Clearing the Way...

Note: I realize this will come across as a selfish, another "me" posting. But, hey, this is my blog, and this is about me learning how to grow my money! Don't you hate it when people (especially those in the academic sphere) tell you your writing isn't supposed to be about yourself, and that you should be objective? There's usually no such thing as objectivism. (Not Ayn Rand's "Objectivism," of course, but an author's right to a well-written and researched, honest opinion). Be a bit selfish. It can't hurt your writing.

I'd like to step away from planning my big, great investment coup and discuss a point mentioned a few blogs ago: what to pay off first? The advice varies. Suze Orman says high-interest loans and home. Patrick Astre states that keeping the house for tax purposes (and setting up a "mortgage buster" with the help of annuities) is good, so go with the high-interest debt. This seems to be a 50/50 split. Most advisers agree on that debt that negatively affects a credit score: credit cards, car payments, etc. So here's my plan:

1. Car Note: I have just under $4,000 left on my Jetta. Interest is at 1.9%. I should probably pay it off (make me feel better), but since the rate is pretty low, it isn't sucking any of my wealth away. And anyhow, interest was paid up front. I'm now riding the principle payments, with only 11 to go.
2. Student Loans: these vary between mine at around 6% to my significant other's, much lower at 4%. This debt is more significant. Alone, I have about $13,000 out and growing. Getting that terminal degree is anything but cheap.
3. Mortgage: Fluctuates with a first and second between 5.3% on the first and 7% on the smaller second. We're riding an interest-only 5 front on a 30-year for 3 more years, which means that 5.3% will feel a lot bigger because we're not required to pay it at the moment. We expect to move between now and 2010, so hopefully the interest on the first will not kick in. Because of our age (early 30s), Orman suggests that we don't need to move to a shorter loan (15-year) until we find the "retire in" home (pt. 4, "Buying a Home," 2002).

To free up money to invest, paying off my student loans first makes sense. Orman suggests, however, that it's feeling trapped or financially stressed that makes people crazy. So, if you feel the pinch, pay off the mortgage. I like this option, but student loans seem, in the end, the more reasonable option. With the car paid off next spring, and a good dent in student loans made, I see no reason not to start investing in the market now, following Orman's "dollar cost averaging" (DCA) scenario. Then, next year, I'll have that $2,000 to really dabble with. I might not make as much with DCA in the short run, but it will be less risky until my feet are wet enough...

References Cited
Astre, P. (2005). This is not your parents' retirement: A revolutionary guide to investment for a revolutionary generation. N.P.: Entrepreneur Press.

Orman, S. (2002). The courage to be rich: Creating a life of material and spiritual abundance. New York: Riverhead Books.