Tuesday, July 14, 2009

Am I better off using my year end bonus to pay off my credit card or max out my IRA?

I have about 4k of credit card debt and I am 27 years old-- I have 2 homes, 50-60k in retirement



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

Credit Cards average 21% Interest



Historical Average for the Stock Market ~12%



If you pay off the cards and don%26#039;t use them any more, you will net ~9%.



I would never keep any balances on your credit cards as the interest is a huge negative on your Net Worth. Of which it looks like you are doing a great job at GROWING! Remember, interest paid out or depreciation is a negative on your net worth. Savings, reducing spending and interest coming in is positive net worth.



Good Luck!!



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

Pay off the credit card, the intersest payment will be 0 and you will gain those payments back into your budget. Then turn that extra into your retirement program right away so you don%26#039;t get used to having it. Paying yourself first just as if you were still paying out on the CC debt.



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

I%26#039;d advocate paying the debt. I%26#039;m paying off the last $4k on a personal loan with my bonus. It will free up $75/month, and will look good on my credit score when my mortgage comes up for renewal next year.



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

In general, the best way to save is to pay off your debts in order of the interest rate. Your credit card is probably charging you roughly -15-18%, while over your lifetime, your IRA might average +8%.



It%26#039;s slightly different when it comes to mortgages or student loans. Since the interest on those is tax-deductible, paying off early doesn%26#039;t make as much sense as putting money into longer-term savings.



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

Pay off your credit cards, why do you want to throw money away every month that is what you are doing when you are paying 18% in intrest.



Am I better off using my year end bonus to pay off my credit card or max out my IRA?

Pay off the debt, then start an automatic deposit into your IRA.

No comments:

Post a Comment