Questions
Answered: Stocks vs Student Loan
A couple weeks ago, I put it out there that I’m on the fence on whether I should pay my student loan off (and focus on that primarily) or invest in other areas… Lots of people commented, with really good insight. Click here to read the original post.
So my decision is to shift my focus away from paying my student loan, and to rather invest that money instead. While its great to get rid of this loan, its more in my favor to invest this money. Here’s why:
- Student loan is only 4% — I could (hopefully, and am) make more money in the stock market/investments. Compound interest, over 8 months, in our economy, is still substantial.
- I get a tax return for my RSP investments, thus, a bigger return at the end of the year — more cash in pocket, to re-invest
- One of my goals is to buy a home, so saving $10k for that will help me get further faster.
- It helps me build a security net , so this new investment money is liquid — paying off a student loan, is not.
That’s my thinking — While I really hate my student loan, having it around for several more years, isn’t going to affect me at all. Aside from maybe paying $600 in interest for the remainder of its life (about 5 years), I don’t even notice it.
But — and this is the big one — my budget is based off my income, and not on my tax return. I may just drop that right on my student loan, and not even think about it. But we’ll see!
Question: Stocks vs Student Loan
I’ve had a student loan for the past six (long) years, and want it gone… I’ve been planning on focusing on it for 2011, and eliminating it by paying $1000/month on it, but I’m having second thoughts now.
Currently, my student loan is about $9,500 at 4% interest rate. While its a pain in the ass to have, 4% is not killing me by any stretch, and I can pay it off over about 6 more years. (At about 150$/month)
Where my mindset is, if I just kept floating the $150/month for six years, I could put the remainder ($850/month) into the stock market and investments… likely, yielding higher gains than 4%. If I focus on my student loan this year, I’ll have it gone by about August — then, I can switch focus to saving, while being debt free!
So thats my question — is it worth it to pay off this student loan (my only debt, that I despise with a passion), or let it ride, and invest elsewhere?
Question: Giving to Charity?
I’ve never had a plan when it comes to donating to charities, but want to start doing it smarter. For the longest time, I always donate whenever I’m asked by a friend (either to sponsor them for a marathon, the 50/50 draws, secret auctions, etc) but with no real rhyme or reason. Every year, the amount I would donate would also vary, along with the organization.
The other day, I was watching the CBC, and one of the commentators, Kevin O’Leary (the money-loving guy from the show Dragons Den), said he personally had what he called a “5 x 5″ plan. Where he gives to 5 charities, for 5 years. Then at the end of that time, he picks moves on to five new charities (or keeps some of the old ones on), and continues to give.
Personally, I think at my income level, I could be more effective giving to just one charity — and receive the tax receipt — rather then giving 1/5th of the amount to five separate charities.
But either way, it got me wondering what to do… I want to give back, but just don’t know where to start. I’d love to hear your thoughts on this, in the comments below.
Reader Questions — Answer in the Comments:
- Do you have a charity giving strategy?
- How do you decide how much, and who, to give to?
- Is it better to give less to several charities, or more to one?