Should i save more or pay down debt?
08-05-2009, 10:36 AM
#12
I realize this is an old thread but I guess I would have different advice.
Get rid of the CC debt first for sure. The car, well if the interest rate is low, no need to pay it off early. If the interest rate is not low, refinance somewhere where you can get a low rate. In the 4% range is not too hard to find. If the rate is low then just make the payments as usual.
For savings, well that depends on your risk tolerance. I am a believer that the market will have some relatively strong advances in the next three years (your timeframe in the service) simply because we will be emerging from the recession, and the markets are way down from the 14,000 dow highs. I can't predict how high it will go, or what the ups and downs will be over the next three years, but I PERSONALLY believe it would not be out of the question to see a 40% gain in the next three years being unrealistic, and maybe even conservative considering how much fear was in the market and how high it was before the crash. But even if it gains only 20% over the next few, you'd have a lot more money if you put it into solid low-fee mutual funds than if you just used it to pay down your car in advance.
I would not suggest cherry picking stocks, but solid mutual funds with proven track records are not hard to find. When you leave the military you will have a car that has just a few payments left or is paid off, and a bigger bankroll to put down on a house or whatever you decide to do.
Could you lose 40% like we just did the last couple years? Sure, I just don't think it is in the cards. And the BEST thing to do IMHO if you are a delayed gratification kind of guy is put it into a ROTH IRA. Its a boring choice, but putting $10k into a roth at a young age will make a nice chunk of tax free change when you retire.
People don't realize the time value of money. If you were to earn somewhere near historical rates in the stock market and put in $10k now and retire around 65 your money would double about five times. That's $10k doubling to $20k, to $40k, to $80k, to $160k, then finally to $320k. $320,000 won't be worth what it is today when you are 65 due to inflation, but it will still be a nice hunk of cash. But its hard to do without it when you are young. But NOT starting to put money away for retirement until you are 27 wastes lots of golden opportunity.
Get rid of the CC debt first for sure. The car, well if the interest rate is low, no need to pay it off early. If the interest rate is not low, refinance somewhere where you can get a low rate. In the 4% range is not too hard to find. If the rate is low then just make the payments as usual.
For savings, well that depends on your risk tolerance. I am a believer that the market will have some relatively strong advances in the next three years (your timeframe in the service) simply because we will be emerging from the recession, and the markets are way down from the 14,000 dow highs. I can't predict how high it will go, or what the ups and downs will be over the next three years, but I PERSONALLY believe it would not be out of the question to see a 40% gain in the next three years being unrealistic, and maybe even conservative considering how much fear was in the market and how high it was before the crash. But even if it gains only 20% over the next few, you'd have a lot more money if you put it into solid low-fee mutual funds than if you just used it to pay down your car in advance.
I would not suggest cherry picking stocks, but solid mutual funds with proven track records are not hard to find. When you leave the military you will have a car that has just a few payments left or is paid off, and a bigger bankroll to put down on a house or whatever you decide to do.
Could you lose 40% like we just did the last couple years? Sure, I just don't think it is in the cards. And the BEST thing to do IMHO if you are a delayed gratification kind of guy is put it into a ROTH IRA. Its a boring choice, but putting $10k into a roth at a young age will make a nice chunk of tax free change when you retire.
People don't realize the time value of money. If you were to earn somewhere near historical rates in the stock market and put in $10k now and retire around 65 your money would double about five times. That's $10k doubling to $20k, to $40k, to $80k, to $160k, then finally to $320k. $320,000 won't be worth what it is today when you are 65 due to inflation, but it will still be a nice hunk of cash. But its hard to do without it when you are young. But NOT starting to put money away for retirement until you are 27 wastes lots of golden opportunity.
08-14-2009, 03:46 PM
#13
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Originally Posted by magician,Jul 12 2009, 11:30 AM
It never rains in California.
Hasn't rained here in over two months 
I was in the same boat as you. Pay off the credit card first before saving money. Otherwise you are pissing away money on the interest charges. Much more than you would earn on an average savings account anyway.
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