@pizzadude wrote:
@Zizou615 wrote:My wife and I have been on a rampage over the past 1-2 years wiping out some debts (none considered bad debts or in bad standing). To-date we paid off a $40k car loan in a lump sum, bought our daughter a $13k first car cash, and this week we are down $100k in student loans. Here is where we stand:
1. Mortgage owes $284k at 4%
2. Student loans owes $136k
3. Wife's auto owes $38k
We are likely considered high income at this point, and we are considering our approach. The student loans (we will NOT have any forgiven) are at 0% until January when they jump to 6%. Our plan right now is to essentially pay off the student loans in the next 12 months WHILE putting an extra $5k towards the principal on our mortgage each month, with a lump sum anticipated to wipe out the auto loan in the next year.
This begs the question: does this approach make sense or should we be throwing the extra $5k/month we have earmarked for the mortgage at the student loans? Either way we track to be debt free (including mortgage) in 36 months, which we are pretty ecstatic about after I had a nasty divorce 10 years ago that took its toll financially, along with a couple of economic downturns leaving me making around $40-45k/year for a few years in the past decade.
I'm assuming your mortgage and student loans are fixed rate, is that correct ? Also what interest rate is your auto loan?
You don't mention what your goals are.
If improving FICO scores is the goal, we would need to know the original amounts of the loans, and which FICO scores.
But if it's just general financial management I would get rid of the student loans first.
@Zizou615 wrote:Not concerned with the FICO scores for any of this... just financial freedom. My monthly payment for my student loans is $1600 give or take, but I've been throwing around $10k/month for almost a year. With the mortgage, if we toss $5k/month for 36 months, we're debt free in three years. But if we wiped out the student loans and then rolled the $10k or so towards the mortgage, it's expedited.
The other component is that we've completely paused any investing to wipe all of this out. Figure the market is a bit wonky, and once we have no mortgage or any revolving debt, we can dump large chunks into the market or other investments at that point.
1. Paying off your debts is a great investment!
2. OK my advice is to throw everything at the student loans. Leave the mortgage for last.
If you're going for maximizing the value of your money, I'd say student loans > auto > mortgage. It's the avalanche method where you target the highest interest rates first.
But I'd also say you probably want to put something towards at least retirement accounts in the meantime too. It's not much with the rest of the money you're throwing around, but at least the $6k each into an IRA per year would get you 36k (between the two of you) in the market that you won't be able to do again later.
But I'd also say you probably want to put something towards at least retirement accounts in the meantime too. It's not much with the rest of the money you're throwing around, but at least the $6k each into an IRA per year would get you 36k (between the two of you) in the market that you won't be able to do again later.
as of 1/1/23
