This episode dives into personal loans and how they can be helpful for managing cash flow and how sometimes debt is a lifeline for some folks who need a leg up.We cited information about debt, specifically student loans. Here’s where we got it:* Lending Tree personal loan statistics* Credit card trends before and after the pandemic (Government Accountability Office)* Bankrate personal loan rates* Bankrate credit card rates* Reuters reports credit card debt topping $1 trillion* Clever survey results: people using credit cards for necessities* New York Fed household debtConsider supporting us by upgrading to a paid subscription on itdoesntmakecents.com (so we can continue to keep doing this work)Or, for a one-off donation, buy us a refreshing beverage on Ko-fi.And make sure you check out our websites as well:* Sarah Li-Cain* Miranda Marquit Get full access to It Doesn't Make Cents at itdoesntmakecents.substack.com/subscribe

One of the biggest rules in personal finance is to buy a used car with cash. You hear stories about how your car loses value as soon as you drive it off the lot. That used car has already seen its biggest depreciation and borrowing just makes it all worse.But what if it makes sense to buy a new car with debt, as long as you acknowledge what you’re doing and you have other plans for your money?Consider supporting us by upgrading to a paid subscription here (so we can continue to keep doing this work)Miranda’s strategy for buying a carWe talk about how Miranda manages her vehicle purchases:* Buy a car with low-cost financing (60-month loan)* In 2001, 1.9% APR* In 2021, 2.49% APR* Keep the money she would have used to buy a depreciating asset in the stock market, where it earns more than what she’s paying on the debt* After 8 to 10 years, use the car as a trade-in for the “down payment” and finance the next car at a low rateIt’s important to note that this approach works best if you can get a good rate. However, in some cases, you need the car for work and might need to finance a used car at a higher rate just to get access to the transportation you need.Sarah has also used a loan to get a car. It was more convenient and easier than getting a cashier’s check from the bank. Her approach was to pay off the loan within a few months. But she maintained flexibility to get the car and keep the loan if the money ended up being needed for something else.Lifestyle factorsWe talk about lifestyle factors that might influence how you buy your cars. * If you like getting cars more frequently, leasing might not be a bad option. * If you expect to drive the car for a short period of time but want to sell it, buying it with cash can make sense.* Think about how you use your cars: work, travel, family, etc., and make a plan that fits with your lifestyle.* Carefully evaluate whether financing a car works (or is required) in your situation. Financial resourcesWe encourage people to check out the following resources before getting a vehicle:* CFPB page on auto loans: https://www.consumerfinance.gov/consumer-tools/auto-loans/* CFPB page on buying vs. leasing: https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/Big thank you to Ashley Barnett for sharing her story! Check out her LinkedIn profile if you’re looking for a top-notch content director or check out her Hit Publish course for writing better content.Consider supporting us by upgrading to a paid subscription here (so we can continue to keep doing this work)Or, for a one-off donation, buy us a refreshing beverage on Ko-fi.And make sure you check out our websites as well:* Sarah Li-Cain* Miranda Marquit Get full access to It Doesn't Make Cents at itdoesntmakecents.substack.com/subscribe

Paying off debt early is considered a “guaranteed return.” But what if you can get better returns elsewhere? Could you use the “extra” you’d put toward paying down your mortgage for other financial goals, like retirement, investing, saving for college, going on vacation, or reaching some other goal?While paying off your mortgage early is a noble goal, it’s not the only way. In this episode, we tackle some of the realities—including the reality that not everyone lives in an area where home prices appreciate dramatically over time.For stats and resources mentioned in this episode, head to itdoesntmakecents.comConsider supporting us by upgrading to a paid subscription on Substack (so we can continue to keep doing this work)Or, for a one off donation, buy us a refreshing beverage on Ko-fi. Get full access to It Doesn't Make Cents at itdoesntmakecents.substack.com/subscribe

There's a whole "order" you're supposed to be following when working toward financial freedom. In fact, some gurus -cough- Dave Ramsey -cough- will tell you that you need to pay off ALL your non-home debt before you start investing. But should you really tackle your lower-rate student loans or other debt before you let compounding returns work in your favor?We're not so sure. Let's take a look at investing while you have debt and how to decide what to tackle first—or even if you need to choose.There’s a lot of talk about how you should go about paying down debt and putting off investing for a minute. We look at:* https://www.cnbc.com/2018/10/03/suze-orman-pay-off-debt-asap-and-not-because-it-costs-you-money.html* https://www.bankrate.com/personal-finance/debt/good-debt-vs-bad-debt/* https://www.ramseysolutions.com/debt/pay-off-debt-before-retirementA quick and dirty look at Miranda’s situationOne of the big things we talk about in the show is the fact that Miranda just went ahead and invested instead of paying down her low-rate student loan debt. Here are some of the deets about the student loan payments:* $53,400 (undergraduate + graduate), consolidation in 2005 for payoff in 2030* $223.79 monthly payment* 1.9% interest rateUsing the Student Loan Planner payoff calculator, Miranda could have saved $3,941 by making an extra payment of $100 per month and being done in a little less than eight years. Instead, by putting that extra $100 per month in the S&P 500 via an index product and reinvesting the dividends, the result is a final value of $66,498.65, not accounting for capital gains taxes, by investing from December 2005 to December 2023. Even subtracting the $4,000 in savings in interest, that’s still coming out ahead by more than $62,000. Miranda still has some years to go before those loans are paid off, so the value is still there. (Calculator used is from DQYDJ.)If Miranda had started in December 2013, after paying off student loans early, the value of her portfolio with only that $100 extra payment, would have been $22,360. Miranda’s total interest cost will be $13,724 at the end of 2030. With a total overall value of nearly $53,000 after interest costs are subtracted. But only with gains through December 2023. This doesn’t account for gains through the end of December 2030. Let’s start with $53,000, assume only 7% annualized returns, and $100 a month. According to the Investor.gov calculator, the portfolio value would be close to $95,500.As it is, Miranda will be Coast FI before the student loans are paid off, and she has invested much more than that extra $100 a month over time. Consider running the numbers on your own, taking into account interest rates and potential returns before deciding to put ALL of your extra money into debt paydown before investing.Why you might want to invest, even with debtInvesting can help us look forward to the future. We reference the idea of “prospection” and how it can help your mental health. * https://greatergood.berkeley.edu/article/item/how_thinking_about_the_future_makes_life_more_meaningful* https://www.amazon.com/Tomorrowmind-Resilience-Creativity-Connection_Now-Uncertain/dp/1982159766We also reference a study that indicates 48% of credit card users have to use them for living expenses (https://listwithclever.com/research/average-american-credit-card-debt-2023/), so investing a little bit now can give you something to look forward to while slogging through daily life. Even if you’re just putting a bit of your paycheck into a 401(k).We reference wages, and how they aren’t keeping up with anything resembling a living wage.* MIT’s living wage calculator: $25.02 per hour, average in the U.S.* Statista: Average hourly wage for all U.S. workers is $11.05* DOL: Federal minimum wage is $7.25It’s practically impossible to prepare for the future without some type of investing, even if you have debt.How to decide between investing vs. paying off debt more aggressively* Consider potential annualized returns: Rule of thumb is about 9%, based on S&P 500 returns over the last 25 years (see: https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/the-strategy-and-corporate-finance-blog/markets-will-be-markets-an-analysis-of-long-term-returns-from-the-s-and-p-500)* Look at your APR: Debt below 6% might be worth slowly paying down while you invest. Maybe start with debt above 15% APR for aggressive paydown* Create an allocation: Maybe put 90%-95% of your available income toward debt reduction when tackling high-rate debt while still investing 5%-10%. Then, as you get rid of higher-rate debt, shift the allocation, so you’re putting more toward investing with lower-rate debt remaining.This episode’s financial resource: https://www.britannica.com/money/start-investing-student-loan-debtConsider supporting us by upgrading to a paid subscription here (so we can continue to keep doing this work)Or, for a one off donation, buy us a refreshing beverage on Ko-fi.And make sure you check out our websites as well:* Sarah Li-Cain* Miranda Marquit Get full access to It Doesn't Make Cents at itdoesntmakecents.substack.com/subscribe

Introducing It Doesn’t Make Cents, a podcast by Sarah Li Cain, AFC© and Miranda Marquit, MBA, launching January 16th.Are you REALLY doing money wrong? Good news: you aren’t doomed to a lifetime of financial failure because you aren’t saving to buy a house, buy a TV with a credit card, or have student loan debt. Get away from all the “supposed-tos” and stop beating yourself up over perceived mistakes. We’re here to debunk prescriptive money rules and inject a little nuance into your financial life. This season we’re talking about the common misconception that debt is ALWAYS bad in season one. You don’t have to pay that mortgage off early. Go ahead and finance that car. We’ll also tackle the controversial aspects of debt. How much social debt are you carrying around? Are you really immoral if you have your student loan debt forgiven? The best way to support It Doesn't Make Cents is to share our work. Get full access to It Doesn't Make Cents at itdoesntmakecents.substack.com/subscribe