There is good advice here, and its jumbled across multiple posts.
First, having a rainy day fund is a great idea. How much of a rainy day fund is up to you, but first you need to figure out what your monthly expenses are - car, home, food, utilities, phone, internet, etc. If you were to lose your job tomorrow, how quickly can you find a new one that pays the same, or that will tolerate your “required” expenditures? Then decide whether you will be comfortable with a 1 month, 3 month, or even 6 month financial backing. After that, your extra money is best placed elsewhere, not in a savings account - it will depreciate due to current interest and inflation of money.
Second, there are many cars available new that are as competitive as used cars in price. Look not only at initial up front investment, but in money spent over time. Do you travel far to/from work, or do you travel often? Do you need to travel in bad/inclement weather (snow, ice, etc.)? Yes, every vehicle takes a hit off the lot new, but you also don’t buy someone else’s problems. This is a tough choice and one that both a calculator, some patience, and common sense can solve. Do the math.
Third, since you have a 401k, be aware that you won’t be getting a “tax break” for having a Roth IRA as you’ll already be getting that savings from your company 401k plan. Unfortunate but true, though its not to say it isn’t worth it to still invest your funds. Match your company’s contributions at the very least, its free money, can’t beat that.
Fourth, how you invest your money after the above is entirely up to you. There are two schools of thought: 1) pay off all debt and rake in pure equity as opposed to stringing out debt over time; 2) invest and pay off the debt over time (assuming said interest rate is fixed, not variable). You can consider consolidating your debt to a single loan for option 2 and get it on a fixed rate.
Now, to decide on item 4, you should make the decision as informed as possible - as you are currently doing. IF you can make more money/return by investing funds than you are currently paying to interest, put the extra funds to interest. Say you are paying 4% interest, but on a firm stock (like blue chip) you can get an annual 7% return. You will be paying off the loan interest plus profitting 3% for the year on the money that otherwise would have been gone. Plus consider that the stock you now own today will appreciate for the future and “grow”. The sooner you get into the market the better. If you can not get returns at a higher rate than the interest you have, pay it off first, then step into the market free of debt.
Some cameo’s to the above. Yes, there are always bits of bits of bits of cameos, such is the way of financial life.
- Many feel the market is currently in a bubble. With QE from the government, the market is currently being held up by a false economy. Jobs are not improving, interest rates are being kept low by the government’s buying, and the moment this stop, the bubble could pop/burst. Its up to you to buy in now and risk it, or wait for the pop, which could never happen or not happen any time in the next year/few years, it is unknown to people at our level.
- Playing with stock is like playing roullette. I assume that since you don’t want to contribute additionally to your work 401k, its because you want to control/influence specifically where you funds go - plus its good to now have all your eggs in one nest. Realize that if you “play the market” you run great risk of losing big - also chance of winning big. If you invest in solid stocks (like blue chip) that is a great investment plan for the future - especially for retirement in 25 - 30 years. If you want to buy in to dividend stock, to combat the potential for a market swing, its best to buy-in over time. Ie, instead of buying stock today with $5000, but it over the next 10 months at $500/month. This way if the stock dips tomorrow, you didn’t just lose out on a big chunk of money. Instead, your money spent on stock will be “cost averaged” over 10 months. Its easier to avoid “big swings” doing this type of investing.
- I highly suggest you find an online calculator to evaluate your current loan payoff. Many times a small extra payment each month on top of your current payment will shrink your loan quickly in interest pay and in the life of the loan. For example, if I pay an extra $400/month on my home loan, I can pay it off 8 years sooner and save over $75000 in interest - yes this is a real world example. You will eventually note that at a certain amount the “value” of return is smaller per the extra finances invested. You need to find the sweet spot.
There is so much more I could type. I’ve been analyzing this situation over the past 6 months for my personal benefit. Its a very arduous, difficult process and anyone claiming otherwise is full of shit. You shouldn’t take your current financial state, or your future lightly. Take your time, think things through, and decide what’s best for you. With all I have told you, I STILL haven’t bought into the market myself - aside from my work 401k - because I honestly am expecting a dip or pop of the market. I’d rather wait until that dip to make my first buy-in of dividend stock. Greater return for initial investment. Just remember, that stock investments are never garaunteed and don’t invest what you can’t afford to lose (ie no one can “afford” to lose money in this day and age, but don’t put your utility funds into stock hoping for a pay out before the bill is due, etc. use common sense).
I’ll try to post more later if I can, but remember that first and foremost, understand where you are today, and then plan for tomorrow.