Pay Student Loans or Save for home

[LivingAlmostLarge]

I use credit cards for everything religiously. I get tons of perks and lots of cash back. Considering how much we spend it's not an insignificant amount. CC aren't any different than debit cards. You can overspend either way.

Anyway don't listen to anyone including "successful" people. No one else has to live with the decisions you make. You take advice as advice. But at the end of the day every decision you still have to live with. They don't.

People love to give advice they think is right even when they aren't. Even on this board you can take what we say with a grain of salt. But at least here people don't have an agenda and they are saying what they have experienced unbiased.

[Jluke]

I say yes to the Roth, and when my kids start working and investing I'll advise them to do the same thing as well as get into a High Deductible Medical Plan so they can contribute to a HSA while they are still young and in good health, so it can built up for use in retirement!

Are you talking about a Roth IRA or a Roth 401k.

The OP stated contributions are to a Roth 401k so she is losing out on the tax advantages now if she would instead contribute to a 401k.

I do 401k and Roth IRA. Not Roth 401k so that is my experience.

[Thrif-t]

Are you talking about a Roth IRA or a Roth 401k.

The OP stated contributions are to a Roth 401k so she is losing out on the tax advantages now if she would instead contribute to a 401k.

I do 401k and Roth IRA. Not Roth 401k so that is my experience.

The Roth 401k, I have both at my job and do both, although put a higher % into the regular. I'm sure you've heard all the pundits talking about putting it in a Roth while they are young and make less, blah,blah,blah.....once your income starts rising, or if you are high income already then ya you need the tax break. But the thinking is those just starting out benefit more from the years of growth and being able to withdraw tax free later.

[MZKIMJACKSON]

Well good for you to reach out to people older and wiser than you for advise. That is how you learn!!

I've always been debt adverse so I'd want to knock those student loans out before I even thought about buying a house, getting married or having kids. It's so hard! And then to have student loans on top of all that, we couldn't of done it.

I'd build your emergency fund up to 5k, all the while paying as much as you can to those loans. When your loans are paid off you can ramp up your emergency fund more.

I'll consider the 5K emergency fund as opposed to 10K. I've had my mind set on 10K but reducing this number would indeed allow me to pay the loans off sooner while still having a cushion

And I have a different perspective on credit cards. I think they are a great tool if used responsibly. Your credit score does matter! And having credit is a big part of developing a score. Your credit score goes into figuring out interest rates you pay on mortgages and car loans. Even your insurance rate takes your credit score into consideration to get a cheaper rate.

I agree here. Thank you for reassuring me. I read a few posts which made me rethink credit card usage and scores. I guess different strokes for different folks

I'm not a big fan of debit cards because of how easy it is for someone to get a hold of your number and then what? Drain your bank account. Sure you can get it back, but it's a big hassle, and you could be bouncing checks left and right and racking up fee's. You won't have that with credit cards. I don't want anything tied back to my $$!!

Plus with credit cards you can earn rewards. There were lots of lean years where we used our rewards to be able to do extra's. Heck even now I've been saving them up and will cash them in next year for my son's graduation party. You just have to be responsible.

Wow! That's awesome. I'm hoping to get to that point once I start using my credit card to charge my monthly bills then paying them with my checking before the cycle ends

I teach my kids to only charge what they have money in their checking account to pay. Example, charge $20 of gas on Discover. They come home and pay that $20 charge on their discover account from their checking online right away. They never have a monthly charge balance this way, and they're learning to use credit responsibly and earn rewards/free $$ for doing it.

Everybody has their own ways of doing things so getting others opinions and learning new things is a great tool for life. The less debt you have the more choices you have in life. Good luck with your choices.

Noted! Thank you so much for your feedback!

[MZKIMJACKSON]

I use credit cards for everything religiously. I get tons of perks and lots of cash back. Considering how much we spend it's not an insignificant amount. CC aren't any different than debit cards. You can overspend either way.

Noted. Someone mentioned something similar. I plan to setup my cards so that I charge my monthly bills to them then pay this off with my checking before the billing cycle is up

Anyway don't listen to anyone including "successful" people. No one else has to live with the decisions you make. You take advice as advice. But at the end of the day every decision you still have to live with. They don't.

True True

People love to give advice they think is right even when they aren't. Even on this board you can take what we say with a grain of salt. But at least here people don't have an agenda and they are saying what they have experienced unbiased.

I definitely appreciate the opinions on here as I need all of the help/criticism possible. I can say that after two replies, I knew exactly what I needed to do.

[MZKIMJACKSON]

Are you talking about a Roth IRA or a Roth 401k.

The OP stated contributions are to a Roth 401k so she is losing out on the tax advantages now if she would instead contribute to a 401k.

I do 401k and Roth IRA. Not Roth 401k so that is my experience.

I contribute 10% of my biweekly check to a Roth 401K through my employer. I don't have an IRA but do plan to get one in the future. Are you saying that it is best to contribute to a traditional 401K instead? Should I go ahead an open an IRA?

[Jluke]

I contribute 10% of my biweekly check to a Roth 401K through my employer. I don't have an IRA but do plan to get one in the future. Are you saying that it is best to contribute to a traditional 401K instead? Should I go ahead an open an IRA?

If you open a Roth IRA you are able to withdraw your contributions. Some people will use that as an emergency fund too.

When I was starting out I did something like $75-100/month for a Roth contribution.

I can see how the Roth 401k could benefit you later. I think the other factor in choosing comes down to your salary and tax bracket. With the traditional 401k I can reduce my taxable income by 18,500 which helps me now at tax time. Otherwise I would owe the IRS a lot more than I currently do.

[Gailete]

It's to my understanding that by contributing to a Roth, then I won't have to pay taxes on this income post retirement. Let me know if I should consider an alternate route. I'm definitely no expert when it comes to retirement and plan to contribute more to that post student loans when I can afford to make a higher contribution. I want to ensure I'm doing what's best long term

Someone mentioned that you have to leave money in a Roth IRA for 5 years before withdrawing any of it. That is not so, which is why I have started putting all my extra savings into one. This is it in a nutshell taken from this site https://www.rothira.com/taking-early...-your-roth-ira

Contributions are the funds that you deposit into your Roth IRA. Because your contributions are always made with after-tax dollars (you already paid income tax on that money), you can withdraw your contributions before retirement without having to fork over cash for taxes or penalties.

Withdrawing your earnings is a different matter. Any money in a withdrawal that exceeds the amount of your original contributions is considered “earnings” and is subject to possible penalties and taxes. The penalty for early withdrawal of earnings, except under certain specified conditions, is 10 percent of the earnings that you withdrew. In addition, you may have to pay income taxes on those withdrawals.

It is very easy to get mixed up with the different rules, but with a Roth IRA you can eat your cake and keep the gravy.

[Gailete]

I teach my kids to only charge what they have money in their checking account to pay. Example, charge $20 of gas on Discover. They come home and pay that $20 charge on their discover account from their checking online right away. They never have a monthly charge balance this way, and they're learning to use credit responsibly and earn rewards/free $$ for doing it.

When I was still working I traveled a lot. I tracked how much gas I put on my Discover card each week and wrote out a check each week to cover the charge from my travel reimbursement and then the rest of the reimbursement was put into a car savings account for car repairs and eventual replacement. When I had to quit working I had gotten to the point that when they told me I had a $500+ repair bill I didn't even blink as I had the money set aside. If I was doing that now, I would have just deposited my gas money into my Disc card on line, but 16 years ago it was just getting popular to use the web for things like that and most accounts weren't even on line.

[Benderz]

Anyway don't listen to anyone including "successful" people. No one else has to live with the decisions you make. You take advice as advice. But at the end of the day every decision you still have to live with. They don't.

People love to give advice they think is right even when they aren't. Even on this board you can take what we say with a grain of salt. But at least here people don't have an agenda and they are saying what they have experienced unbiased.

Can't say I agree, but it is true everyone has a different opinion. There are a few facts to highlight and I'll leave it at that.

I've had only a debit card for my personal account and one for my business account for over 15 years and although I've had my number stolen and a few items charged, my account has never been drained. I manage my balance between savings and checking so they can't get much anyway. The thief always uses the visa type system not the atm. Any charges are put back by the bank the next day.

You can get the exact same rate competitive without a credit score as long as you have good job any documented history of paying your bills. It just takes a little more work because some lenders won't do it.

Using a debit card or a credit card are very different. In one case you are spending your actual money and in the other case you are borrowing it and paying it back at the end of the month. Regardless of how sophisticated you are, it changes the way you think about the transaction and its a fact that you spend more when using credit. In my opinion more than any points or cash back would justify. And it is impossible to spend more than you have on a debit card (assuming you do not enable auto draft protection).

So I agree that everyone has to live with the decision you make. I do not think young people should get excited about debt as a tool because there are so many risks, but thats just my opinion. I would't say you are wrong because that is the choice you have made. MZKIMJACKSON should look around at her friends and co workers, won't have to look to far to see someone struggling because of credit cards. Then decide if its a good idea to incorporate them into your life.

[MZKIMJACKSON]

If you open a Roth IRA you are able to withdraw your contributions. Some people will use that as an emergency fund too.

When I was starting out I did something like $75-100/month for a Roth contribution.

I can see how the Roth 401k could benefit you later. I think the other factor in choosing comes down to your salary and tax bracket. With the traditional 401k I can reduce my taxable income by 18,500 which helps me now at tax time. Otherwise I would owe the IRS a lot more than I currently do.

I think I understand now.. So a Roth 401K is good for someone like me because I'm just starting my career with an entry level salary and am in a lower tax bracket. I take it I would maybe need to consider a traditional 401K once I start making the big bucks to reduce my taxable income and keep from paying a large amount in taxes?

[MZKIMJACKSON]

Someone mentioned that you have to leave money in a Roth IRA for 5 years before withdrawing any of it. That is not so, which is why I have started putting all my extra savings into one. This is it in a nutshell taken from this site



It is very easy to get mixed up with the different rules, but with a Roth IRA you can eat your cake and keep the gravy.

Thank you for this information. I now have a better understanding of a Roth IRA. I actually may need to open one sooner than later. Originally, I thought I would wait until next year but I'm sure I can find another 40 to 50 to squeeze out now. Do early distributions (such as for a down payment on a home) have to be repaid?

[LivingAlmostLarge]

Can't say I agree, but it is true everyone has a different opinion. There are a few facts to highlight and I'll leave it at that.

I've had only a debit card for my personal account and one for my business account for over 15 years and although I've had my number stolen and a few items charged, my account has never been drained. I manage my balance between savings and checking so they can't get much anyway. The thief always uses the visa type system not the atm. Any charges are put back by the bank the next day.

You can get the exact same rate competitive without a credit score as long as you have good job any documented history of paying your bills. It just takes a little more work because some lenders won't do it.

Using a debit card or a credit card are very different. In one case you are spending your actual money and in the other case you are borrowing it and paying it back at the end of the month. Regardless of how sophisticated you are, it changes the way you think about the transaction and its a fact that you spend more when using credit. In my opinion more than any points or cash back would justify. And it is impossible to spend more than you have on a debit card (assuming you do not enable auto draft protection).

So I agree that everyone has to live with the decision you make. I do not think young people should get excited about debt as a tool because there are so many risks, but thats just my opinion. I would't say you are wrong because that is the choice you have made. MZKIMJACKSON should look around at her friends and co workers, won't have to look to far to see someone struggling because of credit cards. Then decide if its a good idea to incorporate them into your life.

Absolutely wrong. You an absolutely NOT Overspend on a CC. You can write down every charge in a check register or online against your checking account and still use a credit card.

When my DH and I were graduate students together in southern california we made $20k each and both used credit cards. We never paid interest on our credit cards. Friends would qualify for food stamps. We lived with others to save money.

Both of us always tracked to the penny how much we had to spend. We knew to the penny how much was charged at any given time. We never ate out, didn't have cable, no extras. We used to do studies, blood, second job to make ends meet.

So no you do NOT overspend using a credit card. You overspend because you choose to overspend and have NO discipline and control over your spending.

If you wrote down in a book every charge and looked at everything you bought even in a grocery store and added it up with a calculator and then said I have $40 this week. That's it.

There is NO mistakes when you have no money and you know how credit cards work? Sorry. It doesn't happen. Credit cards are tools. They don't decide how you spend money. YOU do.

Take personal responsibility. You have to know how much is in your checking and you have to know how much you just spent to the penny no matter how you pay for it.

I'm sick of people blaming credit cards. The truth is that they know how much they have and how much they can charge but they don't care.

[Gailete]

Thank you for this information. I now have a better understanding of a Roth IRA. I actually may need to open one sooner than later. Originally, I thought I would wait until next year but I'm sure I can find another 40 to 50 to squeeze out now. Do early distributions (such as for a down payment on a home) have to be repaid?

As long as you only take out the money you put in, not the interest/dividends in the account, you do not need to pay it back. That is with a Roth IRA. A Roth 401K I believe is through your work and if you took money out then you most likely have to pay that back. I never had a reason to study up on them as they were never offered at my job.

If you look at your Roth IRA as strictly a retirement account, like I do, then you might not want to think about touching it. However, If you look at it as a saving account where the interest is your retirement money and the other can be used if needed or as part of a saving up for something special such as college or a down payment, you don't have to pay it back. It gives you a back door so to speak that most retirement funds don't give you.

[TrueMaroonGrind]

It's to my understanding that by contributing to a Roth, then I won't have to pay taxes on this income post retirement. Let me know if I should consider an alternate route. I'm definitely no expert when it comes to retirement and plan to contribute more to that post student loans when I can afford to make a higher contribution. I want to ensure I'm doing what's best long term

I have a 401k(pre-tax contributions) through work and a Roth IRA(post-tax contributions) on my own. I have always been told to have both a pre and post tax plan, because you never know if taxes are going to skyrocket or freefall. A pre-tax plan gives you an advantage because it lets you accumulate gains on income that would otherwise be taxed and if tax percentages in the future are small you will make out like a bandit. Taxes could also be super high in the future and destroy your pre-tax plan. You are correct Roth IRAs or post-tax plans don't get taxed when you withdraw money. This effectively protects you from future gigantic tax increases. They also don't let you accumulate years of gains on money that you would otherwise give to the government.

It is all about protecting yourself and making the most of your hard earned money. I advocate having both, but not everybody does.