So here's my current situation:20K debt @0% till april 2015Monthly out:~2700Monthly in:~1100/weekI have my company match down already at the max company contribution at this point. I have not invested in 2014 roth yet but i know i have till april next year to invest if needed. So my question is how I should pay off my debt? One simple way i can think of which is what i am doing now is just pay off the minimum requirement from the 0% while keeping existing charges at 0 and just "wait it out" till the 0% expires then pay it lump sum. I also thought about investing in Roth asap but that would delay me by a few months in paying things off. I do have FICO score 721 right now and i have another CC with credit line ~24k and they offer 0% every now and then so i *could* do that if i really need to but i dont see the reason to right now.... Should i stay current course and try to pay off the debt till next year then worry about investments/buying house etc? Because buying a house is also on my mind since I rather invest the 1200/month rent into mortgage....Thanks!
That's 4400 take home per month? $1700 per month to devote to cc pay off is pretty good. By April 2015, you will have just a little over 3k in cc debt, which depending on the new interest rate on the card, should just take a few more months to pay off. Do you have any opportunities for overtime or a side job to increase your income to accelerate debt pay-down? Can you cut expenses? Move to a cheaper place? As per your other question, do you have a down payment saved up yet? If not, I would wait till your debt is paid off before you start saving up for it. If you have not yet started to save funds for the downpayment, you likely have years before you build s a substantial amount and with the debt gone, it will go much faster. Do you have an efund? other debt? Why were you in debt in the first place? relocation, overspending, student loan, etc. What are you doing to make sure you stay out of debt.
So here's my current situation:20K debt @0% till april 2015Monthly out:~2700Monthly in:~1100/week$1100/week = $4767/monthYour net amount to put toward debt (assuming that the $2700/month you indicate is your 'monthly out' REALLY does cover ALL of your spending), should be just over $2000/month.That means that if you really stick to your numbers, you can manage to pay off your debt and still pay little/no interest - depending on exactly when in April 2015 your 0% expires.I have my company match down already at the max company contribution at this point. I have not invested in 2014 roth yet but i know i have till april next year to invest if needed.If you fund your Roth, you will end up paying some interest - either as a BT fee, or paying interest on the current card after your promo rate expires. If you decide to fund the Roth, you really need to run the numbers to see if the BT fee would cost you more or less than the interest you will pay.One simple way i can think of which is what i am doing now is just pay off the minimum requirement from the 0% while keeping existing charges at 0 and just "wait it out" till the 0% expires then pay it lump sum.Well, that depends a lot on how good you are at actually saving money and not spending it. You need to take a hard look at your personality and habits and determine if you will be able to put the money away and actually not touch it.I also thought about investing in Roth asap but that would delay me by a few months in paying things off.Whether you invest in the Roth now or during the first part of next year, it will delay you paying the debt off in either case.Should i stay current course and try to pay off the debt till next year then worry about investments/buying house etc? Because buying a house is also on my mind since I rather invest the 1200/month rent into mortgage....Well, back on this thread in January http://boards.fool.com/need-help-with-retirement-investing-a... you also had $20k in debt. You don't appear to have paid any down. Did you do what you indicated you were going to do, and put money into the savings account? If so, how much do you have saved toward the debt? In other words - what is your debt net of your savings? If you don't have at least $8k - $10k saved toward the debt, there's something wrong with the expenses you say you have, the income you say you make, or the discipline that you have in putting away money. In that case, I would strongly suggest that you stop the 'savings account' idea, and put all but $1k - $2k of your savings toward the debt, and pay down every penny that you can toward the debt every paycheck.If you do have $8k - $10k saved, then you are probably good to use some of that money to fund the Roth now, and continue down the path you are going.AJ
Because buying a house is also on my mind since I rather invest the 1200/month rent into mortgage....Oh, and by the way - when you get a 30 year mortgage, you are, for the 15 - 20 years, mostly just paying rent on the money that you borrowed. So it's rent either way. And if you are buying with the minimum down, the rent that you will pay on the money you borrowed to buy the house will be a lot higher, as you will either have to pay PMI (with a conventional mortgage), MIP (with an FHA mortgage) or interest on a second mortgage. And there are a lot more expenses when you own a house than when you rent - maintenance, repairs, property taxes, insurance, costs to buy, costs to sell, etc. Yes, you get a deduction, but if you are paying $1200 a month in PITI (equivalent to your rent), you are probably starting at around a $10k annual deduction for the house. However, even as a single person, you would already be able to deduct $6100 of that as your standard deduction. So the additional $4k deduction will probably net you about $1k in tax savings. Compared to all the extra costs in owning a home, it may not save you a dime. And if your standard deduction is probably already as much or more than your deductions for interest and property taxes will end up being. So buying a house with a PITI of $1200 (same as your rent) will end up costing you more in the long run.So, you really need to look at the rent vs. buy calculations for your area to see if it's worth it to buy just to 'not pay rent'. If you want to buy because of the lifestyle, and not just to 'not pay rent' - that's a different discussion. But that's not the reason you gave - so you need to make sure you aren't going to end up costing yourself extra money just to 'not pay rent'. AJ
AJ, Thanks for the thorough reply. In terms of the debt i did pay some off but I had a little more from student loan transfer(basically i had higher rate student loan - did balance transfer from CC then paid off the higher interest student loan so it "appears" debt is the same as before). In terms of savings I have a few thousand besides my normal roth and 401k. As for the housing I was actually thinking of buying a house/condo and renting out part of it to reduce cost. I know it is not a long term strategy as i have a family of my own but i think it might work in the short term? The housing here is kind of expensive ... i pay 1200 for rent inc utilities and for a cheaper "total package" place i probably need to be 20-30min more away from work and with morning traffic it translates into ~1 more hour commute a day for maybe 100 or so savings a month. But to really save money on rent i would need to get a roommate either renting or buying.
In terms of the debt i did pay some off but I had a little more from student loan transfer(basically i had higher rate student loan - did balance transfer from CC then paid off the higher interest student loan so it "appears" debt is the same as before).So what was your total debt (student loan plus credit card debt) back in January vs. what it is now? And how much have you added to savings since then? If the total of the debt paid off plus the amount you've added to savings is in the $8k - $10k range, you can probably go ahead and fund your Roth. If it's not, then you need to think again about your strategy - (1) if you are truly disciplined enough to save enough money to pay off the debt, or if you should be paying as you go and (2) how much in interest and/or BT fees you will have to pay in order to fund your Roth, and if it's worth paying that.As for the housing I was actually thinking of buying a house/condo and renting out part of it to reduce cost. I know it is not a long term strategy as i have a family of my own but i think it might work in the short term?Purchasing a residence rarely works out to be a good short term strategy. In some markets that exhibit bubble characteristics, it can work - as long as you get out before the bubble bursts. But in most cases, the frictional costs of buying and selling mean that to break even vs. renting, you really have to commit to the purchase for at least 5 years.Since you say you have a family, but it sounds like the place you are thinking of buying doesn't sound like it will be large enough to house your family, nor does it sound like your family is there with you or that where you are now will be your family's permanent home, it seems like you are in a temporary living situation. That's a perfect reason to rent, rather than throwing your money away on purchasing a short term home.But to really save money on rent i would need to get a roommate either renting or buying.Well, finding a roommate to rent a place with sounds like a much more reasonable alternative than buying a temporary place.You don't 'invest' in a mortgage. All parts of the PITI (Principal, Interest, Taxes & Insurance) mortgage payment are expenses (just like rent), except the Principal part of the payment, which is just moving money from a liquid asset (your checking account) into a pretty illiquid asset - your home's equity. And in the early years of the mortgage, the expense part of the cost far outweighs the asset transfer. I'm about 18 months into my current mortgage, that I got at 20% down with a rate of 3.25%, and the principal part of my mortgage is still less than 30% of my monthly PITI cost. For you, with current rates about 1% higher, and little/nothing down, so you will have to pay PMI, MIP and/or interest on a 2nd mortgage - you will be lucky to have 8% - 10% of your monthly PITI be principal, or maybe $100. You would be much more likely to actually save $100/month by renting a slightly larger place with a roommate.AJ
One more caution on funding a Roth IRA......You say you have a family, but it's not clear what status you are using to file taxes.If you are MFS and make more than $10k, you are over the limit for funding a Roth IRA.If you are MFJ, since you are covered by a an employer retirement plan, you need to take your joint MAGI into account when determining how much (if any) you are allowed to contribute to a Roth. If you are filing HOH or Single, there are also limits, but they are based on your individual income. If you exceed the limit for contributing or for contributing fully, there may be a way around this restriction, but you'd need to provide more information about your situation. If you don't feel comfortable doing that on a public message board, then you should consult a tax professional before making any Roth contribution. As a start, I would suggest reading IRS pub 590 http://www.irs.gov/pub/irs-prior/p590--2013.pdf paying close attention to the limits on funding a Roth.AJ
If you are MFS and make more than $10k, you are over the limit for funding a Roth IRA.$10K? That can't be right. This website says the limit is $5500 for someone earning under $181K per year: http://www.rothira.com/roth-ira-limits
Sorry. That's correct if you lived with your spouse at any time during the year. http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employ...
$10K? That can't be right. This website says the limit is $5500 for someone earning under $181K per year: http://www.rothira.com/roth-ira-limits =================================Are you looking at the married filing separately?
stevenjklein:<<<If you are MFS and make more than $10k, you are over the limit for funding a Roth IRA.>>>"$10K? That can't be right. This website says the limit is $5500 for someone earning under $181K per year: http://www.rothira.com/roth-ira-limits"No, it does not.From your link:married filing separately and < $10,000 a reduced amountyou lived with your spouse at any time during the year > $10,000 zero Regards, JAFO
Sorry, I obviously missed the MFS part.
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