Post by roseflower on Mar 27, 2015 16:15:03 GMT -5
PDQ
I have seen different posts or references to in regards to this, but I wanted to get more clarification. We have debt part student loans part CC and very little retirement/savings (less than $5000) we are 29 and 30. DH is in school and works so we will have next year and the year after that he is in school and we will accumulate more in SL over that period. I have been a SAHM to our daughter for a couple years. I don't have a previous profession to go back to that would justify my working full time, but I may be doing after school childcare for a church family starting next fall which will bring in a little bit extra.
As we try to become more educated and better at money handling something I have seen in comments is talking about people putting money in retirement first over paying off SL debt because they gain more in their retirement interest than what they are paying for the low interest SL. Is this correct? My natural inclination is to be throwing all our money towards debt, but then we aren't putting any money away in retirement. DH's job has I think...a simple IRA account (I will have to double check, but whatever it is it isn't a lot) and I don't know much about retirement or investing etc. We are obviously way behind in saving anything at all and want to take the steps to be better about this.
It's going to depend on what the interest rates on the SLs are. As a long-term average, most people assume investments in the market will gain at least 7%, so if the SLs are below say 5% it makes a little more sense to invest in your retirement accounts. Credit card debt should go first though, since presumably it's higher than 5% interest.
And good for you on wanting to learn more about saving and investing!
1. If your H does indeed have a SIMPLE IRA, I believe employer matching/contributions are required. Find out what the amount is - mine is a match up to 3%. Contribute as much as necessary to take full advantage of the match because it is free money. So, if his is like mine, contribute NO LESS THAN the 3% necessary to get the maximum match.
2. Pay off any debt that is at an interest rate of > 10%, which is likely the credit card debt.
Once you accomplish #1-2, then:
3. Split your available $ between additional retirement savings and paying down the SLs. The urgency of SL payoff should depend on the interest rate (higher = pay it off faster) and the degree to which it is impacting your overall financial health/budget (the more onerous it is, the faster you may want to pay it off.) Your balance point as far as % of the available cash going to retirement vs. SL payoff will depend on your personal circumstances.
One final note, if you don't have an e-fund, somewhere between 1 and 2 you should build at least a small one up!
I would take what ever money you have to work with and use 1/2 to retirement and 1/2 to credit card debt. When the credit cards are paid off - then throw what you were paying toward credit cards to to your student loans. Any future use of the credit cards once paid off should occur only when you can pay it off IN FULL each month.
Post by steppenwolf on Mar 27, 2015 18:43:31 GMT -5
I'm struggling with making a decision on the same issue! I've been meaning to post a budget here. It really seems like it depends on your individual situation w/r/t interest rates, etc. Have you looked at a paying off student loans vs investing calculator? Here's one I found: studentloanhero.com/calculators/student-loan-payoff-vs-invest-calculator/
Would you feel comfortable posting the %, total balance and monthly minimum on your credit card debt? That will help us give specific recommendations....
I'm inclined to say that you should focus on paying off the credit card debt first. ASSuming the student loan debt is at a low % rate, I'd make those a low priority. Fund a retirement savings for you and your husband first. Eben though you're a SAHM, you could contribute to a ROTH in your name.
The ladies here are an amazing resource! If you share your monthly budget, we might be able to help you squeeze blood front he money turnip :-)
Post by imojoebunny on Mar 27, 2015 21:01:21 GMT -5
I would not worry about paying student loans while your DH is in school. Fund the work plan, if you can afford it, and by afford it, I mean not go into more SL debt to invest.
It's going to depend on what the interest rates on the SLs are. As a long-term average, most people assume investments in the market will gain at least 7%, so if the SLs are below say 5% it makes a little more sense to invest in your retirement accounts. Credit card debt should go first though, since presumably it's higher than 5% interest.
And good for you on wanting to learn more about saving and investing!
Student loans are definitely less than 5%. I know nothing about investments or where to start with that. Do you have any recommendations?
1. If your H does indeed have a SIMPLE IRA, I believe employer matching/contributions are required. Find out what the amount is - mine is a match up to 3%. Contribute as much as necessary to take full advantage of the match because it is free money. So, if his is like mine, contribute NO LESS THAN the 3% necessary to get the maximum match.
2. Pay off any debt that is at an interest rate of > 10%, which is likely the credit card debt.
Once you accomplish #1-2, then:
3. Split your available $ between additional retirement savings and paying down the SLs. The urgency of SL payoff should depend on the interest rate (higher = pay it off faster) and the degree to which it is impacting your overall financial health/budget (the more onerous it is, the faster you may want to pay it off.) Your balance point as far as % of the available cash going to retirement vs. SL payoff will depend on your personal circumstances.
One final note, if you don't have an e-fund, somewhere between 1 and 2 you should build at least a small one up!
Thank you for laying it out like that. Our student loans are less than 5% right now. We have a very small e-fund but we most definitely need more. So should we concentrate more on that at the moment before retirement?
I would take what ever money you have to work with and use 1/2 to retirement and 1/2 to credit card debt. When the credit cards are paid off - then throw what you were paying toward credit cards to to your student loans. Any future use of the credit cards once paid off should occur only when you can pay it off IN FULL each month.
Thankfully we broke the habit of using cards. We haven't used any of our credit cards since last summer. We are going to double check but I think we are matching his employer contribution, I will find out early next week for sure. If we are going to put 1/2 to retirement and 1/2 cc, where should we start in regards to retirement funds. Would that be a Roth IRA?
1. If your H does indeed have a SIMPLE IRA, I believe employer matching/contributions are required. Find out what the amount is - mine is a match up to 3%. Contribute as much as necessary to take full advantage of the match because it is free money. So, if his is like mine, contribute NO LESS THAN the 3% necessary to get the maximum match.
2. Pay off any debt that is at an interest rate of > 10%, which is likely the credit card debt.
Once you accomplish #1-2, then:
3. Split your available $ between additional retirement savings and paying down the SLs. The urgency of SL payoff should depend on the interest rate (higher = pay it off faster) and the degree to which it is impacting your overall financial health/budget (the more onerous it is, the faster you may want to pay it off.) Your balance point as far as % of the available cash going to retirement vs. SL payoff will depend on your personal circumstances.
One final note, if you don't have an e-fund, somewhere between 1 and 2 you should build at least a small one up!
Thank you for laying it out like that. Our student loans are less than 5% right now. We have a very small e-fund but we most definitely need more. So should we concentrate more on that at the moment before retirement?
At 5%, SLs would be a pretty low priority for me, unless the balance was so big that it was causing you budgeting hardship. I'm not hearing that in your posts, so I'd let it ride with minimum payments for now.
I would build an e-fund up to 3 months' expenses after #1, but before increasing retirement further than [3% in my example].
Post by tacosforlife on Mar 28, 2015 8:12:40 GMT -5
I have come around to deciding that SLs are lowest priority for me, unless they are at obscene rates or something. I essentially consider that attitude an addition to life insurance. Generally (although I can't say universally, of course), SL debt dies with the debt holder. So if my H dies, I no longer have to pay his SLs, but I am entitled to whatever is in his retirement accounts. But if we prioritize paying off his SLs to the detriment of his retirement accounts and he dies, then it's yay for the bank that got more of its money back but boo for me who is left with a big bag of nothing.
So basically my contingency plan for my H's death is that I would get $X in life insurance proceeds, but my monthly obligations would also go down by $500/month.
I would take what ever money you have to work with and use 1/2 to retirement and 1/2 to credit card debt. When the credit cards are paid off - then throw what you were paying toward credit cards to to your student loans. Any future use of the credit cards once paid off should occur only when you can pay it off IN FULL each month.
Thankfully we broke the habit of using cards. We haven't used any of our credit cards since last summer. We are going to double check but I think we are matching his employer contribution, I will find out early next week for sure. If we are going to put 1/2 to retirement and 1/2 cc, where should we start in regards to retirement funds. Would that be a Roth IRA?
I would fund any retirement plan offered thru your employer matching to their input amount. Then fund a ROTH IRA . If you still have $$, then go back and fund more in your employer plan.
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