Author Topic: 0% interest credit card debt vs 401k  (Read 2561 times)


  • 5 O'Clock Shadow
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  • Posts: 2
0% interest credit card debt vs 401k
« on: June 11, 2017, 10:02:58 AM »
Hello MMM community!

I'm a recent addition to the family and have been pouring through articles and forum discussions to learn more and embrace this amazing lifestyle. You've all been so helpful already with all of your other posts so thank you for the wealth of knowledge.

I have a specific order of financial operations question and I'll try to be as succinct but detailed as possible.

Fluctuating  yearly income, but ~ 50k : 15-20k W2 & 30-35k 1099
~14,000 in CC debt all on 0% interest offers
I can move about 8,500 of that to a new card - 0% for 21 months w/ 5% transfer fee
FWIW I will also be getting married this year and filing joint taxes for the first time. Fiancée will make approx 30-35k this year almost exclusively w2.

By my calculations, that CC debt is costing me about 2.58% (based on the transfer fee) over the course of the 21months.

I'm contemplating opening an i401k to help cut down my taxable income.

Does it make sense to pay off whatever CC debt I can't put in the new card and then focus my money into the i401k, assuming the benefit of getting more little green employees working for me outweighs the cost of the debt? Or am I totally crazy and playing with fire (the bad kind of FIRE)? Is there a hybrid version of this that's preferable - wherein I split my money between paying down the CC but also investing?

Thanks in advance for any and all help!!!


  • Walrus Stache
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Re: 0% interest credit card debt vs 401k
« Reply #1 on: June 11, 2017, 02:56:28 PM »
While I tend to favor the "pay the minimum on a low interest home mortgage so there is more cash flow to invest" philosophy, bouncing from one CC to another just seems a bit much.  Might not be consistent, but so it goes.

For a look at a maybe-extreme-maybe-not saving rate for your situation, see the tables below.  Perhaps something to discuss before marriage...?

Salary/Wages for earner #1$1,500$18,000
Salary/Wages for earner #2$2,708$32,500
Traditional IRA$642Room to increase?$7,705
401(k) / 403(b) / TSP / etc.$3,000At maximum$36,000
Subtotal 1$566$6,795
Schedule C net profit$2,708$32,500
Federal Total Income (for IRS tax)$3,275$39,295
Federal tax$02017 rates, MFJ, stand. ded., 2 exempt.$0
State/City tax$0Guess, using 0.00% * (AGI - Exempt'n)$0
Soc. Sec. tax$261Assumes 2 earners paying$3,131
Medicare tax$61$732
Self-employment Tax$383$4,592
Total income taxes$705$8,455
Income before other expenses  $2,570$30,840
Monthly Average Expenses:
Total to invest$2,570$30,840
"Gross" income$6,917$83,000
Income taxes$705$8,455
After-tax income$6,212$74,545
After-tax investable$2,570$30,840

Filing Status21=S, 2=MFJ, 3=HOH
# Exemptions2
Adult #1Adult #2
# of earners2
Total Income$39,295
Std. Deduct.$12,700
Act. Deduct.$12,700
Deductible SE tax$2,296
1040 Tax$1,620
Saver's credit$2,000
Tax after n-r credit$0
Net Tax$0


  • 5 O'Clock Shadow
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  • Posts: 2
Re: 0% interest credit card debt vs 401k
« Reply #2 on: June 13, 2017, 10:32:57 PM »
Thanks for the thoughts, MDM!

That's a super helpful outline of a way to allocate our resources. I'm gonna sit down and work through where our money has been going over the past 6 months - 1 year to create a budget and see how close to this we can get.  I have been woefully bad about tracking our spending in the past (hence credit card debt), but I'm feeling inspired and there are so many helpful tools on this site to track and handle it all.

thanks again!


  • Walrus Stache
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  • Posts: 9552
Re: 0% interest credit card debt vs 401k
« Reply #3 on: June 13, 2017, 10:39:48 PM »
You're welcome.  You can download the case study spreadsheet and enter numbers yourself if that helps.