Friday, July 21, 2017

Debt vs. Saving vs. Investing



My Investing Plan has been on my mind lately, mostly because my Debt has not decreased any since coming up with the plan.  It’s actually increased because of interest.  When I originally got  the loan, my intentions were to pay it off quick.  After selling the Honda, I immediately replenished my savings account, paid off my bank credit card, and put $1000 toward the loan.  Well, I made the payment on my bank app that didn’t allow me to specify where the payment went, so instead of paying off principle, the $1000 went to future payments and made my next due date November of 2017.  With the addition health insurance premiums for my boys changing my budget and my purchasing of stock and putting money in savings, I haven’t been making the loan payment since it’s not technically due.  (Due dates are good motivators)  The principle is accruing interest though.  I’ve been hoping the sailboat that is blocking my driveway would sell by now and I’d be able to make at least a $2000 payment to my loan, but I’m having so little bites on it.



It’s sailing time people – come buy my boat.

With the kidney stone, I didn’t buy any stock last payday, nor put any money in savings, nor pay my loan payment.  I’ve been waiting for the day to have ZERO debt for years, but this last 5k seems to be kicking my ass.  I have no motivation to get rid of it, but I want to get rid of it.  I’m thinking of pausing my work IRA contributions (and lose out on the company match) so I have extra money to throw at it as well as pausing stock purchases and contributing to my savings account.  Technically, if all money otherwise used for savings and investing is used for paying down the debt, my savings rate remains the same as it’s still money contributing to my net worth.  I have really enjoyed buying the few shares of stock I own, so maybe not being able to purchase more and missing out on my company IRA match will be exactly the motivation I need to get my ass in gear and be done with that loan – my LAST piece of debt.

3 comments:

  1. Brian, first of all, congrats on getting your debt down to 5k. That is a huge accomplishment. You're going to have to find what works for you. Here's what worked for me. I used a spreadsheet (available online) to list my debt. Once I tell the sheet how much extra payments I can make, it shows me what's in effect an amortization schedule. So, I know exactly when I'll be able to finish paying off the debt. If the time it takes to pay off the debt is too long, then I increase the amount of extra money I can towards it to bring the time period down.

    Now, it looks like you don't have any extra money. I'm assuming you've looked at your budget (do you have one?), are already tracking your income and expenses, and know that there's no way you can find extra money to throw on the debt. So, you have to decide if you want to stop investing vs paying down debt. Well, it really depends on who you want to listen to.

    Dave Ramsey would suggest that you stop investing and pay off the debt. He first suggest having $1000 in emergency funds and then tackle the debt from smallest balance to highest. You only have one debt to worry about, so, following his approach, you would throw everything extra towards the debt.

    I was in somewhat of a similar boat and it is a hard choice to make because I wasn't getting any younger. I realized that the sooner I start investing, the more time compounding will be able to work in my favor. So, I found a happy medium. I paid extra towards the debt while continuing to invest. Perhaps one approach for you is to contribute to your 401k to get the company manage (100% return on your money up to the match), and then use extra on the debt. You wouldn't necessarily continue to buy shares outside of the 401k, until you paid down the debt.

    Clearly, I am not a financial adviser and can't give you financial advice. I'm just telling you what worked for me. You just have to decide what you're priority is. Good luck. I'm interested to know what you decide.

    ReplyDelete
    Replies
    1. DivPort,

      Thanks for the kind words of encouragement. I do follow Dave Ramsey and have that 1k beginning emergency fund in place. I also have another savings account that is slightly less than that. I do run an annual and monthly budget, I just don't follow it as much as I should. Eating out throws my budget out of whack!!! I think what I'm going to do for now is pause my company IRA (and lose the match), stop buying stocks, stop saving, and throw all extra money at the debt until it is gone. My hope is that losing my company match will give me the motivation to get this last liability paid off and gone from my life, at which point I'll get back on track with my investing.

      Delete
  2. The last miles are always the hardest, but keep going at it and you will remove the last part of your debt. And think about what an amazing feeling that will be!

    ReplyDelete

November Dividend Income - $0.64

Income - HAHA - November was Tiny I don't feel like I even made enough dividend income in November to warrant a post, but I'm...