Author Topic: What is the first priority when you become debt free?  (Read 2970 times)

T-Rex

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What is the first priority when you become debt free?
« on: January 05, 2014, 01:58:24 AM »
I read Mr. Money Mustache's post about debt being an emergency akin to burning on fire, and I have been treating it that way ever since. I have a couple months left and I want to learn how to grow my stache.

What are the steps you took (or plan to take) in order of priority?
« Last Edit: January 05, 2014, 05:42:42 AM by T-Rex »

Khan

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Re: What is the first thing to do when you became debt free?
« Reply #1 on: January 05, 2014, 02:20:42 AM »
-Start your TSP contributions, set it at a decent amount. make sure to change it from the straight G fund to the other funds.
-Start building an emergency fund, fund a ROTH IRA(Every year, use it or lose it)
-Read a few books on asset management, like The Investor's Manifesto, it'll explain things like risk premium vs return
http://www.amazon.com/The-Investors-Manifesto-Prosperity-Armageddon/dp/1118073762/ref=sr_1_1?ie=UTF8&qid=1388913487&sr=8-1&keywords=investing+for+the+armageddon

little_owl

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Re: What is the first priority when you become debt free?
« Reply #2 on: January 05, 2014, 05:49:01 AM »
Congratulations on making progress against your debt!

I would focus on building up a modest emergency fund first, and then immediately investing for retirement next.

Start your retirement investing in tax-advantaged accounts first (TSP, 401k, IRA....whatever is the best option for you given your employment), and then focus on investing outside of tax-advantaged accounts once you have maxed out your tax-advantaged options.

Keep it simple, and you will get your money working FOR you, which is great!

T-Rex

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Re: What is the first priority when you become debt free?
« Reply #3 on: January 05, 2014, 07:53:38 AM »
It seems like I could put money into TSP or an IRA for most of the foreseeable future. At one point should one look into things like mutual funds or other investments?

Cooperd0g

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Re: What is the first priority when you become debt free?
« Reply #4 on: January 05, 2014, 08:03:37 AM »
I'm in the military as well. I would recommend using the Roth TSP if you plan on staying in until retirement, otherwise the Traditional TSP is also a good option. Do not start a Roth IRA until you can max out the $17,500 in the TSP. If you max it out then start a Roth IRA with Vanguard. General guidelines are that when you can max out both the TSP and the IRA and you still have more money left to invest that is when you start a taxable savings account. Mine is also with Vanguard with mutual funds.


captainawesome

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Re: What is the first priority when you become debt free?
« Reply #5 on: January 05, 2014, 10:47:37 AM »
Definitely take advantage of the tsp. however which you invest in depends on your other finances. Would contributing to a traditional TSP lower you to the next tax bracket? Same with Roth IRA or traditional. For us, my goal is to first lower us to the next lowest tax bracket between my contributions and my wife's 401k, then contribute to Roth accounts. Biggest thing is putting that money aside and letting it work for you, especially when current military retirement is a huge ?  I'm investing now without my 20 year pension in mind, so I'm not putting all my eggs in one basket. Nord has posted a lot about this stuff, he's always a good source of military FI info.

Thegoblinchief

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Re: What is the first priority when you become debt free?
« Reply #6 on: January 06, 2014, 08:20:19 AM »
Once you're debt free, get your savings rate as high as possible!

Once my DW and I are debt free, if our budget remains the same, we'll be at close to a 80% savings rate. It will take us longer to kill the debt off than it will to go from debt-free to FI (25x expenses).

If your goal is early retirement, research rollovers/early distributions from tax deferred accounts, or start a taxable account to give you the bridge funds from ER to traditional retirement age.