(22M) I make about $3200 a month after tax. I am going to be getting 1100 dollar a month raise (untaxed) next month. I have about ~$5000 in savings so far. My question is should I apply the extra funds to pay off truck ($31000) ($599/month) or just put it all into savings. I do not plan on increasing lifestyle or getting into more debt so it is purely just extra money. Nor do I need it for any bills as I make enough to support that already. Any advice appreciated.
Truck loan interest=7.1%
What should I do with extra money
byu/Such_Entertainer_110 inpersonalfinance
Posted by Such_Entertainer_110
7 Comments
What’s the interest on the truck? You may be better just investing it
How much are your expenses each month? It would be comfy to build up say maybe 6 months of expenses in savings in case of emergency. I would recommend on building that up first.
Depending on the interest rate of the auto loan, it may make more mathematical sense to invest it than it does to pay off the loan. That said, being debt free is a very nice feeling and if it were me, I’d be 100% focused on getting out of debt ASAP.
What’s interest rate on truck? If it’s 6-8% range, definitely worth considering putting it towards that. If it’s even higher, for sure worth doing.
Do you invest into retirement at all? If not, this is where you need to be looking for tax advantaged investments.
Follow this: https://www.reddit.com/r/personalfinance/w/commontopics
There are many right answers here. I would contribute towards Roth IRA in full each year. Then I would build towards 6 months of expenses for emergencies. Then I would pay off the truck. I would work towards maxing out your tax advantaged savings before any lifestyle change. Once you max Roth, 401k and HSA and have an emergency fund you can really treat yourself without stressing about what could have been done with the cash and balance investing further with treating yourself.
Save money. Invest as much as you can.