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re: Mid 30s Financial advice.....
Posted on 8/12/16 at 10:35 am to HYDRebs
Posted on 8/12/16 at 10:35 am to HYDRebs
quote:
I said you would have a bigger stack of cash in 5 years. AKA if you paid it down on the loan your stack of cash in 5 years according to your numbers would accumulate to 42,500 instead of the paltry `$40,020 you would have from your savings account.
Your loan would be paid off sooner resulting in the FCF
I get ya.......I understand the concept but hypothetically lets say I find a nice buy on low income housing......I buy a 40k house and it generates 500 per month......which is better option?
Posted on 8/12/16 at 10:55 am to L S Usetheforce
If it nets $500 per month then obviously go buy the house. Because your rate of return would be 15% per year.
Your question though was paying off the loan versus holding it in a savings account.
If you change the equation more than likely the answer will also change
Your question though was paying off the loan versus holding it in a savings account.
If you change the equation more than likely the answer will also change
Posted on 8/12/16 at 11:00 am to HYDRebs
IMO, the potential lost opportunity (even if you don't know what it is currently), outweighs additional interest payments saved from paying down the loan quicker. I am in a similar situation with my car at 2.5% interest. I could pay it off now, but I'd rather have a good chunk of change on standby in case a good opportunity shows up. I will not lose sleep over not paying down the loan quicker even if I don't find an investment in the short term.
Posted on 8/12/16 at 11:02 am to Grits N Shrimp
quote:
IMO, the potential lost opportunity (even if you don't know what it is currently), outweighs additional interest payments saved from paying down the loan quicker. I am in a similar situation with my car at 2.5% interest. I could pay it off now, but I'd rather have a good chunk of change on standby in case a good opportunity shows up. I will not lose sleep over not paying down the loan quicker even if I don't find an investment in the short term.
Perfectly articulated.......is 2500 dollars guaranteed worth potential lost opportunity?
Posted on 8/12/16 at 11:11 am to L S Usetheforce
quote:
is 2500 dollars guaranteed worth potential lost opportunity?
I don't think it is.
Posted on 8/12/16 at 11:24 am to L S Usetheforce
Are you married / have kids? If married, what's the wife's situation look like?
Also, do you make too much money to deduct interest on student loans? I'm assuming the answer is yes, but I want to ask, as that can effect the financial analysis
Also, do you make too much money to deduct interest on student loans? I'm assuming the answer is yes, but I want to ask, as that can effect the financial analysis
Posted on 8/12/16 at 12:23 pm to L S Usetheforce
It may not be the most efficient option, but I'd pour the $40k into the student loans along with any excess income from each month's pay. It's not simply about paying less interest but also freeing up future cash flows currently going to those loans. You'll also have a bit more security, better peace of mind that you have less debt hanging over you.
But that's just me. Feel free to disagree.
But that's just me. Feel free to disagree.
Posted on 8/12/16 at 1:09 pm to LSUFanHouston
Married 3 kids, wife stays at home with them....
Too much to deduct interest
Too much to deduct interest
Posted on 8/12/16 at 8:18 pm to L S Usetheforce
quote:
I don't think Dave Ramsey's pay all your debts off is the best solution
If the rate is low (4-5% or less) you're right. Cheap debt isn't terrible, in fact it can open opportunities for you.
Everyone needs the ability to raise cash in a hurry. Having an emergency fund is one way to do that, but there might be other and better ways. For example, a nice Roth IRA balance or a HELOC can do the job nicely. As you've probably figured out, having lots of cash in a savings account is better than nothing at all but isn't particularly productive either.
So I'd look at the interest rate on the student loan. Is it high? Then see if you can get a low-rate HELOC so that you can raise cash if you need it while you aggressively attack the loan. Is the loan rate low? Then maybe don't worry about it so much and just make the payments.
If you are maxing your 401, HSA and any other tax-deferred opportunities you're doing just fine.
Posted on 8/12/16 at 10:00 pm to L S Usetheforce
It seems like you make more than $184K or whatever the ROTH cutoff is currently. I'd say try to back door money into the ROTH. If this isn't an option, there is no chance I'd be paying that much extra on student loans in order to save an insignificant $2500 over a few years. I'd be looking to save the cash and jump on some rentals or just put it into a taxable investment account.
Posted on 8/12/16 at 10:28 pm to L S Usetheforce
Might also consider the Bernie effect.... Aren't the dems claiming to zap student loans?
Posted on 8/14/16 at 1:28 pm to Zilla
If you will pay them off by 2020 anyways, I'd save the cash and look for potential investment opportunities. 3% isn't much and with a chunk of cash, it leaves you a potential for real estate, etc. that might show up I. The next 4 years.
Posted on 8/16/16 at 8:58 am to L S Usetheforce
It all depends on your goals. You have mainly 2 types of goals:
1) Getting financial freedom and creating as much disposable income as possible.
2) Getting the most bang for your buck with no immediate timetable requirements and accumulating the most wealth you can (or the early retirement types).
These two goals impose limits on each other and make the compromise difficult for many people. If goal #1 is you, then pay off the loans so you can do other stuff with that monthly amount sooner and enjoy the freedom of less debt.
if goal #2 is you, then any financial guy is going to tell you to invest the money instead of paying off debt since your interest rates are below 4% to make the most of your money as historical returns over large periods of time are going to be better than 4%
1) Getting financial freedom and creating as much disposable income as possible.
2) Getting the most bang for your buck with no immediate timetable requirements and accumulating the most wealth you can (or the early retirement types).
These two goals impose limits on each other and make the compromise difficult for many people. If goal #1 is you, then pay off the loans so you can do other stuff with that monthly amount sooner and enjoy the freedom of less debt.
if goal #2 is you, then any financial guy is going to tell you to invest the money instead of paying off debt since your interest rates are below 4% to make the most of your money as historical returns over large periods of time are going to be better than 4%
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