Start investing or pay down debt?

[BigVic]

Hey everyone as you can see I am a newbie here. I have just started investing and am looking for a little advice on my situation. So here is my first post.

I am 23 years old, I make right around 26,000 a year gross.

My debts:

CC1: $900 at 24% (I will be paying this off in 2 weeks)
CC2: $2400 at 17%
Installment Loan(Auto): $8500 at 6.9% 6 Months into a 48 Month loan.


I just started my 401K contributing 5% to receive the maximum company match. I am thinking of opening a ROTH IRA in the near future to house the rest of my retirement savings. Is this a good idea or should I contribute more into my 401K?

What direction should I go here? Paying down the credit card debt, which will take me about 3 months, focus on paying down all of my debt including the auto loan before putting any more into my retirement, or contribute more into my retirement and pay down my debt as fast as I can with what I have left?

Any advice will be greatly appreciated.

[PRICEPLUS]

BigVic, my motto has always been "out of debt out of danger".

Look at the high interest rates you are presently paying on the cards. No investment I know of is returning 24 or 17 % these days. My advice is to get out of debt and stay out of debt. Pay off those high interest cards and pay cash as much as possible.

401k.....if your company will match then contribute what you can.

Roth IRA...the market will not stay down forever and you have time on your side. I would look for conservative investments in the short term for the 401and the Roth IRA.

Read as much material about investing as you can. Remember not to invest in what you do not understand.

The car loan is not too onerous and I assume the payment are fixed. Me, I would make regular payments on the car. When the cards are paid off take that money and invest in 401k and Roth. When the car is paid off save that money as well!

Remember the strongest force in the universe is compound interest!

[disneysteve]

My debts:

CC1: $900 at 24% (I will be paying this off in 2 weeks)
CC2: $2400 at 17%
Installment Loan(Auto): $8500 at 6.9% 6 Months into a 48 Month loan.


I just started my 401K contributing 5% to receive the maximum company match.

I would pay off CC1 and then throw every extra dollar at CC2. I don't care where you invest your 401k or Roth money but there is no way to be sure of earning a 17% return.

After that, I'd probably start the Roth and just make the regular payments on the car loan. You are young. The market is nearing a bottom. It is a great time to be getting in.

[jIM_Ohio]

I think you posted the cc debt will be gone in 3 months? Stick with the cc are paid off before investing plan.

Then look to invest more. My suggestion is 15% of gross income into a retirement portfolio and 5% of gross income into cash accounts (for an emergency fund, or other short term expenses like a new car, new roof or vacation).

The 15% retirement contribution could be a combination of 401k and IRA. Whether to choose 401k or IRA depends on your filing status (for taxes) and income level. For example if your taxable income for married is more than $65100, the 401k is a much better deal than the Roth IRA.

[BigVic]

Thanks! I am glad that you all basically confirmed my thoughts on the situation.