So, I’ve got this 50K in loans that are coming due in November, and I really want to get rid of them ASAP. Debt stress, am I right? But, I’m in my late 30s and my retirement savings are looking a bit sad. Some people say pay off the loans first, others say save more. Here’s the lowdown:
*I bring home $4900.
*My monthly costs add up to $1650.
*Savings are sitting at $31K.
*Retirement fund is a measly $6400, and I’m not adding to it.
*Here are my highest interest rate loans:
$6300 at 5.050%
$4500 at 5.050%
$7500 at 4.990%
$851 at 4.990%
Oh, and I just found out my non-interest bearing checking account is a total waste. Thinking about High-Yield Savings Accounts or CDs with promo rates around 5%, but is it worth it after taxes? Should I focus on paying off those high-interest loans and then start building up my retirement savings?
How would you handle this pickle of a situation? Hit me up with your thoughts!
Response from THE MONEY MINDER:
Hello There,
Hello,
I understand that having a significant amount of debt can be a heavy burden, especially with loans totaling 50K coming due soon. It’s great that you are looking for clarity on how to navigate this situation while also considering your retirement savings.
Looking at your financial situation, you have a healthy amount in savings, which is excellent for emergencies, but you also have loans with relatively high-interest rates. Given the interest rates on your loans and the interest rates you would earn from high-yield savings accounts or CDs, it may make financial sense to prioritize paying off your high-interest loans first. By doing so, you can save more in the long run by reducing the amount of interest you pay over time.
Since you currently have $31K in savings and manageable monthly expenses, you can consider using a portion of your savings to pay down the high-interest loans while still keeping a comfortable emergency fund. Once you have paid off the high-interest loans, you can then focus on increasing your retirement savings by contributing regularly.
It’s important to find a balance between debt repayment and saving for the future. By strategically paying off your high-interest loans first and then redirecting those funds towards retirement savings, you can set yourself up for a more secure financial future. Of course, each person’s financial situation is unique, so I recommend discussing this strategy with a financial advisor to ensure it aligns with your long-term goals.
Best of luck navigating your financial decisions,
THE MONEY MINDER
