X2 bro just trying to spread a little financial literacy. I do like your question, there are many variables involved, I’ll bring up a few factors (assuming that you are US based, in your 20s):
Retirement Accounts: Is the a company match or not? If there is definitely contribute to the maximum amount that will be matched. Ideally you’d be receiving $1 to be matched by $1 from the firm up to a percentage of your income or flat amount. If there is a match your effectively doubling your investing power, so INVEST.
- Roth IRAs: Invest right NOW. You will pay using post tax dollars and the current rate of the US deficit and spiraling spending. taxes should be higher 20 years from now. INVEST.
Loans: There are many types of loans so I’ll bring up common types of debt:
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Credit Cards: If you are carrying a balance with higher interest (anything above 10% is high). PAY THEM OFF. You enjoy no tax benefits and the finance charges/associated credit card fees are ridiculous.
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Student loans: Unless they are private loans, most student loans have lower tax rates when govt sponsored and are tax deductible. Also depends on the how much of a balance you are carrying (If its $5K vs. $50K). So it DEPENDS.
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Mortgage: Again depends on circumstances. I prefer an accelerated payment schedule. Small trick, if your mortgage company allows for bi-weekly pay option, you should definitely select it. It reduces principal much faster and depending on your term, you might be able to pay off the mortgage much faster. So it DEPENDS.
Car Loans: I hope you didn’t buy new unless it was cash for clunkers or otherwise subsidized program. Cars heavily depreciate (lose value) as soon they are driven off the lot. If you are looking to buy, might as well buy a 1 or 2 year old car with a solid reputation like Honda or BMW. If your loan interest rate is low then you might consider waiting for the payments or else PAY THEM OFF.
Guys these are just STARTING POINTS to make you think about your financial, don’t take it to heart. If anyone specific questions, I will do my best to help so bring them up and be as detailed as possible.
X2, I don’t want to insult anyone but when the level of financial literacy is so low, I don’t think that people will be able to calculate the net effect which is why everyone should have an accountant/financial planner helping them chart their financial course based on their individual/family goals and retirement plans. It’s really foolish to save a few hundred in accountant fees when you may have potentially lost thousands in poor investment choices or needlessly paying interest.
Now anyone want to help me review this pitchbook that will take all night? My lafanga Analyst is away celebrating his gf’s birthday.