Stop Investing, Pay off cars/debt?

[tricie17]

Agreed!  Happier with no debt.  More for saving and investing.  401K for life (working) after life (retirement), keep it that way.

[NeverTubetheGoose]

There is never a right answer to these questions because we all have different circustances. Personally, I hate debt and would prefer not to carry any except maybe a mortgage. For me personally, I would:

1. Participate in the 401k up to the match. Not doing so is like throwing away free money.

2. Sell any non-retirement account investments

3. Start an emergency fund with the money from #2, fund it with $1-3k to start. Find a HYSA or MMA, but don't get too caught up on the actual yield. Rates are so low right now that it's not going to make much of a difference. This isn't to be used as an investment. It's for emergencies so you want to be able to access it easily if you NEED it and don't want to run the risk of losing it. Getting a little interest on it is a bonus.

4. With the remaining money from #2, start paying off your debt, paying the lowest balances first.

5. Once you have used up the money from #2, calculate how much those monthly payments added up to. Add that to your minimum payment on your lowest remaining balance. (This is the snowball method that Dave Ramsey promotes).

6. Once all debt it paid off, build up your emergency fund. The amount will vary depending on your needs (do you have disability insurance? how stable/reliable is your job?)

7. Now you max out all tax advantaged retirement accounts (401k, HSA, Roth)

8. If you can still invest more, start investing in a taxable account.

[loyalsudz]

There is a little too much debt here for this to be simply a question of payoffing your debt in my humble opinion.  Is the coronavirus a concern?  What if you or your her get it before you can pay off the debt and start to manage your existing joint debts?  While I am no expert, I recommend that you look at all the debts and the minimum payments as just a payment for the minimum for now, get some security gland items in place and then tackle the debt, finish the 3 to 6 month emergency fund and then, start to commit to retirement.  If you do it out of order, you and your her may end up retying up your liquid funds again.  Remember, if she is a stay at home wife or mom, she has what is known as a income value that if you had to pay out of pocket, it would cost you significantly, thus get with her a ROTH IRA and max both your and hers out, after that is maxed out then move any thing left over into the 401K IRA traditional to mitigate income strain on your net take home pay.  Paying out $300 dollars a month in a 401K IRA is pre-tax and almost will not affect the take home pay but by like $50 dollars if that.  

Risk Mitigation Plans:

1) Please be sure to add any insurance to cover you and her in the event of whatever since you have joint accounts and she will be stuck with those in the event of disability to death and vice versa. Term insurance vs. wholelife usually cost significantly less.  Just from a risk mitigation stance, with the insurance and a will one for you and her this helps mitigate risks and lightens burdens. If that is in place then, the level of debts across the board indicate that you make a steady income and practice good things like paying off things in full, already but something took place that was an emergency and your cash reserves are not liquid. If it is the liquidity factor AKA Robinhood and you want to hold on to the stocks for a year so that you obtain the tax free income if you do sell after holding it for one year then simply set aside a small amount of income to buffer your liquid savings.

2) A good start is to set aside one month baby emergency fund of $1000 dollars.  This may take about 60 to 90 days. 

3)  It does not seem like much but the 3rd option for you on the table to mitigate risk is to start a 52 savings plan.  And since we are starting the new year soon is for both you and your her to start to do a 52 week reverse or forward moving savings plan.  The first week you start and there is nothing that says you cannot start now meaning you'll have approximately $1376 a piece going into the holidays next year.  To reverse start, just pay $52, (incrementally go down the next week by a dollar) the highest in the first week or to move forward, just pay $1, the next week you pay $2 ~ you get the gist.  Envelope it and just date it with each week to track it.

4) Or as an alternative get a month ahead on your monthly expenses.  This means at all times, you have the next months expense funds just sitting in your checking or savings account.  This can mitigate risk and add a buffer and the affect is if you do not spend it right away and just stay on point it becomes the 1st month of your fully funded emergency fund. Lastly, and it is completely up to you but start to place known annual and semi-annual expenses in a sinking fund divided by 12 (months) and treat it like one of your debts, so over time it remains on the list but it does not come as a surprise and wipe out on your cash reserves at once.  

5) Give you and her personal money for those things like entertainment fund or birthday fund so they do not set you back, but more importantly add about $25 to whatever you agree upon of guilt-free spending money.  It is important that you do not ask her why she spent it on something and she not ask you.  It can be an emotional buy but it cannot be judged by either party.  For example a married couple I read about in Kiplinger Magazine a few years ago had a joint pot of $5000 dollars but they made about $300 to $400K annually.  This cuts down on arguements if it is not used as a weapon.  Anything above this should go into a sinking fund for extra expensive items.  This is to spend and have guilt-free fun each month so that you do not get burned out while you are saving and paying down debt.  An ice cream cone or a juice shake maybe a Redbox movie, it does not have to set you back to much.  

6) On the car sale, hold off until after the pandemic due to the fact that DMV may not be where you want to be going during this time, check your city for lockdowns, and just make sure you obtain a title original so that you are ready when you want to sell the car.  That and a statement from the bank that the car is fully paid off and you should have enough documentation to complete the transaction without too much worry: just the price.

Reverse Savings Plan Link

Drive Free Cars for Life Link 

[Revelate]

As the prior poster mentioned knowing what your income and/or cash flow is, is rather crucial for any real analysis.

I was sitting on something like 587K in debt at one point this year, admittedly all 3.85% or below to be fair on the APR side, but when my actual paychecks were netting out a serious fraction of that it wasn't a real concern.

Just as napkin math if I'd paid that all off at the beginning of the year that would've been missing out on 59K in gains S&P index style investing YTD... and my own returns which have utterly blown that out of the water, which would've set me back years on my retirement.  I probably never get this sort of market windfall ever again, but long story short be smart about debt paydowns: my long term historical market return assumption is 5%, and anything below that I usually let ride for all that I did recently pay off my car note well ahead of schedule but ultimately my financial facts are just different now than they were at the beginning of the year.

[Citylights18]

Definitely the OP has a strategy by leveraging credit and putting away into retirement accounts.

I think the cars I probably wouldn't touch. Monthly payments on an installment loan are good for credit, especially once you've paid off 50% plus.

You might want to take out a true BT card like Disco. Move and consolidate your balances there to save APR and focus on paying that down. Also try to lower the utilizaton per card to improve credit score.

Paying off the cards probably not bad idea. You can always lose the money in the market instead. But the 401k is great because of the tax advantage plus the match so I would take that.

[Chache]

I was told to invest but im concerned because my only income is from disability from working with the fed gov, i was awarded backpay of over 6 figured i paid my credit cards all of at the advise of others and now i have 75k just sitting in my navy fcu savings doing nothing for me, but im concerned about investing although people tell me every day im losing money with it in a savings account i have never been involved in stocks had no idea you could pay a financial advisor? Is it even worth it for me or do you need to have alot more money saved

thanks as always

[Revelate]

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@Chache wrote:

I was told to invest but im concerned because my only income is from disability from working with the fed gov, i was awarded backpay of over 6 figured i paid my credit cards all of at the advise of others and now i have 75k just sitting in my navy fcu savings doing nothing for me, but im concerned about investing although people tell me every day im losing money with it in a savings account i have never been involved in stocks had no idea you could pay a financial advisor? Is it even worth it for me or do you need to have alot more money saved

thanks as always

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I would be leery of taking hardcore financial advice from here.

Yes we could ask you probably the same questions a financial adviser would, and realistically if you haven't done so already see if you can figure out how much money you have coming in regularly vs. how much money you have going out.  

I see "Come in and talk to us!" emails from literally every major bank that I have any sort of current or even past account at, I suspect NFCU has similar and you can talk to them for free.  It probably won't be the most optimal advice but they will probably ask for details you would be reluctant to hand out over any public Internet forum and there's certain rules and regulations they have to abide by and it costs you nothing for a little additional education that won't be terrible just like always do a little sanity checking after you talk to them before you sign up for something possibly awkward.

Ultimately it's a strange time right now and I'm sitting on my own dwindling cash pile currently rather than trying to get a really optimal return on it.  75K windfall after paying off CC debts (smart move) probably gives you a little more breathing room than I have where I'm just trying to get to Jan 1 right now.

[sjt]

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@JetOneTV wrote:

(If can't see photo - https://i.imgur.com/rNb7Q94.png)

Hello, I've been struggling to come to terms with everything finding out everything late about investing. But anyway, hopefully, the small photo above gives some light to my question.

Should I stop investing, take everyone out, and pay off cars & debt?

I've thought about trying to sell the "CAR 1" and paying for a new one in cash... ugh, it's just so much to think about when doing all of this, but wasn't sure... - I've not started using my 401k yet at my job (because I had to wait a year anyway), but that was extended due to "CV19". However, they did turn it back on recently and can start using it, but I wanted to use it properly. That's why I didn't do anything yet.

Please advise - thank you.

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Like the other posters said, everyone, is different and has different approaches to their own financial situation. 

If it were me, I would pay off the revolving credit accounts with some of your cash. Make additional monthly payments on your auto loans and put some cash towards your reserve. The other option is to leave just start putting all your monthly income towards debt and leave your investments and savings alone. Don't start adding until the debt is paid. The exception to that is if you start up a 401K.