So, this current year, I've been making an extra $200 contribution with each bi-weekly paycheck so to get caught up on HSA contributions for 2015. With my current payroll deductions to my HSA. I'm on track to hit the IRS contribution limit for 2015 and 2016 both Which leaves me with a dilemma -- how best to allocate this now free $400/mo?
Some background. I presently have 3 debts on my books. 1 credit card with $2000 on it at 0% interest until Jan of 2017, 1 credit card with 3500 on it at 0% until June of 2017. and $44,000 in federal student loans at 6.75%. I am presently paying $250/mo on the credit cards in an effort to get them paid off quickly. I know I could easily lower payments and stretch those balances for all of 2016, but I want my debt *gone* and my cashflow back.
I also have two tax-advantaged accounts at present. A 401(k) through work with lackluster fund options and professional management from Stadion with expense ratios at least 1% if not higher (Vanguard has spoiled me). I presently contribute $3750 to this a year. There is no employee match. I also have a tIRA through Vanguard that I stuffed 401(k)s from former employers into. I presently contribute to that the $40/mo that was shaved from the budget when I cancelled the gym membership and bought a bike instead. Pathetically lackluster, I know, but it ain't nothin' at least.
Here are the scenarios I've considered.
Scenario 1a: Max 401(k) contribution to the IRS limit, then debt snowball
I've run the numbers through a paycheck calcualtor, and this should lower my take-home pay by about $400. Little else changes from a day-to-day cashflow perspective. money remains tight due to those damn credit cards, but I at least max out the 401(k) for 2016. Credit card 1 gets paid off in August. Allocating that $250 to credit card 2 gets it paid off in November.
Scenario 1b: As above, but prioritize the tIRA.
When Credit Card 1 is paid off in August, allocate that $250 towards my tIRA, stuffing an extra $1000 before year end. CC2 is paid off Mar of 2017, before the 0% interest expires.
Scenario 2: Max tIRA, snowball the rest.
Set my tIRA contributions at the beginning of the year (a little over $200 bi-weekly) to max out the $5500 IRS limit. The remaining free $200 gets added to CC1's payment for a total of $450 a month. CC1 is paid off in May. Fold that $450 into CC2's payment, bringing it to $700. CC2 is paid off in August.
Scenario 3: Maximum snowball. Die, debt! Die!
Allocate the $400 to CC1 to bring it's payment to $650. It is paid off in March. Allocate that $650 to CC2 to bring its payment to $900. CC2 is paid off in June. Don't think just because you're huge that means you're safe, Student Loans...
Obviously, Scenario 1, in both variants leaves me with the most net worth at the end of the year, but will leave me with the tightest cashflow, and those damn credit cards hanging over my head as a source of stress. Scenario 3 leaves me with the least net worth at the end of the year, gets rid of the credit cards the fastest and knocks out a good chunk of the student loans. This also leaves me with the most flexible cash flow should unexpected events occur. Scenario 2 strikes me as a good compromise between the two. Delaying the payoff of the credit cards by only 2 months gets me a full tIRA, and still plenty of flexibility in cashflow to meet unexpected events.
I'm feeling inclined to go with Scenario 2, but was wondering what you guys would recommend.