Invest extra take-home salary from tax cut or put into student loans?

[PharmacistFl12]

With the new tax cut set to take effect in February, i'm estimating my paycheck to increase by $300/month. I'm currently paying $4,500 monthly towards $153k student loans @4.85%. I'm undecided right now as what to do with the extra income. I'm leaning towards investing the $300 extra from tax cut into safe dividend blue chips stocks and use DRIP. This will serve as potential emergency fund. I already committed 70% of my take home pay towards student loans. Should I put the extra $300 into student loans?

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[mentos]

With the new tax cut set to take effect in February, i'm estimating my paycheck to increase by $300/month. I'm currently paying $4,500 monthly towards $153k student loans @4.85%. I'm undecided right now as what to do with the extra income. I'm leaning towards investing the $300 extra from tax cut into safe dividend blue chips stocks and use DRIP. This will serve as potential emergency fund. I already committed 70% of my take home pay towards student loans. Should I put the extra $300 into student loans?

Pay the loan, it's 4.85% guaranteed. You would need to earn 6-7% in the market to beat that rate due to taxes. You could just as easily lose that amount or more.

Might as well refinance since you're paying them off aggressively. You could get 2-3% variable if you have good credit.

 

[pezdispenser]

Focus on one main goal at a time. Right now that is paying off your loans. You'll achieve it faster and better when you focus on it. In a couple of years once the loans are gone, then you can put the $4-5k/mo towards investments and make some serious returns. Right now, $300/mo will not make much.

 

[WVUPharm2007]

Focus on one main goal at a time. Right now that is paying off your loans. You'll achieve it faster and better when you focus on it. In a couple of years once the loans are gone, then you can put the $4-5k/mo towards investments and make some serious returns. Right now, $300/mo will not make much.

Nonsense. If I did that in 2010...I'd have missed on one of the biggest expansions our economy has ever enjoyed. Focus on both and you further diversify your position if the market goes one way or the other.

 

[PharmacistFl12]

Focus on one main goal at a time. Right now that is paying off your loans. You'll achieve it faster and better when you focus on it. In a couple of years once the loans are gone, then you can put the $4-5k/mo towards investments and make some serious returns. Right now, $300/mo will not make much.

That is true I probably won't make much putting in only $300/month. I'm thinking of putting this money in market as a place to park some money for emergency fund.

 

[pezdispenser]

Nonsense. If I did that in 2010...I'd have missed on one of the biggest expansions our economy has ever enjoyed. Focus on both and you further diversify your position if the market goes one way or the other.

I'm talking about 3 years to pay off the loans. Yes, the stock market may have great returns during those 3 years, or it might crash. No one really knows. I don't think it matters that much anyway, because you'll have the rest of your life to invest and there will be many more boom and bust cycles so you aren't missing out on anything.

The other flaw is that you're comparing loan interest and investment returns from opposite principal amounts. $153k @ 4.85% is around $7k interest in the first year. But if you invest $15k, even if you make 20% in a good year, that's only $3k. The elephant in the room is still the loan interest.

 

[Sparda29]

Put the extra $300 into crytpocurrency.

 

[panasoniku]

Are you maxed out in your 401k and IRA? Max those out before opening another account

 

[Dred Pirate]

Nonsense. If I did that in 2010...I'd have missed on one of the biggest expansions our economy has ever enjoyed. Focus on both and you further diversify your position if the market goes one way or the other.

#thanksobama

PS - I had to interject politics into this thread just for the hell of it

#sorrynotsorry

 

[Amicable Angora]

Going to back up pezdispenser here, throw it toward student loans don't bother with investing. There's another reason why: you're also getting charged lots of brokerage fees each time you invest. Depending on which brokerage you go with, that's an automatic -5 to -10 dollars off of your $300. And that's assuming you're only investing in 1 stock/fund every pay period.

 

[Momus]

4.85% is quite high, I would try to pay it off asap. If your loan is around 3%, then it's probably better to invest.

Fyi: I have a 350k mortgage at 3.125% I can pay off anytime. I'll carry the loan forever since I make 3x/yr at least in stocks on average.

Going to back up pezdispenser here, throw it toward student loans don't bother with investing. There's another reason why: you're also getting charged lots of brokerage fees each time you invest. Depending on which brokerage you go with, that's an automatic -5 to -10 dollars off of your $300. And that's assuming you're only investing in 1 stock/fund every pay period.

0 cost with Vanguard mutual fund/ETF, which I hold all my money with.

Cost $0, $2, $7 per trade if you have 1 mil, 500k, 0-50k. I don't recommend trading coz 99% people will not beat the market over 30-40 yrs career.

 

[gwarm01]

Are you maxed out in your 401k and IRA? Max those out before opening another account

I'm going to second this. Paying off your loan is great, but don't waste precious years of compounding interest if you aren't already utilizing your tax advantaged accounts.

 

[babybull]

I put in all my money in the market for the past year despite having student loans on an interest only payment plan. 30% index returns vs 4% interest payments. No brainer here. I couldn't tell you how much longer these returns will last but 30k DOW is my target for the next year so I'm all in for at least one more year (will probably pull out before the summer and go from there)!

On Robinhood, NO fees (save for the negligible ones the SEC charges -- pennies).

There's A Free Stock Waiting For You

Use this link if you would like to get started with a free random stock with downloading the app (referral link) lol

You get one, I get one -- we both win

 

[PharmacistFl12]

Pay the loan, it's 4.85% guaranteed. You would need to earn 6-7% in the market to beat that rate due to taxes. You could just as easily lose that amount or more.

Might as well refinance since you're paying them off aggressively. You could get 2-3% variable if you have good credit.

I put in all my money in the market for the past year despite having student loans on an interest only payment plan. 30% index returns vs 4% interest payments. No brainer here. I couldn't tell you how much longer these returns will last but 30k DOW is my target for the next year so I'm all in for at least one more year (will probably pull out before the summer and go from there)!

On Robinhood, NO fees (save for the negligible ones the SEC charges -- pennies).

There's A Free Stock Waiting For You

Use this link if you would like to get started with a free random stock with downloading the app (referral link) lol

You get one, I get one -- we both win

I'm planning to add financial, energy and industrial stocks. These are no brainers IMO. Stocks like Citibank and Bank of America are easy money, especially with rising interest rates.

 

[babybull]

I'm planning to add financial, energy and industrial stocks. These are no brainers IMO. Stocks like Citibank and Bank of America are easy money, especially with rising interest rates.

You and me both! lol

I have had half my position on the DOW for the new year. I'm thinking the DOW could beat out the NASDAQ this year. Financials, energy, and industrials are currently propelling the DOW to a record year. Check out UDOW, which uses a leveraged position (3x) to track the DOW

Other holdings are financial and energy
citi, goldman sachs, morgan stanley, capital one
kinder morgan, chevron, exxon
still holding some chip stocks (AMAT, microchip)

 

[lord999]

Don't count your chickens before they hatch. Actually look at your I/O budget flow (and especially your O) before thinking about what to save. Strategically, the number is around true inflation to whether or not you pay down debt versus invest. If your interest rate is below true inflation, then you simply invest as paying down the debt under those circumstances penalizes you twice. If your interest rate is above true inflation, then it's a question which others have weighed in on which comes down to your appetite for risk versus general market trends.

I'm out of the market. I missed the boat these last several years, but my household makes more than enough that we both don't care. We've already won, and we've locked in our "winnings". To have anything at all and not be in debt is suitable enough for our retirement (even if we end up having an acrimonious divorce, our prenup would break us up without large expense, and if anything, I'd be the one receiving alimony). Also, I don't think I can plan working past 45 anyway with the way the civil service works, so I am planning for the RIF retirement to kick in which pensions me only at 33% of my top 3 with a long life of inflation left to go.

 

[Momus]

You and me both! lol

I have had half my position on the DOW for the new year. I'm thinking the DOW could beat out the NASDAQ this year. Financials, energy, and industrials are currently propelling the DOW to a record year. Check out UDOW, which uses a leveraged position (3x) to track the DOW

Other holdings are financial and energy
citi, goldman sachs, morgan stanley, capital one
kinder morgan, chevron, exxon
still holding some chip stocks (AMAT, microchip)

Leverage ETF works both ways, a 10-15% drop will make you lose 30-45%. If you have a 100 grand, you do the math. If it happens tomorrow, can you hold your positions and sleep well with it? What if it drops 25%, making you lose 75%? Still sleeping well? Do not discount the downside and only looking at the upside. The leverage position is also has a time decay risk associated with it. Time is not your friend with 3X leverage position. Look it up if you don't know what that means.

 

[Momus]

Don't count your chickens before they hatch. Actually look at your I/O budget flow (and especially your O) before thinking about what to save. Strategically, the number is around true inflation to whether or not you pay down debt versus invest. If your interest rate is below true inflation, then you simply invest as paying down the debt under those circumstances penalizes you twice. If your interest rate is above true inflation, then it's a question which others have weighed in on which comes down to your appetite for risk versus general market trends.

I'm out of the market. I missed the boat these last several years, but my household makes more than enough that we both don't care. We've already won, and we've locked in our "winnings". To have anything at all and not be in debt is suitable enough for our retirement (even if we end up having an acrimonious divorce, our prenup would break us up without large expense, and if anything, I'd be the one receiving alimony). Also, I don't think I can plan working past 45 anyway with the way the civil service works, so I am planning for the RIF retirement to kick in which pensions me only at 33% of my top 3 with a long life of inflation left to go.

Where can I find a sugar momma?

 

[lord999]

Where can I find a sugar momma?

Not sarcastically, probably start with signing up at one of the downtown corporate gyms (not brand, but exclusive ones). Even better if you're an instructor. Sarcastically, you happen to live in a well to do parish, going to Mass will take care of itself. I mean, you've got the game, right? That's the way the young work now. If you're Asian and in CA, the Benevolent societies.

Also, you're looking for someone who understands the value of things (i.e., acquired them on her own). Everyone i knew who married rich without that qualification worked for their money. I have no advice beyond remaining disciplined that I would not date a socialite or a relationship objectivity (not big O objectivist, the sort that only cares about the value of you as an accessory).

Sarcastically: "If I want to get money, I can get a job. If I want a companion, I can make friends. If I want intellectual stimulation, I can read a book or teach. But while you are all of those things to me, the reason I want you is because I can 'enjoy your company' without taking another lover" is the gist of what my wife said upon being married. Somewhat horrified with the attitude, but find someone who has a sense of her priorities that you can be compatible with as well as tolerate your shortcomings (and that was one for me).

 

[Wickett]

With the new tax cut set to take effect in February, i'm estimating my paycheck to increase by $300/month. I'm currently paying $4,500 monthly towards $153k student loans @4.85%. I'm undecided right now as what to do with the extra income. I'm leaning towards investing the $300 extra from tax cut into safe dividend blue chips stocks and use DRIP. This will serve as potential emergency fund. I already committed 70% of my take home pay towards student loans. Should I put the extra $300 into student loans?

With high interest rates and unstable future professional outlook, I focus on paying off the loans first. Other than health insurance, budgeted expenses, my emergency fund and 401k up to the company match, rest is dumped into loans.

 

[babybull]

Leverage ETF works both ways, a 10-15% drop will make you lose 30-45%. If you have a 100 grand, you do the math. If it happens tomorrow, can you hold your positions and sleep well with it? What if it drops 25%, making you lose 75%? Still sleeping well? Do not discount the downside and only looking at the upside. The leverage position is also has a time decay risk associated with it. Time is not your friend with 3X leverage position. Look it up if you don't know what that means.

sticking with my thesis. the dow will hit or come close to 30k this yr. im getting out at 28.5k

i should add, i'm a bit cautious about end of jan-feb as certain specific events i am aware of can be cause for some significant pullback (will not be all in during this time). summer-fall also could be a time of significant pullback due to events in the fall and i am planning my moves accordingly

 

[wagrxm2000]

If this was asked 5 years ago, FANG and stock market hands down.

However, this market is nearing an end. We're seeing a correction probably before Trump is out of office. Not even Trump could fix the nonsense that Obama caused.

We're going to continue going up from here but $3600 in the market isn't going to compound into much for a long time.

Oh and don't listen to momus for early investing advice or it'll take you forever to get to the point where you earn more in the market then at work.

 

[gwarm01]

Thanks Obama?

 

[PharmacistFl12]

If this was asked 5 years ago, FANG and stock market hands down.

However, this market is nearing an end. We're seeing a correction probably before Trump is out of office. Not even Trump could fix the nonsense that Obama caused.

We're going to continue going up from here but $3600 in the market isn't going to compound into much for a long time.

Oh and don't listen to momus for early investing advice or it'll take you forever to get to the point where you earn more in the market then at work.

I'm thinking of slowly accumulating stocks that missed out on the rally. Like GE, majority of energy stocks and utilities.

 

[PharmacistFl12]

If this was asked 5 years ago, FANG and stock market hands down.

However, this market is nearing an end. We're seeing a correction probably before Trump is out of office. Not even Trump could fix the nonsense that Obama caused.

We're going to continue going up from here but $3600 in the market isn't going to compound into much for a long time.

Oh and don't listen to momus for early investing advice or it'll take you forever to get to the point where you earn more in the market then at work.

I'm already paying $4,500 monthly towards student loans. Additional $300 from tax cut might not do much. Reason why i'm considering parking that money in the market buying dividend stocks and use it as emergency fund.

 

[wagrxm2000]

View attachment 227929

Thanks Obama?

We are in the biggest bubble ever. There's a chance that whole amount will be lost.

 

[wagrxm2000]

I'm already paying $4,500 monthly towards student loans. Additional $300 from tax cut might not do much. Reason why i'm considering parking that money in the market buying dividend stocks and use it as emergency fund.

I'm completely fine with an emergency fund that's invested. Just don't leave it if you think you'll need it during a recession or if there's a chance you'd lose your job.

 

[babybull]

I'm already paying $4,500 monthly

I'm thinking of slowly accumulating stocks that missed out on the rally. Like GE, majority of energy stocks and utilities.

utilities may still lag behind i feel. that's something that investors more strongly rotate into during down times. be sure not to miss out on DOW 29k! there will be big movement from GE earnings soon, so care. GE if i understand correctly is just a small portion of the DOW. other high fliers (think boeing) represent a much larger portion. i think dow 28k-29k is just guaranteed money and from here on out and represents 10-20% upside DIA, UDOW

 

[babybull]

Leverage ETF works both ways, a 10-15% drop will make you lose 30-45%. If you have a 100 grand, you do the math. If it happens tomorrow, can you hold your positions and sleep well with it? What if it drops 25%, making you lose 75%? Still sleeping well? Do not discount the downside and only looking at the upside. The leverage position is also has a time decay risk associated with it. Time is not your friend with 3X leverage position. Look it up if you don't know what that means.

don't lecture me. i bought 6 bitcoins in 2014 (sold last yr) when i was a dirt poor student not working in pharmacy school they call me the next nostradamus. my first purchases for 2017 were Boeing, KBhome which also have over 100% gains in the past year

 

[Momus]

don't lecture me. i bought 6 bitcoins in 2014 (sold last yr) when i was a dirt poor student not working in pharmacy school they call me the next nostradamus. my first purchases for 2017 were Boeing, KBhome which also have over 100% gains in the past year

No one cares really...

 

[wagrxm2000]

don't lecture me. i bought 6 bitcoins in 2014 (sold last yr) when i was a dirt poor student not working in pharmacy school they call me the next nostradamus. my first purchases for 2017 were Boeing, KBhome which also have over 100% gains in the past year

Nice, there are plenty of smart traders here.