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Old 04-20-2016, 05:55 PM   #21
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Imagine this scenario: It is September 2007 and you are exactly where you are today. You invest $60,000 in the stock market (say SPY), which is higher than it has ever been. The market starts to slide. Less than six months later, Bear Stearns fails and the market really starts to crater. Panic selling sets in that fall of 2008. By March 2009, your investment is down to $25,900. All around you, people are losing their jobs, their investments and their homes. The taxpayers demand relief and your local school budget takes a substantial hit. As some of the most junior teachers, you and spouse are RIF'd. You now have no cash flow, a three month emergency fund and whatever you can salvage of your SPY investment. AND you still owe almost $60k on your student loan -- which cannot be discharged in bankruptcy. Now what do you do?
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Old 04-20-2016, 09:46 PM   #22
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Imagine this scenario: . . . As some of the most junior teachers, you and spouse are RIF'd. You now have no cash flow, a three month emergency fund and whatever you can salvage of your SPY investment. AND you still owe almost $60k on your student loan -- which cannot be discharged in bankruptcy. Now what do you do?
Consideration of a scenario like that would convince me >not< to use the majority of the money to pay off the low-interest student loan. The cash-flow calamity can come from many directions, some are more likely than another widespread financial downturn--just a regular job loss, birth of child (more expenses, less pay, and sometimes some unanticipated medical bills), an illness, etc. Having liquidity to keep the bills paid could be a lot better than losing liquidity by paying off that student loan. It could be darn difficult and expensive during a personal or widespread financial setback to borrow more money--so I'd want to avoid the risk of needing to do that. If they have the money in CDs, low-risk investments, etc they can always pay off the loan, but that's a one-way door. In their present situation, I'd choose to retain maximum flexibility. In a few years when they have more in savings and more seniority at work, then I might make a different choice.
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Old 04-21-2016, 05:45 AM   #23
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Good points all, SamClem. As in everything, the future is a mystery. But I think it helps to contemplate the downside as well as the upside of any investment.
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Old 04-21-2016, 02:14 PM   #24
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Imagine this scenario: The market starts to slide. Less than six months later, Bear Stearns fails and the market really starts to crater. Panic selling sets in that fall of 2008.
I was an employee of Bear Stearns....That Friday before the fall on Sunday - all BIG shots in firm told us not to worry and instigated us to buy Bear Stocks as it was trading at $30(was around $100 few months prior to this). Me and bunch of other idiots followed and I bought 1000 shares at $30 two minutes before the close. That Sunday it was sold to JPM for two bucks....A loss of 28K(93.3%) in two minutes--yikes. And following Monday, I had lost my job also....still makes me sick when I think about that.
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Old 04-21-2016, 02:21 PM   #25
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Everyone is different, but I find being debt-free so liberating, and it makes sleeping at night easier. As teachers, you can have reasonable expectation of job security and consistent salary increases, but nothing huge. At least, that's been the experience of my DW.
Wouldn't life be easier without that debt load, freeing up the cash flow?
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Old 04-21-2016, 03:10 PM   #26
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Invest the first $11K in Roth IRAs his/hers this year. Use the last $49k to pay down as much debt as you can, then take the $500/month from the cars and put it towards the student loan to kill that off. Then have the $850 to invest, etc.

Every year you don't invest in your tax-advantaged accounts is a lost opportunity.

Now may not be the best time to buy real estate. Do some research in your market, but some areas have rebounded nicely from the dip in 2008-9 which isn't a good thing for buyers.
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