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07:04 PM on 11/27/12 
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Nevuk
Post-Structural Anarchist
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Cincinnati OH
Male - 25 Years Old
Well, they are all higher than the rate I am earning on my savings. So while I have cash in the bank, I am losing money on my debt's interest rate. So the question is whether or not the risk of having a low savings balance for a while so I can wipe my debt out is worth it.
My father's advice on this issue was that it basically amounted to how many months in the worst possible scenario it would take you to find another job. Add up the monthly expenses you have and the rest of the money after the point you've determined to be how long in the worst-case you would need to live off of your savings. That's better off being used to pay off the high interest rate loans (ie credit cards) as no sane, safe investments are going to give better returns than the rates on those credit cards.

Cut-off points people frequently choose are generally 3 month increments. 3/6/9 months are common (my father recommended 6 as safe amount of time for younger people, like in your 20s when you don't have mortgages or children, said that 3 was something you pretty much only did if you had extremely few expenditures and were very young. Of course this was before the recession hit fully). If you're wondering why I'm referencing my father it's because he's a very talented accountant (ie, tied for second on a 10,000 accountant exam (the CIA), he's a CPA) who takes very cautious stances about money management.

The other option of a cut-off point you can pick involves how long your unemployment benefits would last (or if you would have them at all).
07:16 PM on 11/27/12 
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Nevuk
Post-Structural Anarchist
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Cincinnati OH
Male - 25 Years Old
I'm in a similar situation, kind of - I all of a sudden have a healthy amount of money that I really don't know what I'm supposed to do with. Except I don't have any debt, and I don't know a thing about investing.
Certificate deposits, Treasury bonds/Bills/notes are as safe as you think the US government is. (T-bills) are exceptionally safe short-term (ie weeks rather than years) investements

http://en.wikipedia.org/wiki/United_...asury_security

Certificate deposits are safe for amounts up to 250$k due to the FDIC, however be sure that if you use a CD it's with a bank that actually has FDIC and be suspicious of rates above 5%.

The stock market is always on average the best investment return over the course of 10 years but... very volatile at the moment and requires a lot more time in research
11:07 AM on 11/28/12 
#3
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Nevuk
Post-Structural Anarchist
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Cincinnati OH
Male - 25 Years Old
If I pay everything off I will be left with about a month of living expenses. But I am also going to have a lot more money because I am not paying bills on my debt, so I could probably get up to 6 months of savings pretty quickly. There are some things I want to do to my condo next year.
That mostly comes down to how likely you think it is that you keep your source of income and how risk-averse you are. If you're very sure (ie above 95% that you won't lose your job or whatever it is) then it's probably a good plan.

There are some actual statistical tests for this but they ask for quantifications of emotions... so I don't really like them.



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