Okay, I'm out. got a plastiderp link for me? no, nevermind. It's over my head I am sure.

 

Good move IMO. You can only estimate returns on an investment because who knows how it's gonna move. But to pay down an interest loan early, you can easily calculate the return in the savings. Since the $10k acct is just savings w/piddly interest, there's no friction for using that money, vs say a brokerage acct when you've invested and seen good paper returns so far.

If you're in your early 20's and thinking like this, when you hit your 40's you'll be doing well, trust me. When you get back to rebuilding that $10k acct, possibly look at something with a higher risk/return profile. Something I started out doing early on was putting $50/mth into a T.Rowe Price Asset Builder acct. They're no-load mutual funds so you can pick a sector, market, etc w/o risk of being in a single stock. I picked TRP because $50 per fund was the cheapest I could get and at the time, that was a chunk for me. The option to manually toss in extra at anytime is there. To this day, I still trickle in the $50/mth, but the accts have done well and beat the crap out of any savings acct return to date.

 

Don't pay interest on things that aren't making money for you.... Pay cash for cars/furniture/appliances/clothes/food... and anything other than an investment that buys you cash flow and appreciation.... I bought the storage facility at age 37 and retired in 2004. My time is my own... follow those who are where you want to be. Advice without experience is BS! Commercial real estate is still king in my book... based on my life experience, compared to playing with stocks.

 

it seems people are making things overcomplicated. I'm long winded, but actually the below is simple (because I'm somewhat simple, I guess!). Here's the steps I'd take (I'm doing similar stuff). Yes I read every post, but I'm restating things in a generalized fashion for anyone to apply.

1. Build up a safety net to a point where it covers total cost of living. Total cost of living means roof over the head, food in the stomach, transportation (which might be bus system even), clothes on the body. Everything else eliminated. Estimate this for one month, then multiply by a determined factor of how long it would take to recover from whatever happened that caused you to receive zero income, which is typically the assumption of loss of work. My plan is to build this to 3 months, then handle step 3, then come back and build this to a 2 year. I've seen too many people out of work for 2 years around me. I was lucky with 3 months out of work!

2. Adjust your retirement spending. Adjust the 401k such that you are only contributing up to your company's matching. Unless your company has something amazing, a company 401k is not very flexible over who you wish to invest with. Additionally, 401k is tax-deferred, so when you go to take it out - you have to pay tax. Not only is that bad, but you are paying at the future tax rate, which has gone up since today's X%. Take that extra contribution and move it to a solid Roth IRA. I can't say what the best option is for you, but at my age I'm choosing a balanced fund which was recommended to me by a man who deals with people who have no less than 500k to begin investing. He mentioned that index funds are the way to go - boring, but boring is predictable and safe. Once there's a foundation, then start playing. Once the IRA contribution is maxed, come back to the 401k.

3. If you are financially secure, if you have money that is sitting around that is accruing less than what your loan is costing you, then dump that money at the loan. Simple math: bank is paying you 1%, loan is costing you 5%. You are losing 4%. NOTE: make sure your loan doesn't penalize for early pay-off!

4. After paying off a loan, use that loan payment as an extra payment against the principal of whatever other loan you have to pay, and continue in this fashion until all loans are paid. Be careful of two things: one, make sure your loan doesn't penalize for early pay-off. Second, put the payment as an extra payment against the principal. If you don't mention it's an extra payment, the bank will figure you are just paying early and won't bill you next month, and you will begin to fall off the wagon, plus if you don't pay principal, you are paying towards interest. Payments towards interest never actually knock down the actual loan amount, it's just shaving the crusty build-up off the top.
If loans are paid off, you can then use this money towards investments or personal use.


I'm not sure I agree with jandrews about renting. Owning a house is considered a form of equity. If I rent a home, lease a car and borrow all my 'possessions', I have a net worth of zero... note that I am not saying you should buy a house for the sake of having one - that's what most people do, and they can't afford it - hello foreclosure. I'm saying his idea is a radically different approach to traditional views, and it may make sense. I'm going to have to do my own research on that one.

I don't subscribe to the idea that you need credit the way everyone thinks you need it. The only reason to need a credit score is if you need to buy something... on credit. Essentially, you are building a debt score so you can do a better job of putting yourself in debt. If I pay for everything in cash, I don't need a credit score. However, most of us don't have the wad to outright buy a house.
Personally, I buy near everything on debit or credit card WITH the impetus that I have the full amount sitting in the bank that I can pay it off immediately. In this sense, I'm using the cards as a way to just not carry around paper money. I pay the credit card in full each month, and I never carry a balance. EVER. As a side benefit, I get some cash back, which, since I am paying off in full each month, actually counts as cash back - not an incentive to use a card where I get a dollar and lose five

 

X2 im only 21 but iv have been investing through someone whom i met when i was 10 mowing lawns. Paying everything with a card also makes documentation amazingly easy. I rarely even have cash. Unfortunatly good credit is something that you need in this life lol. Unless your making a killing to buy a car or house outright.

I would seriously look into going to an investment service. Iv made a hell of alot more off what i have invested through what i have invested (some high risk/some safer) than i would ever have made off a money market or a savings account. You also have the option of selling your stocks and getting cash wired to you bank the same day should you need it in an emergency.

 

I took the bestbuy sign up for a credit card get 10% off an entertainment system deal. Paid off the balance imediatly and chopped up the card. Thats about as much as i like using those things.

 

pay it off. its drawing more interest than your savings is accumulating. however, I wouldnt use the money if it is going to put you in a financial bind. If it were 0% I would say keep making payments, but that isnt the case unfortunately.

 

you need good credit to rent an apartment, lease a car, get and keep a good job, and get utilities turned on. Not just to get deeper in debt.

 

Buy stock in

 

It makes it easier, but not necessary. If you can prove a good rental history and/or show you have mad income, they will accept you.
For example:

Why would you want to do something like that? The only time it makes sense is if you are putting on ridiculous amounts of miles and keep cycling cars so fast that buying even a used car would be more expensive.

That's a pretty blanket statement, and depends on your job, the state you live in (see the specific laws), and the employer in general. I'd guess the income and education level required for a job is inversely proportional to how much they care about credit. There are some damn rich people out there with no credit score because they don't need one.

However, this is not true for government, state/federal, or DoD-related jobs. I applied for Lockheed-Martin and my application was 20 pages thick, documenting every place I had ever lived, my careers back down to my summer job picking blueberries at 14, traffic violations that weren't on my permanent record... you name it. A parking ticket from 10 years ago may have negatively affected my interview.

Same thing as before. If you can prove the bill is an inconsequential sum, they aren't going to keep you from business.


Mind you, this is all provided the negative credit is a result of NOT using credit... not because you are running around with unpaid bills.

 

okay,. all good points. It does help but it is not a deal breaker for sure. Getting a mortgage is another story entirely. You will need a good credit score there for sure. Especially a commercial property.