Payoff Student Loan Or Invest
For most of us, investing money isn’t easy. We don’t have the time or the know-how. And if we do try to invest on our own, we’re likely to make mistakes that cost us more than we would have earned in the first place. One way around this problem is through employer-sponsored retirement plans: automatic payroll deductions that put some portion of your paycheck into an investment account managed by someone else (a professional). The benefits of employer-sponsored retirement plans are many: they’re automatic and out-of-sight, out-of-mind; there are tax benefits; you get company match money as incentive; and they can be accessed before 59½ without penalty (if used for house down payment). But there’s also one drawback: when you borrow money for college using federal student loans—even with flexible repayment options—the interest rate is fixed at 6% for 30 years!
The old financial adage of “pay yourself first” is a good way to start.
You should pay yourself first.
Pay Yourself First: Paying yourself before you pay anyone else is an important step in protecting your money and making it grow over time. The old financial adage of “pay yourself first” is a good way to start, but how much should you pay yourself?
Pay Yourself Last: It’s also possible to make sure that your investments are getting paid before you pay other bills. This means that any extra money you have will go towards investing until all the bills are taken care of first, then anything left over gets put into an investment vehicle like a 401k or IRA (Individual Retirement Account).
Keeping an Emergency Fund
An emergency fund is a necessity. This fund should be three to six months’ worth of expenses, and it should be kept in a liquid account separate from your retirement accounts. The best type of account for this purpose is the high-yield savings account at a bank with no fees, which is FDIC insured up to $250,000 (or $500,000 if you’re married).
Investing Early Increases Net Worth
Investing early is one of the best ways to increase your net worth.
This is because investing early can help you save more money and get more out of the compounding benefits of investing. If you invest $100 in an investment that earns 8% per year and leave it untouched for 40 years, you’ll end up with $967—a total return of 967%.
On the other hand, if you invest $100 at 20 years old instead of 40 years old, leaving it untouched for 40 years would result in only $569—a total return of 569%. This illustrates how much better off financially you will be if you start saving sooner rather than later.
Instead, companies match a portion of employees’ contributions as a way of offering incentive and as part of their employee benefits package.
Instead, companies match a portion of employees’ contributions as a way of offering incentive and as part of their employee benefits package. For example, an employer might offer to match $0.50 for every dollar an employee contributes to their 401(k) plan up to 6% of the employee’s salary. This means that if you make $80,000 per year and contribute 6% ($4,800) toward your retirement savings plan, your employer will also contribute 5% ($3,600).
If you’re looking for ways to save money in 2019 and beyond—and perhaps even earn some extra cash on the side—consider opening up a Roth IRA or two (or three).
Retirement funds cannot be accessed until you reach age 59½ (except for certain extenuating circumstances).
Retirement funds cannot be accessed until you reach age 59½ (except for certain extenuating circumstances). Retirement accounts are subject to income tax and may be subject to an additional 10% penalty if withdrawn prior to age 59½.
The only way around this rule is if you’re using the money for financial hardship, medical expenses or tuition/educational expenses, or a first-time home purchase. You can also avoid the penalty by withdrawing from your IRA after you turn 59½ if your withdrawal amount is equal to or less than your modified adjusted gross income (MAGI) — which means the total of your wages and other taxable sources of income minus any deductions.
If you’re trying to keep up with the Joneses, workplace retirement plans can be especially helpful, because they’re automatic and out-of-sight, out-of-mind.
If you’re trying to keep up with the Joneses, workplace retirement plans can be especially helpful, because they’re automatic and out-of-sight, out-of-mind. Automatic savings plans are set up so that money gets deducted from your paycheck before you even see it; this way, when it comes time for a big purchase or an emergency situation, there’s no need to worry about having enough funds on hand. The downside is that this can also put temptation in front of you: seeing as how you don’t have enough cash right now (or ever), maybe it would be okay to borrow some money?
If you’re struggling with credit card debt or student loans and want help getting back on track financially but don’t know where to begin—or if saving at all feels like a foreign concept—automatic saving might seem like an impossible feat. But when implemented properly, these plans can be extremely effective in helping people save toward short-term goals such as paying off debt or buying their first home (and long-term goals such as retirement).
By investing aggressively while you’re young, you can get the most out of the compounding benefits over time.
Investing is a long-term game. If you want to make the most of your investments and enjoy the benefits of compounding over time, then you will need to invest aggressively while you are young. The earlier in life that you begin investing, the more time there will be for compounding to take effect.
You may think that it’s better to pay off your student loans as quickly as possible and have more money available for spending purposes. However, if you’re willing to delay paying off those loans in order to invest aggressively now, then you can earn significantly more money by investing than by paying down debt early on.
If you’re trying to keep up with the Joneses, workplace retirement plans can be especially helpful, because they’re automatic and out-of-sight, out-of-mind. If you have a company match, it’s even better! By investing aggressively while you’re young, you can get the most out of the compounding benefits over time.