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Financial Planning / Paying For College

URL:  http://boards.fool.com/this-would-be-a-good-article-to-read-and-that-web-31109780.aspx

Subject:  Re: Investment Vs. Debt Repayment Date:  2/8/2014  9:17 PM
Author:  Watty Number:  8103 of 8153

This would be a good article to read and that web site might get you some more detailed response.

http://www.bogleheads.org/wiki/Paying_down_loans_versus_inve...


Generically speaking I would look at making the payments in this order;

1) Contribute enough to get any 401K match.

2) If you have modest income you might qualify for a retirements savings credit especially if you are married. If so make enough of a contribution to get all of that that. Note: the income limits are after a lot of adjustments so be sure to look at the details of the adjusted income numbers.

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employ...

3)Build up a modest emergency fund. Getting into a bind and carrying a credit card balance can be big trouble.

4) You have bad interest rates on the student loans even if you can deduct the interest. Paying them off is a question of when not if, so the sooner you can pay them off the better. Every dollar you use to pay them off will increase your net worth by a dollar just like you invested the dollar. At those interest rates you are getting a good risk free return on any amount that is paid off.

A good thing to do is to make a simple spreadsheet with all your assets and debts ad of January 1st. It looks like it will be negative now and that is OK since most of the debt was used for college to get better future earnings in your career. With a negative net worth you have a few more years of frugal living ahead of you since you don't want to still have a negative net worth for very long. Add a new column to the spreadsheet each year so you can see how your net worth changes over the years.
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