Oso planning to go pro
Do both. I respect Dave Ramsey and agree with a lot of his stuff, but the idea that you should put off saving for retirement until you are debt free seems insane to me. My student loans have a 5% interest rate and I would have left a ton of money on the table (work 401k match and an average of about 10% annual returns in the stock market since I have started working) if I followed his advice.Pay your debts and save at the same time.
Student loans are low interest and aren't considered bad debt. I only pay the minimums on my student loans because there have been years inflation was higher than the interest rate I have. I'm in my 40s and make more than I deserve and still do it that way. Don't ever forget to live your life. The future is uncertain and the end is always near. It's not all about "the future." How many bums are on the street because they didn't save enough? None. You'll figure it out.
My main advice to the 20-somethings and 30-somethings is don't buy a house till you really can afford it.A house is not an investment; it's a place to live. If you are really lucky, you will make a little money over time, but it's often not as much as one thinks it is after all the extras are figured in: closing costs for buying; closing costs for selling; property tax; insurance; maintenance; minor repairs; major repairs. And all that is in addition to the interest and principal, of course.There are folks who buy a house for 300K and sell 5 years later for 330K and think they actually "made money" on the deal. In all likelihood, they lost money, and quite a bit of it because of all the extras.Renting gets a bad rap. My wife and I were between houses in 2007, thought we would rent for 4 months. Because of circumstances, we ended up renting for 40 months. I thought we would hate it but we actually liked it. We liked not having to do yardwork, liked not having to shovel snow, liked not having to worry about maintenance, and especially liked that we could leave if we wanted to without being tied down by a house to sell.When we moved to N.C., we bought a house. Owning is fine, but frankly, I miss a lot about renting. In Chicago, we rented in Lakeview, walking distance to Lincoln Park Zoo, the lake and all kinds of entertainment. Bus line downtown outside our front door. El right down the street. To buy that convenience, a decent condo would have cost us $500K minimum and a house would have been 7 figures. Our rent wasn't cheap but it wasn't outrageous for all we got, including a doorman. As I said, I miss it sometimes.Buy a house because you want a house and because you need a place to live. Don't buy it because you think you're supposed to by a certain age or because yahoos tell you "renting is throwing money away" or because you look at it as an investment.
What you are saying is true if you end up moving around, but maybe not if you plan to stay put for awhile. When you rent, you are always paying the current market rate for housing, but when you purchase, you are locking in most of the costs up front.
Student loans are low interest and aren't considered bad debt. I only pay the minimums on my student loans because there have been years inflation was higher than the interest rate I have. [...]
Not anymore; not even close. Student loan interest rates are going off at 6% on the low end and plenty are north of 8%.
What you are saying is true if you end up moving around, but maybe not if you plan to stay put for awhile. When you rent, you are always paying the current market rate for housing, but when you purchase, you are locking in most of the costs up front.We still live in the first house we bought 25 years ago. At the time, we were childless newlyweds. A lot of our friends were buying condos or smaller houses, but we got a place we knew would serve our long-term needs. We have refinanced a few times, and what we pay for our mortgage and property taxes (after the income tax deductions) is less than the rent on a decent two-bedroom apartment in our area. We certainly could have paid off our mortgage by now, but our investments are earning more than the interest rate we are paying.
Excellent points, chick.You bought a house to live in long-term. Hopefully it will have turned out to be an outstanding investment, too.I agree that when you rent you are paying the current market rate and when you buy you are locking in costs up front. That didn't work too well for those who bought in Phoenix or Vegas in 2006, when they felt they had better buy -- even if they had to win bidding wars -- because, by gosh, they would "miss out" before prices went even higher!As far as paying off the mortgage, that's an individual choice. I like being unencumbered, but I certainly understand your reasons for not paying off your mortgage. Many financial experts would say I was foolish for doing so, and I could give a rat's rear what they say!Real estate is very local and a principal residence should be viewed as long-term, just as you did. Congrats!
how are student loans not bad debt? Arguably it's the worst kind, since you can't get rid of it even through bankruptcy. Not an expert on poverty but I'd say the ability to live well within your means (which means by definition accumulating some savings) will probably help you weather storms better than without.
Some student loans are not "bad debt." Some are. We shouldn't paint with too broad a brush.$200k in debt from 4 years undergrad at MU, 3 years of law school at MU, and no job? Student loan = bad debt. Same debt but a $100k year job at a big firm? Student loan = good debt.
+1I took on $30k in graduate school debt and I know I am easily making 50% more than I would have had I only had my MU undergraduate degree (which left me no debt thanks to scholarships and generous help from my parents). It sort of sucks starting 30 grand in the hole, but its worth it in the long run.
I took on between $60-$70K for grad school, but my first job was a 60% raise from my previous position, and at my next raise is will put me probably the same % above where I would be similarly if I hadn't gone. So my loans are very annoying, but I don't regret it financially in the least.As for loans, mine that I got between 2010-2012 average out to around 7% (most were at 6.8%). Even looking at potential re-financing would only get me down to 4%-ish, which would then extend them out another few years. Not a brutal double-digit rate, but still not a sure guarantee to beat from an investment/cost of money perspective.
ZFB has been spending less lately. Instead of higher cost escorts he's just visiting low-cost Jack-shacks. End result is the same, but he saves tons of time & money.
If you have, say, $100k in total debt.... $50k left on mortgage and $50k in student loan debt. If interest rates were the same, pay the student debt down more aggressively.
What are your loans' interest rates at? What sort of rates would make you switch your strategy?
I had no idea loans were 6-8% now.