| Hi Taylor
- My husband and I are trying to figure out the smartest way to allocate
our income. We're both mid-20s, earn good salaries and have about
$30,000 in savings. Right now we have about $2,500 a month to split
between savings, our brokerage account, and our car payment. We owe
$25K on the car and with a rate of 2.74% and a $600 monthly payment.
How would you divvy this money up? - Tessa
Hi Tessa - Glad to hear you guys are making good money and figuring
out what to do with it. From what you've explained, you have a lot
of liquidity and steady cash flow, which is good to hear.
$25,000 is a pretty sizeable car debt, so you want to get that off
the books as fast as you can. If you aren't overly attached to the
vehicle, you might want to consider trading it in for something cheaper.
I always advise people to avoid borrowing for anything that isn't
an asset, and while your car might retain a certain amount of value,
it's worth is always declining and it isn't something you're expecting
will bring in revenue. If this is the vehicle of your dreams and you
can't live without it, carry on. Whenever you next buy a car, try
to get something you can buy with cash.
If you don't have more debt in the form of credit cards or student
loans, I'd start trying to pay off that car with as much force as
you can. If you're just putting money into a savings account, you
probably aren't making that much interest, so that money will serve
you better if it eliminates debt. Keep putting money toward retirement
and investing, but the sooner you have that car paid off, the more
work you'll actually be able to do.
Try paying $1,500-2,000 each month on the car, and putting everything
else into your investment accounts. This will speed up the payment
process, cost you less in interest and allow you to save more in the
long run. The goal is to have a lot of money to live off when it comes
time to retire, so the longer you take to pay off that car, the less
money you'll have when your working days are done.
It sounds like you're earning good money and have your sights set
on the future. Get whatever debt is holding you back out of the way
and then get to work building your retirement and investment accounts.
Keep at it!
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an offer or solicitation for the sale or purchase of any specific
securities, investments, or investment strategies. Investments involve
risk and, unless otherwise stated, are not guaranteed. Be sure to
first consult with a qualified financial adviser and/or tax professional
before implementing any strategy discussed herein. To submit a question
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