I'm out of debt...Now what?

[Banimal]

Hello,
I just paid the last chunk of my debt off. I had 3 credit cards that accumulated through out college, a car loan, and 2 student loans. I just finished and it's all gone...it took a bit of time but I finally did it . I'm fairly young and not sure what to do now. I was used to not having any money from my paycheck left over after dumping the rest off into credit cards (60% of my paycheck ).
So what now? I maxed out the matching on my companies 401k, and currently dump the rest into my credit union's savings account 2% interest. Should I wait and just build up savings or start investing in stuff?

Thanks for any and all advice.

[greenskeeper]

what are your goals?

do you want to purchase a house?

If so that would be next to save for a down payment.

emergency fund?

should be at least 6 months living expenses.

[Banimal]

Thanks for the reply!
You're right I should make goals now. That's how I got out of debt in the first place. I guess I was in shock when I paid the last thing off.

what are your goals?
Hmmm.

do you want to purchase a house?
I'm debating whether or not this is good for me now. I don't have kids, i'm not married and I might move locations for work. I could think it of it as an investment but I probably will worry more if I can't sell it.


emergency fund?
should be at least 6 months living expenses.

I have that already somehow. I freaked out when the recession occurred and started dividing the rest of my expendable income to my savings and debt. I would have had my debt down sooner but I didn't know if I was going to have a job with the cuts that happened the last couple of years.

[maat55]

Are you investing 15% of your income?

After your match, you can be funding a Roth or a Traditional IRA.

You should establish a car and house fund.

[greenskeeper]

Originally Posted by Banimal

Thanks for the reply!
You're right I should make goals now. That's how I got out of debt in the first place. I guess I was in shock when I paid the last thing off.

what are your goals?
Hmmm.

do you want to purchase a house?
I'm debating whether or not this is good for me now. I don't have kids, i'm not married and I might move locations for work. I could think it of it as an investment but I probably will worry more if I can't sell it.


emergency fund?
should be at least 6 months living expenses.

I have that already somehow. I freaked out when the recession occurred and started dividing the rest of my expendable income to my savings and debt. I would have had my debt down sooner but I didn't know if I was going to have a job with the cuts that happened the last couple of years.

renting makes sense for some....in your case it does.

Since you are fully funding your work match, I would put 10-20% into physical (not paper) precious metals to preserve wealth as the world's currencies become worthless.

[Banimal]

Are you investing 15% of your income?

After your match, you can be funding a Roth or a Traditional IRA.

You should establish a car and house fund.

Do you mean 15% of my income to my 401k? I only go to 6 or 7%, whatever my company matches. Should I put more now that I can afford it?
I already have a car I really like and put time into taking care of it, so it should last me a bit (knock on wood). I'll start making a house fund, should it be separate from my regular savings?

Since you are fully funding your work match, I would put 10-20% into physical (not paper) precious metals to preserve wealth as the world's currencies become worthless.

Should I investigate into metals that serve mostly as utility like palladium and aluminum or others like gold and platinum?

Thanks again!

[maat55]

[quote]

Originally Posted by Banimal

Do you mean 15% of my income to my 401k? I only go to 6 or 7%, whatever my company matches. Should I put more now that I can afford it?
I already have a car I really like and put time into taking care of it, so it should last me a bit (knock on wood). I'll start making a house fund, should it be separate from my regular savings?

You should be investing 15% of your income. Above your match, you should fully fund a Roth(depending on your income).

Most people end up financing a car because they do not save in advance. I have an on going car fund. I can decide later how best to apply it.

Should I investigate into metals that serve mostly as utility like palladium and aluminum or others like gold and platinum?

Personally, I would open a money market fund with a broker like T.Rowe Price, Vanguard or Fidelity. It is usually not wise to time the market, but I feel there is a correction coming. If you are in your twenties, I could just put your money into one of their target funds for your retirement age until you understand your investment choices better.

[jpg7n16]

Originally Posted by Banimal

what are your goals?
Hmmm.

'hmmm' isn't good enough on this one you've gotta have a reason for saving. So you've likely got goals, just never really thought it through.

Why do you want to save?
When do you want to quit having to go to work? (you can always go to work for fun, but when do want to stop 'having' to go)
Is there anything special you want to buy?
Anything you've ever dreamed of owning?

do you want to purchase a house?
I'm debating whether or not this is good for me now. I don't have kids, i'm not married and I might move locations for work. I could think it of it as an investment but I probably will worry more if I can't sell it.

Given what you've said here, I would pass on home ownership. A house should be a long term investment, and you don't seem keen on the idea.

emergency fund?
should be at least 6 months living expenses.

I have that already somehow. I freaked out when the recession occurred and started dividing the rest of my expendable income to my savings and debt. I would have had my debt down sooner but I didn't know if I was going to have a job with the cuts that happened the last couple of years.

Well if you already have 6 months, you probably already have MORE than 6 months. You're not married and you don't have kids (ie - no one else is relying on you) so 6 months is probably already too much.

My bet would be that you have too much in cash right now, and should move anything over 6 months expenses into a Roth IRA (if you qualify).

---------------------------------------------------

So having said that... welcome to the world of investing! It's a beautiful world where your money goes to YOU each month, instead of a credit card company.

Here's my advice for you just starting out:

- celebrate your being debt free you should celebrate because you've accomplished something that's excellent for your financial future! So do something to reward yourself

- set up your retirement accounts to save 15-20% of your pre-tax income (preferrably 20%). this will keep you on an excellent path to a healthy retirement

- free up some cash in your current budget to increase your current standard of living. Financial health is about finding a good balance between your money today and tomorrow.

- start learning about investing. Post questions, read books. You're gonna have more and more cash available, and you've gotta do something intelligent with it

[Banimal]

Thanks everyone for the advice. I'll start investigating stuff in these forums and other sources. I'll first look into a Roth IRA and see if I qualify.

[Frugal]

Personally, it seems that putting some money into a solid savings account would be your best bet after paying off debt. It is exactly what I would do if I was fortunate enough to be able to pay off all my debt.

[BMEPhDinCO]

In addition to the RothIRA - which you would qualify for if you make less than $120k per year - you should consider investing 2-5% of your income in metals, etc. The bulk though, should be in a target fund (Vanguard, Fidelity, USAA, etc all offer these). I would say:
15% to RothIRA
6% to 401k
4% to "risky" investments outside of retirement - these are the fun ones you can play with, compared to the retirement that you leave alone for 40+ years

Also, since you are single and not tied down, consider saving for a super fun vacation - start a "Trip" fund and put in stuff there. Other goals should also be accounted for - future car, future electronics, wedding, etc.

And congrats on paying off everything, I bet it feels great! (My SL is still in deferment so not worth paying, but it is there and thus I can't claim debt free)

[DRILLINDK]

I will be completely debt free around the end of the year (student loan debt). Assuming you're maxing out your 401k, contributing to building a 6 month emergency fund, and saving enough for atleast 20% for a down payment on a house. Here are the mutual funds I'm considering investing in:

(VIMAX) Vanguard Mid-cap Index ---->Mid-Cap

(VSMAX) Vanguard Small-cap Index ----->Small-Cap

(VEMAX) Vanguard Emerging Markets Stock Index ---->Foreign Stock

(VWELX) Vanguard Wellington ---->Balanced

(VWINX) Vanguard Wellesley Income ---->Balanced

(VBILX) Vanguard Intermediate-Term Bond Index ---->Bonds

(VBTLX) Vanguard Total Bond Market Index ---->Bonds

(VBIRX) Vanguard Short-Term Bond Index ---->Bonds



Here are some individual stocks I'm watching as well:

WM
VE
CAT
IBM

[uRabbit]

How the heck did you get 2% interest?

[bjl584]

Take a break. Maybe a weekend getaway as a reward. Maybe buy yourself something. You have accomplished a great thing. It's time to take a step back, take a break, and treat yourself a bit. Just don't use a Credit Card to do it.

[Banimal]

Originally Posted by uRabbit

How the heck did you get 2% interest?

My savings account is with my company's credit union which gives 2.something % quarterly. As soon as I found out about the interest rate I switched savings accounts.


I forgot about mutual funds. I'll look into them too. Good god there's a bunch of options.

My celebration trip has been planned already .


I don't want to start another thread. So i'll ask another question.
Now that I have no credit card debt, in what manner should I pay for things? Credit card, charge card, debit card?
When I had credit card debt, I would just use my debit card for food, insurance etc. and whatever I didn't use I'd throw into my credit card debt or emergency savings. I wasn't a fan of cash because I'd get change back that would collect in a jar.

So should I continue using my debit card or use one of the credit cards for monthly expenses? I plan to pay off the credit card fully at the end of each month if I were to use it. Should I get a charge card which forces me to pay everything at the end of the month?

Thanks again!

[DKAS]

Originally Posted by Banimal

My savings account is with my company's credit union which gives 2.something % quarterly. As soon as I found out about the interest rate I switched savings accounts.


I forgot about mutual funds. I'll look into them too. Good god there's a bunch of options.

My celebration trip has been planned already .


I don't want to start another thread. So i'll ask another question.
Now that I have no credit card debt, in what manner should I pay for things? Credit card, charge card, debit card?
When I had credit card debt, I would just use my debit card for food, insurance etc. and whatever I didn't use I'd throw into my credit card debt or emergency savings. I wasn't a fan of cash because I'd get change back that would collect in a jar.

So should I continue using my debit card or use one of the credit cards for monthly expenses? I plan to pay off the credit card fully at the end of each month if I were to use it. Should I get a charge card which forces me to pay everything at the end of the month?

Thanks again!

Congrats. If you have the patience to not overspend and pay everything off every month than consider getting a cashback card or maybe a airline mileage accruing card based on your preference.

[kalimaniac]

Now is a good time to invest in real estate. I would save for a downpayment and try to get into something before prices start going back. MOST IMPORTANT: don't go back into debt, EVER.

[riverwed070707]

Originally Posted by uRabbit

How the heck did you get 2% interest?

My checking account earns 4.5%

[Steel]

Have goals aim for financial freedom so you wont go back into debt.

[sternchen]

congratulatios!

i have 2 weeks left and i'm out of debt too

well

i think that when i'm out of debts

i will try my best to manage my money well

i don't want to be indebted again