TODAY ON REASONED REFLECTIONS:

• Personal finance articles 💰;

• Happy Black Friday;

• Which debt should you tackle first;

• Quote of the Reflection.

Personal Finance Articles 💰

Time for a bit of R&R

• You can learn from Mr. Buffett’s updated will

  My Take - If you don’t want your assets to pass according to your State’s intestacy laws, then you need an estate plan. Warren Buffett knows a thing or two about investing, but you can also learn something from his updated will.

• Should you pay for your house in cash?

  My Take - I don’t think you can go wrong paying for the entire house upfront or putting that money in the S&P 500. The peace of mind that comes with not having a mortgage payment sounds pretty nice, though!

• How much can you withdraw in retirement?

  My Take - Who knows?! Everyone will have different retirement situations, so we all need to do what’s best for us. It is important for you to calculate how much you can withdraw in retirement, however.

• Hot take on homeownership!

  My Take - I agree—homeownership isn’t a good investment. It may be the lesser of two evils between owning a home versus renting, but all of the maintenance expenses, mortgage interest, and rising property taxes make owning a home quite a burden.

• 2025 tax changes

  My Take - Tax planning for 2025 starts now. You should know what changes were made to the federal tax brackets and standard deduction.

Happy Black Friday!

Happy Black Friday to all you financial gurus! I hope you all had a great Thanksgiving celebration yesterday. I ate too much (per usual) and watched a lot of football. With Black Friday upon us, remember to shop responsibly out there! There will be a lot of deals, but ask yourself whether you really need that item before you hit buy now.

Reflection No. 11: Which Debt to Tackle First

I - Issue: Should you pay off credit card debt with a 0% intro APR or a car loan with a 15% APR?

R - Rule: It is better to first focus on paying off debt with the highest interest rate. This strategy reduces the overall interest you will pay and puts you on a fast track to debt freedom.

A - Analysis: When deciding which debt to pay off first, you want to prioritize the debt with the highest interest rate—known as the “avalanche method.” In this case, the 15% APR on the car loan is much higher than the 0% intro APR on the credit card (obviously). While 0% APR sounds like a great deal, it’s temporary. If you don’t pay off the entire balance by the end of the introductory period, the remaining balance will start accruing interest, which could be pretty high, often 15-25%.

By paying off your car loan first, you reduce the amount of interest that compounds on your principal each month. Let’s put this into perspective. If you owe $10,000 on your car loan at 15%, you pay about $1,500 a year in interest alone. In contrast, as long as your credit card is under the 0% APR period, you’re not paying any interest on the balance, which gives you breathing room.

However, this assumes you are disciplined enough to pay off your credit card in full before the intro APR period ends. If not, you could get hit with a hefty interest charge. Let’s say your 0% APR expires in 12 months, and you still owe $5,000. If the new APR jumps to 18%, you’ll see an additional $900 in interest charges the following year.

Another key consideration is your cash flow. If your car loan payment is a significant monthly expense, paying it off might free up cash you can allocate toward paying off the credit card or other financial goals. Conversely, keeping the 0% APR card could help you buy more time to increase your income or cut other expenses.

If you can attack both debts, consider making minimum payments on your 0% credit card while aggressively paying down your car loan. When you’ve paid off the car loan, focus on eliminating the credit card balance before the 0% period expires. You can also consider using a balance transfer if you qualify for another 0% offer to extend the interest-free period on your credit card debt.

Overall, paying off the car loan first maximizes your savings on interest. But be cautious about the credit card—keep track of when the intro period ends and have a solid plan to pay it off.

C - Conclusion: Because of the high interest rate, paying off your car loan with the 15% APR should be a priority over the 0% intro APR credit card debt. However, make sure you have a plan to pay off the credit card before the 0% period ends to avoid costly interest charges.

Time to Reflect…

If you’re trying to decide between paying off a high-interest car loan and a 0% APR credit card balance, prioritize the car loan to minimize overall interest costs and expedite debt repayment. Keep the credit card’s 0% deadline in mind, and create a plan to pay it off before the intro period ends to avoid future interest charges. When you balance both debts thoughtfully, you can save money and get closer to financial freedom.

Quote of the Reflection

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