Hi everyone, here is a situation for your consideration. I think I have a decent idea here, but want to make sure I'm not doing something silly.
I currently started a new job in a new industry, making new-guy wage. It was a pay decrease from my last job, but should allow for better growth in the future. Because of this pay decrease I'm now living basically paycheck to paycheck, but my new job is stable and I'm performing well, hoping for a raise in the near future.
I'm deciding if it makes sense to pay off my car loan in full to keep some of that money in the bank for living expenses, so I'm not quite so close on income each month, and investing the other part in newly opened investment accounts. Here are the numbers:
Current savings: $37k in savings account and a Fidelity money market holding account. This cash is all liquid
Current investments: $10k recently invested into index funds and a few dividend ETF's. I'm looking to divert some of the car payment to investing into these accounts monthly.
Car Loan: About $10k left on the loan. $367 a month payment at about 2.9% interest. I have about 2 years left on the loan.
Other debts: None. My only other debt is credit cards, which I pay off in full each month and use for living expenses.
The Plan: pay off the $10k car loan now. Divert $200 a month to the investment accounts per month, keep the other $167 per month in the bank for living expenses.
To me this seems like a good plan since I have the money to fully pay off the car loan now and still have plenty left in savings. It will also allow me to skip the last 2 years of interest payments on the car loan and instead invest some of that money where it can grow, and keep the rest as an extra buffer against monthly expense variations.
Are there any red flags or oversights here that those more experienced than I can see? I appreciate your consideration!
original posted by Boureyn to r/personalfinance on Sat, 23 Mar 2024 23:12:22 GMT.