$10K bonus post-tax. $110K principal student debt to pay over 10 years with fixed 5.25% rate. Should I (1) put the bonus toward the principal, or (2) invest? Goal: build wealth. My student loan is my only debt. If (1), why? Is eliminating debt fast the best way to reach FI? If (2), why? What are some strong options you guys like? Seeking wisdom. TC 180K
5.25% Guaranteed return is nice. Of course you could get like 8% safely in today's market, that 110k principal is pretty nasty. Edit: Just pay down your debt
What's your yoe?
5.25% is pretty damn high..I'd pay that off first. It's a guaranteed return and investing in the market with post tax money is just gambling. If you want to build wealth, max out your retirement pretax funds.
I'd like to know why you have this opinion (last sentence)
To get rich you need to be rich. Think about it
My advice, eliminate your debt quickly. Put all as much money as you can towards paying your debt. Bonuses, some money every paycheck etc.
Pay down your loan, peace of mind. What did you study? Hefty loan.
Refinance your debt and consider investing. Mine is down to 2% much more manageable - used first republic happy to refer you if you dm. But you must be in sf Bay Area
That’s pretty sweet. Nothing close to that on the east coast. Would like to know if there are similar options.
I think they may have a location near Boston. If you check out their website and it’s close enough for you to go in lmk and I can refer They also refund your 2% in interest if you pay off your loan within 2 years.
Pay it down. This is a simple case. For more types and instances of debt - I’d advise listing them in descending order of impact. Impact being rate*principal. That’s how much you pay every year to keep this debt. Then pay off everything above the rate you’re not able to generate yourself safely. You’ll keep adding and getting out of debt as you go. Mortgage, cars etc. Some debt is best kept for the longest you can. Some debt is best gotten rid of ASAP.
Rate*principal is bad advice. Rate is the only one that matters. How much will $1 make (for me or someone else). Congratulations on your financial literacy, Morgan Stanley.
Pay loan > max out 401/retirement > invest yourself
401k is, generally speaking, a horrible investment vehicle.
Pre-tax gainzz
Pay off the debt as quickly as possible then go just as hard on investments after that. That's the most sure way to build lasting long term wealth
Consider what you get post-tax
This will be post-tax.