Do you save?

I like your style.

 

Waffle, it sounds like you're fairly young -- 20s? Maybe not but that is the feeling I get.

Keep in mind the "Rule of 72." It says that you will double your investment at the rate of (average annual return times length of time). For instance, at 8 percent annual, it will take 9 years to double.

So if you are 29 and plan to retire at 65, that's 36 years. At 8 percent -- fairly standard historical rate -- every $1,000 you put away now will be $16,000 at retirement. When you're young and can handle the risk, you can really play with those numbers; there are some very good tech funds for instance that could return something like 11 percent in that time frame, meaning that $1,000 would become $32,000.

Einstein called compound interest "the eighth wonder of the world." In that light, it has always been easier for me to put savings first.

 

A question I grapple with is whether to save at all when there is still outstanding debt at a higher interest rate than saving would return. So, for example, I owe $16,000, give or take, on my car at 15.5%. Should I hold off on saving any money until the car is paid off, as it is unlikely that an investment will return 15.5%?

 

Pay it off.

15.5 percent? Is that from the Bank of Guido?

 

I do think that many of the assumptions on return that American investment advice have is overly optimistic. American equities since about 1850 have been the greatest investment in history. For the rest of our lives, I'd expect something closer to the rate of return of equities in other established nations, which is solid but not world-breaking.

 

This is a no brainer. That is an insane interest rate, although Small Potatoes would be impressed

 

Same with me and, at 54, with about 6-10 years to go before I pull out of the rat race, I'm in position to vouch for it despite the worst economic downturn of our lives. To young folks who are in position (and I know not everyone is) I'd suggest maxing out your 401-Ks. If you can make an automatic deduction from your paycheck, just do it and don't think about it. Twenty or 30 years later, you'll be amazed.

 

That's a crazy rate. I bought my car in January '09 and my rate was 1.9%, I believe.

 

Holy Christ. Why in the world would you have an auto loan at 15.5% in this day and age?

 

Not sure. My credit score is pretty decent. Maybe it was worse when I bought it. And actually, that's the car we only owe about $1,400 on, now that I look. I'll have to take a look at the $16,000 car's rate when I get home.

But, generally, the consensus seems to be to pay off debt first, save second if the debt is above, say, 10%?

 

I haven't had time to read the whole thread....but I think (without crunching the numbers) we put away about $250-400 a month in savings as a couple.
At my last job, my 401(k) got no contribution about 6 months into the job, so I said forget it and went to Edwards Jones. Been with them for 4 years now and it's been a big help and we have saved and invested much better than the first 6 years we've been married.
The wife is in the university setting and her retirement is beyond awesome, so that helps as well, but we are pretty frugal on most things except for entertainment. We like to eat out and go to the movies when we can, but that's really our only "blown" money per month, which is about $200 a month.
I'll be interested to read everyone else and their stories.

 

The only debt I have is about $59k in student loans (yeah, I know, that's a lot). I max out my 401k, which is a generous plan. I put in 9% every paycheck, and they match 7%. I want to start up an IRA fairly soon. I'm likely moving from one of the most expensive parts of the country to an extremely cheap part of the country, so I should have more to save soon.