AboutJohn D Smith, CFP Expertise I can answer detailed questions regarding mutual fund investing, retirement planning, education planning and related financial planning/investment issues. I have a B.S. degree in Financial Planning & Counseling. I am also a Certified Financial Planner (CFP) and have performed fee only investment management and financial planning services for the past 11 years.
Question Hi,
I am 28 years old and am just now starting to have enough money saved that I need to consider what I should do with it. My husband and I have about $12,000 in savings. In the near future (within a year) we would like to buy a home, we are currently renting. Our current debts include a car loan with about $9,000 left at 10.5% interest, and a student loan with about $12,000 left at 7% interest. I am currently saving 8% into a retirement plan, and my husband is saving 5%. After budgeting we are able to save about %1000 dollars a month that is currently going into a savings account with a low interest rate.
I am considering paying off one of our debts with the money we have saved, but don't know if it would be wiser to invest it somewhere instead or save it for a down payment when we are looking to buy. What is your advice?
thanks,
Sam
Answer Hi. Unfortunately there is no one answer to this question that is right for everyone since it is dependent on each persons specific goals and risk tolerances. The basic financial answer is if you can invest your $$ and earn more on it than the debt is costing you then you should do so; if not, then you shouldn't. However, there are other considerations like making sure you have enough liquid assets in case of an emergency or for other reasons. I will also add that since you are considering a purchase of a home, you should expect to put 10% if not 20% down to get a competitive rate so you should keep this in mind as you make your decisions. Again, I realize this answer is not a direct one to your question but it is difficult to answer in a forum such as this. I hope this limited information helps.
