Where should I put my money first? My company offers a 401K match, and I am always hearing it is never to early to start planning for retirment. (I am 25) BUT... I have about 50K in student loan and Credit Card Debt. about 10K has high interest rates. Should I be paying the high interest rate cards off before I invest? should I only contribute 2% (4% company match though)?
I don't want to be in Debt, and I want to retire with some money! Help!!!
2006-09-12 07:50:39 · 15 answers · asked by ladylu1026 1 in Business & Finance ➔ Personal Finance
You want to consolidate your debt so as to stop paying high interest.
2006-09-13 23:12:25 · answer #1 · answered by Anonymous · 0⤊ 0⤋
1. 401(k) to capture the the 4% match match (that's a 100% bonus return...much better than what the other debt is costing you).
2. High interest rate credit cards
3. Low rate debt (includes the tax deductible student loans).
$50,000 is a lot of debt. There is a great place to go when you are broke....you can go to "work." Good thing there are 168 hours in a week. You can do it, but it's going to take some time.
2006-09-12 08:09:12 · answer #2 · answered by derek 4 · 0⤊ 0⤋
Max out your 401k deduction, which then maxes out the company's additional matching--that is free money. You can still pay on and pay off your credit card debt (first) and student loans (which will be with you a long time). As for the debt, remember, future dollars, in our inflationary-biased economy, will be pay off the debt more cheaply, although that is part of why they charge extra bucks in interest, they think you are their gold mine. Pay a little over the minimum (10-20 percent more than the minimum payment) as early and as consistently as you humanly can, then you can ask for a lowered rate or shop for cards with a lower rate once you've developed a favorable track record.(it may take a couple of years). That in itself will save loads of money that you would otherwise have to shell out in interest charges. Meanwhile, your 401k money, along with the extra the company coughs up, will be steadily building value for you.
It isn't an issue of either or, but a careful both and. Good luck.
2006-09-12 08:03:23 · answer #3 · answered by Rabbit 7 · 0⤊ 0⤋
Pay off the credit card high interest first. The student loan is most likely a low interest item or no interst item so it is not as imperative to pay off. Once you have the credit cards paid off, do not run them up again. If you pay off the balance every time you will not find yourself in the same predicament down the road.
Then concentrate on splitting between payments to get your student loan paid off and putting money away into your 401K.
The thing that usually foils most plans is the continued use of credit cards in excess of what can truly be afforded per month. Examine what you spend your money on, determine what you do with your money that you do not have to do.
There are many companies that help you figure out budgets and that sort of thing, and even Oprah has jumped on the band wagon to help people with advise on this subject.
The bottom line is there probably won't be much left of social security when you are old enough for benefits, so you need to plan for your retirement now.
2006-09-12 08:01:57 · answer #4 · answered by Silvatungfox 4 · 0⤊ 0⤋
Get rid of the credit card debt first because paying 18% is ridiculous.
If you were looking at an interest rate of 10% return on investment and 5% on the student loans it would be different.
Pay off the credit card. Don't buy anything you cannot afford to buy in cash and then save if you cannot do both at the same time.
2006-09-12 07:55:57 · answer #5 · answered by kyrie_eleison_gr 5 · 0⤊ 0⤋
I would take a hard look at Interest $ in, and Interest $ out. Look at the matching funds as well. You will see the plus and minus over the time it takes to pay off the debt.
I would plan a budget for a payoff period for debts and payments that I could afford. If you can see the end of the debt, in years, compare that with your age at that time and decide where you want to be. You may be married with family, and a home mortgage. Children's education will be a consideration as well.
Consider your possible income at that time and/or during that time period.
If you plan a reasonable time to be debt free, and your income increases, then contribute max to 401K.
With that much debt, the interest can eat one alive. Sit down and do some math.
Any high interest debt should be the first to pay off.
Again do some hard math.
2006-09-12 08:08:28 · answer #6 · answered by ed 7 · 0⤊ 0⤋
Look at the economy and the way most companies are going. many are cutting 401k plans OUT. Social Security won't be there when you are able to receive it. Pay off your debt. I own a private franchise and it helps me pay off my debt AND contributes to my retirement (Im 30). I will retire in about 18 months at most! I can share with you what I do. 10-15 minutes. Thats all. Can you afford 15 minutes?
2006-09-12 08:23:51 · answer #7 · answered by Rich 3 · 0⤊ 0⤋
Ideally, you want to pay off your debt as quickly as possible, but you also want to save as well. A lot of what you should do depends on the interest rate you are receiving on your debt vs. your income.
If, for example, your debt interest rate is 10% and your bank interest rate on a savings account is 4%, you will want to pay off your debt first since the interest from the savings is not enough to cover off the interest of the debt. However, if your saving rate is 10% and your debt rate is 4%, then it is better to save as much as you can as your debt is actually financing your savings (you profit by 6%).
I'm not familiar with 401K's but my company has something similar. We pay up to 9% of our salary into a company savings plan and they will match your contribution. If you don't take into account taxes on their contribution, you are receiving a 100% return on your investment. The obvious choice here would be to save and only make minimum payments on the debt.
Ideally though, you should do whatever you can afford. Save and then pay off the debt as quickly as you are able.
2006-09-12 08:08:37 · answer #8 · answered by CBB 5 · 0⤊ 0⤋
Talk with a Debt Counsellor about consolidating the debt into 1 low interest paying
loan. Contribute to the 401 plan 2 - 5.0% to start depending on what your monthly loan payment is and increase as debt decreases. This way you can do both.
2006-09-12 08:00:16 · answer #9 · answered by wisechineseguy 3 · 0⤊ 1⤋
It might sound funny but at age 25, save and pay off debt at the same time. You must join the 401k and save at least for matching preferably 5%. Set everything to pay autyomatically.
If you start in your 20's youll have more than anyone who starts at age 35, over $1 million
2006-09-12 07:52:55 · answer #10 · answered by god knows and sees else Yahoo 6 · 0⤊ 0⤋
First, you should invest in your company's 401k and take full advantage of the amount they match..It's free money. Then I would start paying off those high interest credit card bills. You should only have one credit card and pay it off in full every month.
Then pay off your student loans which probably have a relatively low interest rate on them.
2006-09-12 07:56:11 · answer #11 · answered by jim 6 · 1⤊ 0⤋