Re-invest or pay off debt with severance?

[Oh Haha]

As posted in my other thread, I now know I will be getting a severance package plus my pension and 401k money.


In trying to plan for the future, what do you money guys think would be a better bet? Pay down/off a credit card or take a percentage of what I get and re-invest it?

I am not big on the ins/outs of investing so I am hoping you guys could offer some advice.

I would be open to sharing details in a PM if it would help.

Thanks for all of the support you have shown me as well as all of our Pelican brethren.

[masraum]

How old are you? I'm thinking that you're not that old <40 or 45? If you've got debt, I'd get rid of that. If you're paying X % interest on debt, you probably won't make that on investments. Pay the debt off and then worry about investing. Do you have any savings, like 2-3 months of living expenses worth of savings. Before you invest, I'd want 0 debt (except maybe a house) and enough money in savings to live for 3-6 months.

[Oh Haha]

What, did my wife tell you to say that?

That is exactly what she wants to do. BTW-I'm 42 so I plan to have to work for at least 20 more years before thinking about retirement.



I figure that if we use the money wisely we can set our selves up better and correct some mistakes we made back in time.

If we were to do the above, we would only have our mortgage and monthly bills.

I will be working so I thought we would put a higher percentage in that 401k given that we will have less debt and it wouldn't be a burden to do so.

[Steve Viegas]

Masraum is right. In today's market, it would be difficult to match a guaranteed return of what ever money you are paying on your debt.

[ChkbookMechanic]

I agree with getting rid of credit card debt first before thinking about investing.

[pwd72s]

Originally Posted by masraum

How old are you? I'm thinking that you're not that old <40 or 45? If you've got debt, I'd get rid of that. If you're paying X % interest on debt, you probably won't make that on investments. Pay the debt off and then worry about investing. Do you have any savings, like 2-3 months of living expenses worth of savings. Before you invest, I'd want 0 debt (except maybe a house) and enough money in savings to live for 3-6 months.

A HUGE +1! Credit card companies charge usurious rates. Your odds of making a gain on $$$ you are paying double digit interest on are slim to none, and slim is currently out of town.

[DanielDudley]

Pay it off, and put the card away.

The main reason people get screwed by credit card debt, is that the payments are structured to screw you. You have to pay off your mortgage. You have to pay your electric bill. Your minimum payment makes you an indentured servant to your credit card. They want you to owe them money. You are an endless source of revenue if you pay only the interest.

[KFC911]

No debt = no stress (regardless of what comes at you) from my perspective. Paying off CC debt (something I've never had) is a no-brainer, then tackle other obligations (including mortgage) imo. Some like to attempt to play the "but I can get a higher rate of return" etc. game, but that's a sucker's bet for most, and if the merry-go-round suddenly stops...then stress. Don't take possession of that 401K, leave it in place or roll it over to some type of IRA or the tax hit/penalties will kill you (if the past year hasn't already ). I'm 48, recently unemployed, and I opted to go ahead and take my monthly pension (8.5% guaranteed return can't be beat) after thinking it through carefully. Most importantly, learn to live within your means if you aren't already (and CC debt tells me you haven't). Good luck!

[Oh Haha]

Thanks guys!

I have been letting my wife take care of these type things so I don't micro-manage.


If we pay off the one large credit card(balance transfers, emergency purchases over the years) we will still have 5 figures to invest as well as enough in the savings for probably 4 months.

Again, I am going to be working so we may actually come out ahead of the game in the long run.

EDIT-We only have the one card.

[masraum]

Sweet, sounds like you're set. Pay off the card, you've got savings, now's a decent time to invest for the long term.

Marketwatch.com had an interesting article today. Someone did a study and determined that when Presidents have very high approval ratings that the stock market makes it's weakest gains (not including when it has losses). The gains seem to go up as the presidential approval goes down to a point.

Pres Approval vs Stock Market

[Don Plumley]

Pay off the debt. Unless you are a financial wizard and can reliably make more on investing than your debt rate, you must pay off your debt. Stop, don't pass go.

[Dueller]

Pay off the CC then attack the mortgage with a vengeance applying what you were paying towards the CC. Owning your house outright is the ultimate KMA fund

[Dantilla]

Paying off debt is a GUARENTEED return. Everything else has an element of risk.

[onewhippedpuppy]

Investments don't come due when you neglect them. Debt does. It's a no-brainer, especially in this market.

[turbo6bar]

Pay off credit cards. Then, get 6 months reserve banked (due to the fact you have a new employer) and split the remainder into investment(s) of choice & equity paydown on the mortgage.

Keep in mind this strategy works against our consumer-based economy, so you could be labeled deadbeat and un-American.

Ultimately, as mentioned before, it is about risk vs. reward and adjusting to match YOUR risk tolerance.

If you do nothing else, please pay off that credit card.
good luck, jurgen

[911Rob]

Read: "Rich Dad Poor Dad"

Being debt free is good, especially if you have CC debt, etc.

I personally stay clear of the markets, you won't have any control and there is no rhyme or reason?
I have RE investments that pay fixed returns of 8% plus profit sharing in the development.
I have RE investments that have paid between 500% to 800% returns over the 5 to 8 years; that's avg of 100% return per year - double your money!
I also have RE loans that pay over 30%; short term.

There's great money in RE, make it a hobby, you won't regret it.
Good Luck

[Dantilla]

So do we see a trend yet?

[911Rob]

Originally Posted by Dantilla

So do we see a trend yet?

yeah, it ALWAYS amazes me! It's just too easy

REAL ESTATE
If you're out there, especially if you're young; learn everything you can about RE!
YOU won't regret it.

[azasadny]

Wayne,
I'm so sorry to hear the news. I would take the $ and pay off all interest-bearing debt and put the rest in the bank to use until you find another job. Just my .02 worth and I may be doing the same thing soon...

[Oh Haha]

Thanks Art.

I have accepted the offer from the other company although it will be at a much lower pay. The benefits are almost the same as what we have now and ,at this time, that is more important.

The President of the company has told me that they have big plans for me due to my management experience. If I can hang in there and get to know their operation, the potential to be in a much better position is great.

I don't bank on words but it is nice to hear that moving up the ranks is possible.


My wife and I have agreed, based on the Pelican braintrust's comments, to whatever it takes to get the CC paid off.
When we do this, we will be just fine, even at the lower pay rate.

We won't be rich but we aren;t now, so it doesn't really matter.


I have this bug now that won't seem to get out of m head:

Opening a coffeehouse/cafe. ( Like 911ROB said, be your own boss.)


I know that an endeavor like this would be difficult but it could work, given the right circumstances. My wife was in HR and given my experience in the food service industry, I really think we could make it work. We agreed that , for now, we will just get through the next year or so.


I was just about to send an email to a Pelican about possibly buying the 911 from me when I got the call from the new company yesterday. They wanted to meet and offer me a position. Selling the 911 would not be easy for me BUT I had resigned myself to thae fact that I may have to and do not want to be forced into the sale because everything has fallen apart. I know it's just a car but it's MY car and it would be hard to let it go.