I'm in the group struggling to pay off debt before I up my monthly 401k investment. Too bad so sad.
But, the example I want to make is the converse of Bungleau's. I have one student loan at 1% interest, received for being an "appalaicha student." I pay this off as slowly as possible. Since 1% is usually less than the inflation rate, this loan actually shrinks every year in terms of real debt value.
I also have student loans at 6-7%. Those I pay off timely, but if I have a chance to pay extra I usually put it toward 10%-18% credit card debts instead. Again, the message is the same: hit the highest number debts first.
Now, MagiK figured 10% into his table. I want to point out that 10% is extremely aggressive and risky in today's market, what with the Fed T-bill rate at an all-time low. On the save side I would base my math on 7%, no more. The days of 10% mutual funds being everywhere are gone, at least for now. Some still exist, I assume Janus is likely still doing well. But, to eek out 10%, you need to be doing your own day-trading or simply have a lot of money to invest and/or a long time committment. The incentive is still there to invest, of course, I'm just saying today's market is a bit of a different reality.
Final message, also a result of the same theorem: Get your money out of a savings account. I don't even have a savings account these days. Less that 1.8% is worthless. I have a 1% sweep-style checking account and the rest goes in mutual funds and money markets. Except for the "emergency fund" you have in your savings, put your money in a smarter place. Plus, in the modern day, the "savings emergency fund" many of us remember our parents keeping for broken appliances, etc, is just as well taken care of by having an extra $5K or so available on any one of your credit cards in case of emergency.
[ 06-02-2003, 02:55 PM: Message edited by: Timber Loftis ]