- April 7, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Financial Situation and Considerations
It might not be much to some, but I make about 43k before taxes so this is a tad more than a full month’s salary for me. I live pretty modestly and have about $1500 in CC debt that I’m paying down, 18k left in student loans, about 4k in savings, and no investments as of yet.
I’m considering using half of it to pay off the CC debt and then putting the other half into my high-yield savings account. This would help me reduce my debt and also build up my savings for emergencies or future investments.
However, I’d like to start investing and have considered using a portion of this windfall to do so. The thing is, I don’t yet have the spare income to continue investing consistently thereafter, which to my understanding is necessary for the returns to be worthwhile, so I worry it might be pointless until I can do so.
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Pay off the credit card, save 1k, spend 500 on something that will last you a lifetime.
Pay off the credit card and never carry credit card debt again.
Give yourself $500 to have fun with.
Put the rest in HYSA. The flowchart says to have a 6 month emergency fund before significant investing (unless your company matches 401k). And you don’t have that much savings yet.
Controversial opinion. Totally get your point about $3K being a lot based on your salary. FOR SURE, pay off that $1500 CC Debt it’s not doing you any good. You already have $4K in cash saved, are you saying you have NO retirement otherwise?
One other thing to consider that’s not in the PF playbook is what I like to call “preventing a problem” type spending. Say, for instance, you haven’t done an oil change on your car, or some appliance you have is on it’s last legs. Now might be the time to spend some of that money on “preventative maintenance” since coming up with $1500 isn’t that easy, and if you’re dependent on your car or some other appliance for work, it may be worth trying to get ahead of any problems so you don’t dip into those funds later. Or maybe you’ve been postponing dental work or need new glasses. Stuff like that.
$1500 isn’t likely to be life changing but if your car breaks down of your laptop burns up and you miss work, that’s a much bigger problem.
If it were me, I’d pay off the CC bill in full, and put the rest of the money into savings. I don’t believe you’re in a position to play around with investments.
>I’m considering using half of it to pay off the CC credit and then putting the other half into my high-yield savings account.
This is exactly right.
>However, I’d like to start investing and have considered using a portion of this to do so.
You are not ready to invest yet. You need to be free of high interest debt and have an emergency fund of between 3- and 12-month’s expenses before you start investing.
I can guarantee that your “high yield” account is not yielding as much as the interest charge on your credit card.
I echo what others said: pay off the card (and never carry a balance again), add $1000 to your existing savings (this $5k is now your emergency fund). Use the other $500 for something that will enhance your day to day life.
1. Pay off your credit card debt.
2. DO NOT incur more revolving credit card debt.
3. Put the remainder in your HYSA.
I’d knock out the CC debt and put the rest towards your student loans.
If you take half of that and pay off the CC debt, you’re saving yourself a lot more money than anything else you could do with it.
If you also take this as an opportunity to commit to never getting into CC debt again, you’ll be saving yourself tens of thousands of dollars in the future.
Pay off your credit card debt and use the rest to buy an authentic German cuckoo clock.
Investing is pointless while you have CC debt and such a small savings account. Put it into your CC debt and savings.
Pay off ALL of the credit card debt.
Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics.
i would day pay off the cc, and put the rest into an index fund or bonds. otherwise you’ll pay more than what you save if you split the payment into the cc because of the insane interest.
Always pay the cc debt first. Investing the rest is not going to help you. Use it for some type of education or tooling to increase your income.
Just pay off the credit card and invest the rest in VTI if ur student loans less than 5% interest otherwise pay the rest on student loans
Feel like you’re getting a lot of bad advice in the comments. You make 43K pretax and have 4K saved. You have CC debt and student loans. You shouldn’t spend $500 on something special. Your idea of paying off the CC is a good idea. Definitely do that. For the rest, HYSA and investing are both fine options. I’d probably invest it in VTI. Just because you can’t invest continuously, doesn’t mean you shouldn’t invest this lump sum. The market on average returns about 8% yearly. So having a lump sum sitting in 8% is better than having it sit in ~4.5%. Obviously the market has inconsistent years, so if you feel you may need the money soon, put it in a HYSA instead.
Pay off the debt immediately and add the rest to your savings.
I’d have to agree on the CC debt. Makes zero sense carrying that around. Pay it off and be better about budgeting and keeping it paid off every month.
If you don’t have any investments yet and no 401k, I’d suggest opening a traditional or Roth IRA. Check with Vanguard, Fidelity, Schwab…open then fund the account, and then invest the money in an index fund like Vanguards VTSAX/VTI. Then as time goes on, make it a point to continue to invest money in that fund. Whatever you can as insignificant as you feel it might be.
Next, yeah…blow 500 and have some fun with it.
Good luck.
What do you mean by *return not being worthwhile*? If I offer you $5 or $20 for free, would you say “No, thank you” and refuse that free money because it’s not enough to be “worthwhile”, and only if I offer you a free $500 or more will you get interested in accepting?
Pay off cc debt #1 priority, then sure you can HYSA or buy short end bonds here at 5%, but you should start investing too. If you are worried you won’t stick with it if you put $500 in all at once and the market pulls back -20%, then just deposit $25/month every month if you can no matter what the market does and get in the habit of doing that. Even $5/month… *anything* is worthwhile if it’s essentially free $ over long time horizons and beats inflation, beats HYSA returns, etc., but the real point of it is to get you in the habit of automatically investing so that if and when you do earn more money or have lower expenses later in life, you will already be doing this and can double (or more) how much you invest each paycheck.
**Important Edit:** I missed you have student loan debt! What is the interest rate? You may wish to dial down the investing and pay those down, but investing is so important—I’d be struggling and stressed if it wasn’t for investing so am really biased at how much it can improve your finances over the decades even if you have entire years where you can’t afford to invest much.
I haven’t seen it yet, but what’s the rate of your student loans?
Assuming you have no path to loan forgiveness (I’d check public student loan forgiveness) and see if you qualify. If those are high (6-7% or more) you might want to consider putting extra money towards those as they’ll wipe out any gains in the market or HYSA.
Of course if you are confident your student loans will be forgiven or if they are low then it doesn’t make as much sense.
I agree with the sentiment of putting the non CC money towards emergency/maintenance that will lead to future costs. Also definitely agree to take a small portion of the windfall and use it on something you’ll enjoy. Optimizing life mathematically isn’t as important as continuing to push forward responsibly and most people are going to be unsuccessful without spending some on themselves from time to time
First, don’t use the word spend!! Invest, like you said
– Knock out debt
– Save $1000
– Spend the rest on something special