Quote:
Originally Posted by adaway
Input on possible ways to contribute to goals is appreciated. The extra 50 for SL is something I can do and the other breakdowns sound reasonable. I am still trying to create a budget so I can more clearly see where everything is going. I will consider your suggestions.
BTW, the SL is ~114k at 4.875% and I can get .25% reduction if I sign up for automatic withdrawal from my account.
Right now, I am trying to read up on investing basics bc my 401k portfolio is a hot MESS. I just randomly picked things when I signed up for the plan although I believe I tried to do the aggressive approach. I have TIAA Cref and Vanguard as options. My portfolio is currently comprised of TIAA Cref investments. I did see posts on this site's discussion which discuss the two, so I am looking into them. Looks like more people are in favor of Vanguard so I will keep that in mind. Anyways, this is sidetracking from my original post so I think I will stop here for now.
Everyone's feedback has been helpful. thanks again.
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Automatic withdraw is a good idea, IMO.
114k, 5.875%, payment is $603.30 according to excel. 360 payments. Pay $103,000 in interest.
An extra $50 per month shortens repyament period to 305 months. Total interest reduced to $84,800. Cost you 305*50=$15250 and saved you interest of
$18,200, and monthly payments of 55*650=$25750.
If you sent $100 to a house fund for 305 months, That would be $30,500.
If you sent that $100 to student loans (so paid down $150), the payment period would reduce to 236 months. If the $750 payment was saved from months 237 to month 305 (68 months), you would have put $51,000 into the savings instead of 30500.
Like I guessed earlier, it will be better to pay down the debt prior to saving for a house.
Run similar numbers for an IRA.
Save $50/month now for IRA (keeping the number the same as the pay down). Assume 8% growth (conservative- this is doable with a 60-40 mix of stocks and bonds, 80-20 might be 9 or 10%).
Assume $600 contributed to IRA each year, 8% annual return. In 305 months (25 years) the IRA would have $47,000 in it. This $47,000 is much higher than the $18,200 the $50 saved you on the student loans.
This is why I suggested IRA and pay down student loans before saving for a house. If you can get a condo now for what you rent, I think you will see this picture get better (it became much easier for me to pay down loans when I could deduct the interest on my condo and get more take home pay). This assumes the rent payment and condo payment are similar (my condo cost me $250 more per month, but it saved me much more come tax time).