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Yo, who here is good with time value of money, because I'm
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Oculus Spirit [75921]
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Yo, who here is good with time value of money, because I'm
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Apr 29, 2024, 3:09 PM
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admittedly awful with it.
I've got a savings account drawing 4.4% interest compounded monthly.
I've got a loan charging interest at 8.99%
savings account has ~3.5x more money than I owe on the credit account.
The savings account is not 100% but a very large percentage of my emergency savings.
If you were me would you decimate the savings in order to eliminate the loan? I pay more than the minimum but I've also met me and am not sure I'd deposit that payment back into the savings account at the same clip.
My ss# is 800-637-5309
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Hall of Famer [22145]
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just to confirm
Apr 29, 2024, 3:25 PM
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is your buttwhole bleached?
butttt for reals....is this for a loan that you already have, or are you crunching numbers to pay cash for a car, or pay the note off?
I think it's for one you already have, but not 100% sure from reading the note. Assuming that's the case...couple questions:
What % of your monthly expenses is this loan?
Will a 28%ish reduction in your emergency fund put you underneath what your new Opex would be times 6 months?
What's the delta of payoff loan vs pay monthly * # of payments?
At face value, it'd make more sense to pay cash in this instance. But other variables may or may not make it more uncomfortable / risky for you.
Change your direct deposit at work to put in old car payment back into savings until you hit your number...
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Oculus Spirit [75921]
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Existing loan that I am currently able to be more
Apr 29, 2024, 3:49 PM
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aggressive with than I have been for the past 6 months.
my minimum, which is higher than the actual demanded minimum, is 5% of monthly net.
30 months to get the savings to back even, if I don't include any accrued interest in that time.
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Hall of Famer [22145]
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ok. little trickier answer
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Apr 29, 2024, 4:21 PM
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here's what you gotta do....
Calc1: take today's $ in savings (P) times (1 + interest rate/12)^12*3
Calc2: (P - payoff note) times (1+ interest rate/12)^12*3 PLUS Monthly Payment times (((1 + interest rate / 12) ^12 * 3) - 1) divided by (interest rate / 12)
that should give you the value of your savings account for both scenarios after 3 years. If you're already thinking 30 months is your sweet spot, set the 3s I typed in equal to 2.5 (t is years)
if you wanted to understand what t would equal, then we'd have to do some algebra and figure it all out.
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Oculus Spirit [76633]
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Got dang this guy maths
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Apr 29, 2024, 4:48 PM
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All-In [31957]
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Answer is very simple. Pay the loan off today....
6
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Apr 29, 2024, 3:26 PM
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Then work to build back up your emergency fund.
If you don't trust yourself, auto direct deposit into a separate savings account is the way to go.
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Hall of Famer [23049]
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Split the difference
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Apr 29, 2024, 3:35 PM
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Pay down half and reevaluate your feelings in a few months.
What % of your income is the savings account?
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Oculus Spirit [75921]
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20%***
Apr 29, 2024, 3:49 PM
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All-In [44118]
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I'd keep the loan and keep funding the E-savings account.
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Apr 29, 2024, 3:51 PM
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Would like to see that number at 50%.
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Oculus Spirit [75921]
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So you are thinking keep up with that regular payment
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Apr 29, 2024, 3:58 PM
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and rather than being more aggressive on the debt, put extra into that savings account?
For the past 6 months I've had two loans, one was 0% interest but the payment was double that required of the 8.99%er. Since that one is I've got a lot more cash to play with.
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Hall of Famer [23049]
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If I'm mathing right
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Apr 29, 2024, 4:29 PM
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Savings is 20% of income and 3.5x debt. That means debt is ~6% of income, and would lower your savings to ~14% of income if paid off.
If trusted enough to replenish savings, I'd pay the whole debt off. If not trusted, then split the difference.
As mentioned by TRDJ, try to boost that emergency savings over time to 50-100% of yearly expenses.
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All-In [44118]
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Well, maybe you can hedge that to say 50/50
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Apr 29, 2024, 5:26 PM
[ in reply to So you are thinking keep up with that regular payment ] |
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Put half of whatever extra you have towards the loan, the other half to savings.
Honestly I may would do 75% to savings and 25% to loan.
IMO, financial priority should be:
1. 6 months reserve cash
2. Attack all non-mortgage debt
3. Invest/work on mortgage debt
Saving for retirement concurently with all of this.
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All-In [44118]
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If you pay off the loan, how far does that put you from having
Apr 29, 2024, 3:47 PM
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100% of whatever amount you need/want in emergency funds, and how long will it take to replenish it to 100%?
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Oculus Spirit [75921]
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30 months to replenish if
Apr 29, 2024, 3:51 PM
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only put the minimum back in.
That amount of time to pay off the loan is the part really bugging me about it all. Also the fact that the savings rate is likely to plummet sooner than later.
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All-In [49316]
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Pay off loan, add the monthly loan payment plus your current savings monthly
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Apr 29, 2024, 4:14 PM
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amount to your savings. You may not have enough in emergency savings for a while, but you'd need less if loan was paid off. Be aggressive on debt.
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All-In [44118]
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Hang on. My maths may not be right. Are you saying you have
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Apr 29, 2024, 5:07 PM
[ in reply to 30 months to replenish if ] |
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20% of your annual income in an emergency savings account? So 10 weeks of pay?
And it will take 30 months to build that back up? So like you'd only be restocking at a rate of a third of your weekly pay per month?
If this is correct, DO NOT pay off that loan. I wouldn't do it. I also wouldn't be worrying too much about your rate of return on savings. Just pay off the loan the best you can WITHOUT getting rid of your savings.
Gotta look out for #1 first and have a plan for loss of job or something like that.
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Oculus Spirit [75921]
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The real answers is I gotta stop having fun and
Apr 30, 2024, 8:43 AM
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buying every tool but a band saw I reckon. That savings account alone has 7-8 months of expenses, more if Sharkgirl feeds me. Doesn't take into account other spots I could pull the cash from if something real bad came up.
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All-In [48017]
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There's some radio dood that says: "Debt is dumb, Cash is king"
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Apr 29, 2024, 4:22 PM
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He's a pretty smart guy, worth a bunch.
Pay off the loan, than start saving.
HTH
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Oculus Spirit [75921]
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I think that guy is an out of touch piece of ####, if his name is Dave,
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Apr 29, 2024, 4:28 PM
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that is.
Now I don't think he's always wrong, but he sure lacks any degree of nuance. Also, people richer than he is have lots of debt. Probably not in the way he means though.
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All-In [49316]
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well put. Dave advises in generalities, platitudes, doesn't consider indiv
Apr 29, 2024, 6:51 PM
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circumstances.
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Hall of Famer [23049]
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Re: well put. Dave advises in generalities, platitudes, doesn't consider indiv
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Apr 29, 2024, 9:43 PM
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But for the bulk of UPDers, it's a good starting point. It's very conservative, but many people are foolish with their money.
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Oculus Spirit [75921]
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At some point, maybe the whole time, Dave started telling folks to
Apr 30, 2024, 8:15 AM
[ in reply to well put. Dave advises in generalities, platitudes, doesn't consider indiv ] |
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just make more money. I'm sure more than once he's been the reason somebody low on the org chart didn't make more money.
I also take a second look at anything bible thumpers start really enjoying.
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All-In [48017]
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All that may be true, but his tag line can be hard to argue with.
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Apr 30, 2024, 8:25 AM
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There are exceptions, of course.
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All-In [31957]
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I've heard him say that given someone's debt level..
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Apr 30, 2024, 8:35 AM
[ in reply to At some point, maybe the whole time, Dave started telling folks to ] |
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that they're going to need to get their income up in our to tackle it in a timely fashion. He doesn't just say "go make more money stupid".
It's normally more like "you might need to deliver pizza, or door dash, etc...in addition to your current job" to be able to attack the debt more aggressively.
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All-In [30207]
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Shoot the hostage***
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Apr 29, 2024, 4:41 PM
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Heisman Winner [106016]
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You already know the answer, not sure why you even asked here because
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Apr 29, 2024, 4:54 PM
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Hookers and Blow should fix everything.
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All-In [31957]
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A few more comments after reading the thread...
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Apr 29, 2024, 5:39 PM
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and this is just my 2 cents worth...
I hear folks expressing savings as a % of paycheck. I think it's better to think of savings in terms of months expenses...meaning what min do you need to live each month and maintain your housing and transportation and then keep 3-6 mos of that amount. Measuring an emerg fund as a % of pay seems to imply that you have to spend everything you make to survive through an emergency. Sounds like splitting hairs, but personal finance is a lot more about mindset and behavior than it is math.
As for the question...when looking at things like this, flip the equation. Would you borrow money at 9% so you could put it in the bank to earn 4.4%? That is effectively what you're doing here.
If you are really worried about not having a lower savings amount until you can build it back up, then maybe cut your life style a bit to accelerate building up your savings. In the worst case, if you have an emergency, you can always borrow at that point, if needed.
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Legend [17921]
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Lemme go get my 12C***
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Apr 29, 2024, 5:43 PM
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All-In [40970]
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pay off the loan immediately
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Apr 30, 2024, 4:08 AM
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and put the loan payment and a bit more into savings every month. Get a credit card or increase your available credit to cover emergency fund temporarily. Pay off the credit card on the due date no matter what even if you have to use emergency funds.
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Oculus Spirit [75921]
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Luckily room on a credit card isn't the
Apr 30, 2024, 8:23 AM
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issue. I was a good boy back on 2010 when the government gave me $8000 to buy a house. I have not had one bit of CC interest since then.
I have had car payments and a couple of different mortgages. I played the 0% game a lot over the years but unfortunately the bathroom remodel came in at that 8.99%. We are 15 months into paying for that and it is going way slower than I'd like. I also like seeing the nearly double in interest added to that savings account each month.
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Oculus Spirit [94302]
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Pay off the loan, tighten the belt two notches and maintain that until you've...
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Apr 30, 2024, 6:30 AM
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replaced your savings. When your savings is 110% of previous number loosen the belt one notch.
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All-In [46941]
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How will this affect your hookers and blow account?***
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Apr 30, 2024, 7:56 AM
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Oculus Spirit [75921]
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It will not, that is a different GL all together.***
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Apr 30, 2024, 8:17 AM
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Oculus Spirit [94302]
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