401k vs. debt

[kayvee_]

So I recently got a nice raise, and I increased my 401K contribution from 10% to 11% (not much like an extra $50 per month). 

However, I am trying to save in my 401K and make my monthly debt payments (student loans + car + CCs + living expenses). 

I seem to be doing OK I am able to pay a little more than the minimum on most items (primarely student loans, car and some CCs). I got my CC utilization down from 68% to 62% in the last 5 months, and I am going to continue to chip away at it. 

However, I was wondering if I should pause or lower contributions temporarily and attack my CCs more with those funds? 

I put away about 700 per month to 401K, and I am thinking I could put that towards my CC bills for a couple months.

I am torn whether to stay on the course I am at or to take this route. 

Any feedback is appreciated!

(edit: shortened it due to lengthy post!)

[compassion101]

What are the interest rates on your debts? If any is 0% then for how long?

Assuming you are paying interest on your CCs (or will be) then I would attack that before your 401k. Still contribute whatever your employer matches to the 401k but anything else pot towards the CCs until paid off. Probably not to student loan though, what is the rate on that?

[bdhu2001]

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@kayvee_ wrote:

So I recently got a nice raise, and I increased my 401K contribution from 10% to 11% (not much like an extra $50 per month). 

However, I am trying to save in my 401K and make my monthly debt payments (student loans + car + CCs + living expenses). 

I seem to be doing OK I am able to pay a little more than the minimum on most items (primarely student loans, car and some CCs). I got my CC utilization down from 68% to 62% in the last 5 months, and I am going to continue to chip away at it. 

However, I was wondering if I should pause or lower contributions temporarily and attack my CCs more with those funds? 

I put away about 700 per month to 401K, and I am thinking I could put that towards my CC bills for a couple months.

I am torn whether to stay on the course I am at or to take this route. 

Any feedback is appreciated!

(edit: shortened it due to lengthy post!)

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Stick with your 401K, once you go backwards on your savings it doesn't change.  Chip away at your debts and get a side job if you need to pay down debt faster, but don't reduce your 401K saving. I retired from my job at 53, because I had enough money in my 401b to draw over 1Kper month from my saving and with my pension, live comfortably (I estimate the amt to have the funds last 30+ years).

If you ever decide enough is enough when you're working, your savings will give you peace of mind. In addition, if you top out in your salary, you'll be able to see that you're giving yourself a raise or bonus of $400 etc per month due to your savings.

[kayvee_]

My CC interest is very high...

my student loans vary, the bulk of it is at 4.875%.  A smaller portion at around 6.6%. 

My my employer doesn't match anything 

[thom02099]

Car loan is a finite expense, ie, it has a specific term and at the end of that term it is paid.  Depending on how much you still owe on it could determine a course of action.  If you'll be in a position to pay it off relatively soon, you can "snowball" and take the amount you're paying on the car loan and apply that to one of your other debts.  Presumably, that would be credit card debt, if you're car loan can be paid off soon, since the cc debt is, as you say, carrying high interest. 

That's just one option to consider.  If you could just make a slight increase on your car payment, you could also pay it off sooner.  I've always paid $10-$25 more each month on all my car payments, just to get them paid off sooner, and at some point, depending on what you're payments are, you'll actually be several months ahead. 

I also agree with the above post, stick with your 401(k).  You won't regret it.

[alyssamarie]

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@kayvee_ wrote:

My CC interest is very high...

my student loans vary, the bulk of it is at 4.875%.  A smaller portion at around 6.6%. 

My my employer doesn't match anything 

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In that case I'd personally prioritze paying down your cards, chances are you won't get as high of a return investing the money as you will be paying to the credit card companies.

[compassion101]

In that case I definitely would put it all toward the CCs. After they are paid off then go back to your 10-11%

As someone mentioned above it may be tempting not to go back to the savings, but just be disciplined and you will.

I would just stay with the monthly plan with the student loan and car, not add any payment to that. IMO in your case CCdebt > retirement savings > car payment > car loan

[bdhu2001]

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@compassion101 wrote:

In that case I definitely would put it all toward the CCs. After they are paid off then go back to your 10-11%

As someone mentioned above it may be tempting not to go back to the savings, but just be disciplined and you will.

I would just stay with the monthly plan with the student loan and car, not add any payment to that. IMO in your case CCdebt > retirement savings > car payment > car loan

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If you follow this, you'll need to be disciplined enough to not charge the cards back up and to increase your retirement after you've paid off the cards.  I found the easiest way to say for retirement is to roll all my raises to my 401K/403b.  If you can do that or even 80% of future raises to your 401K you should be fine.

Put together a spread sheet with your bills and anticipated payments. You can also use mint.com which will compute it for you.  Follow your plan and stick to it.  Also pay the amount in your plan ,+ the full amount of whatever you charge, from here forward.  When I initially started the plans, when I was younger, I discovered certain bills that I hadn't anticipated that threw me off.  It'll take a quarter or two to get everything right on your spread sheet, but it'll truly give you a sense of accomplishment to see the amouunt you owe decrease over the years.

[kayvee_]

Thank you everyone for the feedback! 

[GooseGirl]

I think part of the decision also depends on your age. Since I am approaching my 40s, i would keep dumping into my 401K. However, since you have student loans, I'm guessing tht you are probably much younger than I am. In your life situation it may make more sense to back off the 401K and pay extra on the credit card. I was going to suggest you back to down to the % that your employer matches but I reread the posts and saw that they don't match. That stinks! I would probably still keep a few % going to your 401K to keep up the habit and also keep some progress being made on that front but I might drop it to 4%.

The other thing to consider is that if you ever had to file for bankruptcy (and I'm not saying that you ever will) your 401K is protected. Some people would say shortchanging the 401k is a bad idea because of that. I haven't figured out how I feel about that yet, but I'm passing it along.