Can $50.00 a month really make a difference?

[Sonnenwende]

Their is a quote i always remember from , I think , The Millionair Next Door. "people over estimate what they can do short term, and under estimate what they can do long term". Just start doing something. Don't wait until you find the perfect investment vehicle. Now is a great time to start with the market down. It may go lower. But as long as you still believe America will prosper the market will return and you will make money.

You don't even have to believe America will prosper with international stock and bond options.

My student loan debt is my only debt. It is at 2.8% fixed. I will probably get more of a return in the stock market. I can get rid of debt (17 years at the current rate) and have more money freed up, but I can never get back the time that my savings and investments could be compounding, nor the money from the match and future matches. Time is of the essense.

Now, my situation is a little different in that I fully expect my income to double soon and then will work on paying down the debt faster, but will also up the contributions. Kind of having your cake and eating it too. :p

[Thevail]

I've always found the pay off debt vs saving money to be pretty simple to understand.

If you have $100 and you put it in savings for a year at 5% (pretty average)..at the end of the year you have $105..That's really cool..way to stick those bank guys with having to give you $5!

But
If you owe $100 and the interest on that loan is the same 5%...

It's compounded daily or weekly or monthly (many many times in a year) rather than like your savings was which was only compounded yearly (once in a year).

So if it was compounded just once, at the end of the year you'd owe $105, but if it's compounded monthly..
that's $5 the first month..and the next month it's 5% of $105..it just spirals up and up. (I think there are online calculators for figuring this stuff out somewhere)

Looking at the compounded weekly numbers can make you start weeping I assure you.

So if you save the $100 you will make $5, but if you save that 100 bucks rather than paying off $100 in debt, you're LOSING money, and fairly quickly too.

Now, all that being said, there is no substitute for an Emergency Fund. Because the lack of an emergency fund is usually what gets people into debt in the first place.

But investment is a risk, like going to a casino. You're betting that whatever you invested in will be a "winner" and be worth more next year than it is this year.

And just like going to a casino..don't fail to pay the bills just so that you've got money to bet with.

If you win, you win once..if you lose you've lost twice.