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Lets say I have 500 bucks at the end of the month...
Do I (X) ... or (Y)
You do both. And (Z) as well.
The basics (one more time):
Start with the filling up the emergency fund.
Then max out the employer matched 401K.
Then max out the tax exempt IRA.
Anything set aside for the kids college expenses? An organized 529?
Still have some of that loose cash? Budget a weekend get away trip a couple times a year.
How is the house holding up? Have the new roof/furnace cash on hand?
(no... the emergency fund isn't for that)
Get into the groove, nose to the grindstone and maintain for a couple of years.
THEN... you can start looking into other investment options.
Last edited by MrRational; 02-19-2013 at 07:19 AM..
Well.
Funny you ask.
I had the same question.
Right now, my mortgage rate is 2.8%.
My return on investments last year was 10%.
In fact, it was 6% just in the first six weeks of this year.
On average, it's always higher than my mortgage rate.
Then you must analyze the rate of inflation and decide if your dollar today or your dollar in the future will be worth more.
The answer is almost always the dollar today...close to the rate of inflation, it's questionable if you should pay down your mortgage early when you could use the more powerful dollar to involve yourself in investments that will garner you better returns.
I currently have zero interest in prepaying my mortgage.
They pay 50% of the first 8% I put in there, so I put in 8%.
Stan....so your answer would be invest right?
Well, your interest rate is a little higher than mine.
You SHOULD ABSOLUTELY max out your tax-advantaged retirement contributions before you do anything else.
You have an emergency fund?
Well, your interest rate is a little higher than mine.
You SHOULD ABSOLUTELY max out your tax-advantaged retirement contributions before you do anything else.
You have an emergency fund?
I have about 6-7k in savings that I put 400 a month towards it.
I can put in 25% of my pay for my 401k but my company just pays 50% of the first 8% I put into it, so I just put in 8%.
Errrrgh...I'd max out any retirement you can. You're almost throwing money away not to do that.
It not only comes out pre-tax (well, not every vehicle), but the GROWTH is tax-free. That adds up over the years.
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