(Closed) Financially Savvy Bees, help!–where to apply extra money (toward debt)?!?!?

posted 5 years ago in The Lounge
  • poll: Where would the funds be best applied?
    Put the $800 into savings! : (1 votes)
    3 %
    Put the $800 toward a few debts (divide it up)! : (1 votes)
    3 %
    Put the $800 toward one debt (please list below)! : (26 votes)
    84 %
    I have a better option (please list below)! : (3 votes)
    10 %
  • Post # 2
    Member
    1210 posts
    Bumble bee

    annonbee857:  Do you have IRAs? Or any other retirement accts? Everyone will tell you differently, but my husband and I aggressively pay off any debt with >6% interest. Any other debt we pay the minimum and invest any additional money. We figure with average return (being conservative) of 7-8%, we are coming out ahead by investing our money.

    This works for us especially well because the money we are investing is for our retirement, so over the next 25 years, there is a good chance it will average an 8-10% gain.

    Post # 3
    Member
    4505 posts
    Honey bee
    • Wedding: September 2010

    In terms of paying back loans, you should always target the one with the highest interest rate, regardless of principle or your monthly payment. In your case, I’d put the $800 toward your loan that’s at 5.8% interest. 

    (This knowledge is hard-earned from having finally paid off over $100k of student debt, loan by terrible loan…)

    edit: forgot to mention that I would work toward paying off your loans before putting more in your retirement fund at this point (not saying not to invest in that, I’d just put the extra $800 toward that loan).

    • This reply was modified 4 years, 11 months ago by  .
    Post # 6
    Member
    18628 posts
    Honey Beekeeper
    • Wedding: June 2009

    I agree about focusing on thr larger student loan.  You can up retirement savings later when the debt is paid down.

    Post # 7
    Member
    2878 posts
    Sugar bee
    • Wedding: May 2015

    annonbee857: I would not pay back the 0% loan early. That’s free money / liquidity.

    I’d put the extra money in a brokerage account because you should beat your fairly cheap money (per LindyLu:)– it’s not worth the opportunity cost if you are thinking long term. 

    If that makes you feel uncomfortable, apply the extra funds to the principle of the 5.8% loan, as long as there’s no penalty. 

     

    Post # 8
    Member
    801 posts
    Busy bee
    • Wedding: December 2015

    Put it towards the one with the highest interest and largest amount, so the 22k one.  You can invest it, but you have to think about interest paid vs. interest gained.  Unless you can find an investment vehicle that will beat 5.8% interest, you are best off paying off the debt of that level.

    And you might get 5.8% interest in a mutual fund, but you might not.  The best thing to do is diversify, so get different types of savings vehicles, some that are lower risk and immediately available (emergency fund, higher interest savings accounts like Barclays), and higher risk but longer term, like mutual funds or brokerage accounts.  So that’s my general advice.

    But for the immediate question of what to do with the $800, I would put it towards the 22k loan.

    Post # 10
    Member
    801 posts
    Busy bee
    • Wedding: December 2015

    annonbee857:  Sounds like everything is going well!  I think of those other investment (mutual funds) as extras, something to do when everything else is taken care of. And the Sallie Mae account sounds good.  0.8% isn’t super high but it’s hard to find something a lot higher right now.  We have our accounts at Barclays, which was .9% and just got bumped up to a whole 1%!

    And congratulations on the bonus!

    Post # 11
    Member
    2014 posts
    Buzzing bee

    I’ve always been told by many financial advisors to put any extra money I have towards my loan with the highest interest rate (including credit cards).

     

    It might only be a few hundred right now but it could mean thousands down the line.

    Post # 12
    Member
    3729 posts
    Sugar bee
    • Wedding: City, State

    annonbee857:  I would put it to the furnature purchase and when you pay off that, start paying off the student loans. Consumer debt < education debt < house debt.

    Post # 13
    Member
    4524 posts
    Honey bee
    • Wedding: April 2015

    Unless you’re getting more than 5.8% return on your investment (in which case, sign me up) it makes more sense to pay down the loans.

    Post # 14
    Member
    1845 posts
    Buzzing bee

    Just going to echo PPs to say that unless you can gain more in interest from your investments you should pay off the highest interest rate loan first (ie, your DH’s student loans).

     

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