#DebtManagement #Saving #FinancialChoices
Hey there! So, I’ve got a situation that I’d love your thoughts on. I’m currently serving in the military and, while my pay isn’t massive, most of my expenses are covered—think healthcare, rent, and food. Here’s the catch: I’ll be heading out on a seven-month deployment where around 80% of my expenses will be taken care of! 🎉
Current Breakdown:
- Monthly Income: $2400
- Basic Expenses During Deployment: $500 (phone, internet, etc.)
- Car Loan Payment: $600
- Insurance: $250 (but I won’t pay this during my deployment since the car will be parked)
- Original Loan: $19,000 at 7% APR over 4 years
- Remaining Loan Balance: $14,000
Here’s my dilemma: After covering my basic expenses, I’ll have roughly $1300 left each month during deployment. The real question is, should I funnel all of that cash into paying off my car loan, or stick with the $600 payment and save the extra? 🤔
Things to Consider
- Interest Rates: The 7% interest is an expense that adds up. The faster you pay off debt, the less interest you accrue.
- Savings Importance: Even a small emergency fund can save you from future financial stress.
- Your Financial Goals: Think about what you want in the long run—being debt-free or having a financial cushion?
Possible Solutions:
- Aggressive Debt Payoff: Paying off the car loan faster could lead to a debt-free life sooner!
- Balanced Approach: Consider saving a portion while still making extra payments on the loan to keep some financial flexibility.
- Potential Investments: If you save, think about options that could earn interest—like a high-yield savings account.
I’m really torn here! Have you ever faced a similar situation with debt and savings? What did you choose, and how did it impact your financial health? Can you share any tips or experiences? Let’s discuss! 💬
7% is on the high end of the grey area here. Opinions will probably vary. If it were me I’d probably make minimum payments while putting everything extra toward my TSP and Roth IRA. I’d prioritize tax-advantaged investment over a 7% loan, but I’d prioritize the 7% loan over any taxable investments like brokerage accounts etc.
But zooming out a bit, if you’re going on deployment, do you need a car? Could you sell your car before leaving on deployment? It doesn’t seem super smart to pay for a car you’re not able to use.
Check the flowchart in the wiki
I would split the excess money, half into savings/retirement, half into your car payment. 7% is not terrible at the moment but also not”make minimum payments only” low.
Definitely pay off the debt given the high interest rate. Also, you are entitled to a rate deduction while on active duty. [The Servicemembers Civil Relief Act (SCRA) (fhi360.org)](https://www.fhi360.org/wp-content/uploads/drupal/documents/cfpb_servicemembers-civil-relief-act_factsheet.pdf)
I’d pay extra on a 7% loan. Are you going to have to pay to store the car? You also need to maintain insurance, so contact your agent to see if you can get a storage discount on your policy.
I believe you can call your lender and freeze payments while deployed. Not 100% certain but I do believe you are able to freeze some payments and accts like phone and internet while on a deployment.
the sensible answer would be to pay off Debt as the interest rates are high at the moment. On the other side of the coin, if you are a experienced investor, you can make the money work in investments that give a better return than the debt rate but that is harder and takes years of experience
You can make your initial monthly payment, but make another payment on top of that marked for principal payment only. One payment covers interest, anything else covers principal owed on your car.
Pay off the debt, you can save again but debt follows you.