Is this the smart thing to do? Archived From: Finance |
I have $13,000 in my bank right now. I was thinking of paying off my car ($7000). Is this the smart thing to do? What else should I do with the money?
I'm young and currently self-employed. I live at home so I really don't have much living expenses.
Should I put the rest in bonds or a retirement plan or whatever? I have no idea how this works. Thank you
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Vegas. Roulette. Zero.
Cha-ching!!
sushiosushi said:Vegas. Hookers. Blow.
Profit!!
Fixed.
what is ur interest rate?
Roth IRA
If the interest rate on your car is higher than whatever you are planning on doing with it (High Yield Savings Account, Government Bond, etc), then it makes more sense to pay it off.
pay off the car, in this market with interest rates on investments being so low. I think having no debt wins out. Pay off the car and then put the money back into your savings each month that would be your car payment.. to save for maintaining car and so you can pay cash for your next car.
assuming that your car interest rate is higher then the return on your investment pay off the car and then continue to pay the car payment every month into your savings account.
It's important to know the interest rate you are getting on your savings. You have enough cash there for it to make a difference.
13000 at 3%/year will make you a $390 annual profit, and I'm guessing that significant for you. If you aren't getting good interest, you are losing easy money.
You should also know your loan interest rate, and how many years you have left to pay on it.
In your circumstances, I'd want to keep a fair amount of my money in an emergency fund in case I decide to move out, go to school, or travel. It isn't too early, however, to start a Roth IRA if you have earned income. It's just a good thing to know about, and having one makes you more aware. You won't be able to access the IRA money for a long time, but it will grow tax free, and you'll be surprised what a difference that makes over time.
What's your credit score?
janwad said:It isn't too early, however, to start a Roth IRA if you have earned income. It's just a good thing to know about, and having one makes you more aware. You won't be able to access the IRA money for a long time, but it will grow tax free, and you'll be surprised what a difference that makes over time.
Technically, you can withdraw prior contributions (but not any earnings on those contributions) tax- and penalty-free from a Roth IRA at any time. So, while it's not like having cash in the bank, it's a (slightly) better emergency fund than a normal IRA would be.
Having said that, it's a great idea ... open a Roth. Also note that even though contribution limits for a Roth are $5K a year, if you start one by April 15 (next Tuesday), you can actually deposit $4,000 extra as a 2007 tax year contribution on top of whatever you contribute for the current year (assuming your earned income was at least $4K last year). I'm sure a quick search in this forum on 'Roth IRA' ought to get you whatever details you need.
PSP
Use some of it to get an apartment of your own.
depalma13 said:Use some of it to get an apartment of your own.
unless you're asian, in that case stay until your arranged marriage
Whoa, What's the rush for independence here? Nothing wrong with mooching. I left home at 17 and never went back, thanks to uncle sam and two deployments. I'd live at home as long as possible if I could... oh, except for my parents... oh.. and their annoying dogs...
Hmmm, maybe you should consider independence, especially if you pick out your own clothes in the morning.
Did you ask your folks what your should do with your 13K? I'm sure they have ideas.
Nothing wrong with living at home with your parents. I would pay off the car, then split the rest. Half into the stock market & half as a rainy day fund in a MMA.
get two and a half hours with Spitzer's escort. You'll have enough left over for a nice dinner, cab fair and the copay for your doctor and the antibiotics.
Nothing wrong with living with parents. I moved out until 27 and then my girl friend(wife now) and I cashed out our first home at 165K ten yrs ago. I took care of my parents and their house while I was living with them. With that said, pay off the car loan if the interest is higher from the loan than the interest from your 13K. Remember, interest from 13K has to be taxed as well. Do your math.
Pay the debt on the car, the rest in a Roth.
my 2 cents.
I suppose living at home is better than living on the street...
pics?... of the car, naturally.
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