Thank you for your comments. I had a few questions though:
I would be more concerned about your student loans because they are life long debt. I would be trying to pay those down as much as possible; you never know when you might lose your job or your skill set is obsolete.
Even though I am on income based repayment and hence, it is not life long debt? I.e. under my current path whatever is there is discharged after 22 more years (17 once I switch to Pay as You Earn once it is available this summer)? In other words, I should still worry even though it is currently set to x% of my income in payments each month and whatever is left at the end of 17/22 years, whatever dollar value it is, just disappears? As far as my income dropping, my understanding is that under the plan if my income drops and I can show proof of it dropping, they will keep me on the plan and just take a lesser % (or 0% of my income each month). My biggest concern, unless I am missing something, is that in the long run it likely does cost longer to not pay off the debt ASAP even though it is on a steady path that currently allows me to save for retirement and other things and the rest disappears after x years.
As for you 35k in your ~1% account, people are right when they say you should be putting that money elsewhere. I would take out some money for the engagement ring, and transfer some money over to your low yield savings. I would use the rest to pay on your student loans. I sure you did all the amortization to figure out how much is going towards interest and principle, so I'm not going to do any of that.
I would put it into a low yield savings account even though my interest income from it (currently about $300 a year) would shrink significantly to maybe like $10 (the bank's interest rate for this account is pathetically low)? Is that for tax savings (though I don't see how because say 75% (assuming a 25% rate of $300 is still $225 which is better than $10) or do you have some other thought in mind?
I would stop using credit cards. Even though you pay them off every month, there really is no reason to keep them around.
Would you also mind explaining this one further? If I am not riding any balances, it makes no difference except that using the card would allow me to build up my credit (and things like frequently flyer miles) at minimal cost right? Or is there some other detriment to such usage that I am not seeing?
You're doing the right thing, and I think you know that. You want people to validate what you are doing; that is the reason for that question.
Thank you. Actually, often I am not sure I am; the problem I have (as it seems most people unfortunately have) is that I never actually took a financial management course and so am kind of learning this stuff as I go along.
I would pay off the student loan debt. Even though you are on an income plan, you never know when you could be fired or laid off. The debt is life long, because the debt is pretty much is not able to be discharged in bankruptcy court. You can thank your federal politicians for that wonderful law.
I should rephrase what I stated, I would transfer and close out the 5000K account instead. I would transfer that over to your account with 35K. I would then take some of that money to buy the ring, and then use the rest to pay down on your debt.
My point from the original statement was that either way you would end up with a low amount in your account anyways. Why? Because you would have used most of the money to pay on your debts. That 1% is not that much a of difference on a low amount. On top of that, inflation is eroding away your earnings from that account.
For the credit card statement, my point was basically that you might not have a job in the future because of a lay off or firing. Even though you are financial responsible to pay them off every month, I would just start using your own money. Just in case something crazy happens. You can call me paranoid that is fine. My reason is that I have seen people who looked like they had the world wrapped around their fingers with decent jobs and decent pay, and then something happens which leads to financial ruin. They paid their stuff on time and were financially responsible when they were getting paid well, but as soon as their job disappeared their life became hell. Anecdotal story, yes I know, but it gave me some perspective.
These are the reasons I give for paying off your loan. Economically you have what they call opportunity cost, the money that is going towards your loans could be going to an IRA or other investment. The interest or dividend you might have received is the opportunity cost of paying your loans each month. Once your loans are paid off, you can use that money to invest or entertain yourself.
Let me know if I left anything out.