I’m in the throes of a financial existential crisis here, and I need advice. Seriously.
Basically, here’s my situation – remember how I cryptically mentioned that I needed to change my 2011 goals because “something” might be coming in my future? Well, if that “something” happens, it will be another year and a half before it comes down the pike. Which, in financial terms, means I don’t have to worry about it right now. So that puts me back at square one when it comes to what to do with my extra income this year.
The way I see it, I have 3 options; theoretically, I could divide my money between all three, but I hate doing that. I like to focus on one thing at a time. Also, in order to minimize my anxiety, I want to prioritize just ONE as my financial goal for the year. If I can exceed the goal I set, great. But I need to start taking the pressure off of myself, in many areas of my life, including my personal finances. I’ve listed some pros and cons for each option, put I really, REALLY want your input. So please let me know what you think!
Option #1 – Pay off my car
Pros – No more car payment! Yah!
Cons – My interest rate is so low that the extra money I’m throwing at it could be doing MUCH better if invested elsewhere.
Option #2 – Get 3 months of living expenses into my Freedom Fund
Pros – A true feeling of financial freedom. I look at my lack of liquid savings as a more crippling financial factor (when it comes to emotionally feeling caged in by my money situation) than being in debt.
Cons – Kind of a “blah” thing to do with my money. Plus, interest rates suck so BADLY that my money would work much harder for me if invested elsewhere.
Option #3 – Max out my Roth IRA
Pros – A true opportunity for building wealth. Since I’m only in my mid-twenties my money has time to really grow. Plus, it’s still pretty liquid – I can get my contributions any time I want.
Cons – Hmmmm. None that I can see, other than the opportunity cost of taking options 1 or 2.
So, if you were me: what would you do?
Note: With my extra income, I could completely accomplish any one of the above options but not more than one.