Happy Friday everyone! I hope you are all having a wonderful week, and ready to enjoy a sweet 3-day weekend in remembrance of the women and men who have served to protect our freedoms. Like My freedom to hope on the internet and ask everyone a question! And my big question of the week is………..drumroll…….
Well, actually, you can just read it in the title of this post. But for dramatic effect….the question is…..
Should I Pay Down My Student Loans?
Yes? No? Maybe? You don’t care?…Oh, you want more information? Ok, sure.
Our Student Loan Balance Is $13,791
Edit: Just FYI, the interest rate is an average of ~ 6%
Now, remember how I set a goal of paying off my student loans in 2013? Yea, me neither, but apparently I wrote it on the internet. Well, life circumstances and barely making enough to pay the bills has kept me from rocking the student loan payoff like I wanted to. It’s already May, and I had hoped to have already paid down about $5,000 on the loans, but no dice.
I have an opportunity to make a decent sized payment RIGHT NOW! I could drop over $3,000 on principal with the click of a button (well, several buttons, some typing, and possibly a donut)! But I am having trouble pulling the trigger on this decision. Can you help me make the decision? Here’s why I can’t seem to say “YES!” to the student loan crushing grenade I want to drop on Sallie Mae:
Our Current Emergency Fund Is $6,100
Now, before you start throwing rocks at me because I’m a blasphemous financial writer, let me elaborate, because honestly, I’m comfortable with the number above. Here’s why:
I contributed $11,000 total to my Roth IRA when I was 18 & 19 years of age. I am now 27 (UGH! So old!). This means the $11,000 has been in there for over 5 years. And, according to the IRS Publication 590, I can withdraw any amount from my Roth IRA that is not “earnings” after having the account open for over 5 years. So, I can add the $11,000 to the $6,000 listed above as my emergency fund. Now my emergency fund is $17,100! WOOHOO! But wait, there’s more!
As I’ve probably said a BAJILLION TIMES, being a month ahead on your budget is the BEST POSSIBLE THING you can do for yourself financially. We’ve been here for over 4 years now, and we don’t stress about our cash flow. And one other perk of being a month ahead means that it can also act as an emergency fund buffer! So you can take the $17,100 and tack on another month to our emergency savings, which gives us a healthy amount as a backup in case of a serious emergency! We’ve also got our savings buckets which we could raid at any time, because haircuts and vacations can wait when we’re in emergency mode. We would also switch over to our emergency budget, which would free up additional cash flow.
Suffice to say, we’ve got our emergency situations covered. So why, then, can I not pull the trigger on this extra $3,000 (not included in the savings above) to start laying the smack down on our student loan?!
Well, because it’s $3,000 less cushion in case we need it. “But didn’t you just write a few hundred words above on why you DON’T need that extra money?” Why yes, yes I did. But I’d rather not have to dip into my Roth IRA to bail myself out. “But haven’t you been able to handle pretty much any inconvenience that has come your way so far?” Yes, that is also true. “So why are you cowering like a dog with your tail between your legs, hoarding your money for no good reason, letting someone suck interest from your account every month, and keeping your student loans protected like it was your Bieber t-shirt collection? Don’t be a spineless hoarder Jake!”
Wow. That was kinda harsh, guys. Geez.
Readers, What Should I Do?
Ok, now that you’re “In the know”, what do you think I should do? Should I pull the trigger? Or should wait and see how our cash flow situation does over the next few months? What would YOU do in this situation?
Thanks for all the helpful encouragement in advance!