Hi - new Mustachian here.
Quick backstory:
- 29 years old
- Failed in my first 1.5 years of business and amassed $30K of cc debt. (I know, I'm still kicking myself every single day for being a massive idiot.)
- Had a wake up call nine months ago. Did a ruthless 180 in my life. Stopped the bleeding, cut all expenses, even moved back home with my parents (I'm lucky to have that option and I deserve the embarrassment of living at home at 29 years old.)
- As of today, I've paid off $15,000+ in debt. Took on a six figure part time consulting job about four months ago. Aggressively trying to right my wrongs.
- The rest of my cc debt is spread across 0% balance transfers, which are buying me another year or so at 0% interest.
- Discovered FIRE / MMM a few weeks ago. Have been all in and learning as much as I can about living frugally, investing, taxes, etc. (Example recently transferred my old 401K ($51K) full of hidden fees to a Vanguard portfolio.) Thank you all for creating/participating in this forum.
- My business is beginning to pick up as well. It's possible I can double my income to $220K or more within the next 12 months. (Possible, but not certain, clearly.)
- I built an emergency account of $7500 sitting in a 2.05% high interest savings account. Not willing to go below $7500.
This morning I paid off the rest of my interest-bearing debt. Now I have $15K at 0% for the next 12 months or so. Trying to figure out the best way to work my money.
I'm itching to maximize my time in the market; specifically, contribute $5,500 to my new Vanguard IRA for 2018 (and ideally, for 2019 as well right in the beginning of the year)...but I'm debating whether it would be wise to do so.
The $15K is at 0% only until it isn't, and goes back up to ~20% APR. I know the "order of investing" dictates paying off high-interest debt first to lock in that guaranteed return. Right now my debt seems to be in a grey area. The return for the next 12 months is 0%...but if I screw up paying it all back, the remaining balance gets hit with a retroactive APR, and I'm back to piling on more debt. This would be the worst case scenario.
(I realize if that scenario happens, there's a big chance I can initiate another 0% balance transfer on another card at the cost of the balance transfer fee...but that's still risky in my eyes.)
So:
Option A:
1. Continue aggressively paying off my cc debt as much as possible.
2. Don't invest in the market through IRA. Lose out on time in the market.
3. Pay off my full balance in about 5-6 months.
4. Then, invest in the market as much as I can.
Option B:
1. Make minimum payments to cc debt.
2. Max out my IRA contribution of $5,500 for 2018.
3. Go back to paying off debt as quickly as I can.
(Increased probability of staying in debt.)
Option C:
1. Make minimum payments to cc debt.
2. Max out my IRA contribution of $5,500 for 2018.
3. Max out my IRA contribution for 2019 as soon as we get into the new year.
4. Go back to paying off debt as quickly as I can.
(Increased probability of staying in debt.)
Which would you do? What am I missing?
Appreciate your help.
