Another month, another Money Matters with Joe Reinke, cofounder of FitBUX. This month, we’re answering your question: “Should I pay off my loans as fast as possible, or buy that house? What about that 401k? What about the stock market?!
Breathe, we got you.
Joe breaks down this complex question:
- [00:4 5] First, think about how you feel. Are you ok carrying debt, or do you feel that you need to be debt-free in order to be happy?
- [02:30] Thinking pure numbers can help. Let’s take the “should I buy a house?” question. Does it cost less to rent? Or is buying comparable? If your rent is cheap, and buying would be much more expensive, you might want to stick out the rental market for awhile–use that extra money to pay off the loans!
- Thinking about investing? Compare interest rates. If your loan is 6%…you should be making more than that on your investment in order to offset the cost of not paying off the loan.
- What about my 401k? Yes, contribute to that! The 401k saves you money since it’s pre-tax dollars.
- [11:00] Remember, absolute numbers (“I pay $1500 a month in student loans) mean nothing in finance. You always want to compare your interest rates/what you’d make investing vs paying down.
- [12:00] Should I refinance or go on IDR? If the investments you make while on IDR are more than what you’d save paying everything down at once…then IDR is your best bet. Just remember, it’s a government program, subject to change at the whim of Congress. *cough* recent win for therapy cap with PTA reimbursement issue *cough*
The bottom line? You need to think about that qualitative piece, then pick the numbers game that suits you.
Joe Reinke is CFA, CEO, and founder of FitBUX, a finance company developing technology to help you manage your student loan debt, save money, and reduce financial stress. You can find out more about FitBUX here.
Disclaimer: Talus Media, LLC receives no financial incentives from FitBUX. Several of our team use FitBUX services.