Paying off debt or Get straight into Investing

[Cameron Foster]

I am 20 years old and bought a new car last year not realizing at the time that it wasn’t the best idea because of the debt it has put me in. I am currently able to pay off the total balance but am having a hard time deciding whether I should pay the car off or invest the money into real estate instead and keep making payments. Any advice would be appreciated.

[Mark S.]

Looks like your transportation costs are almost 26% of your monthly income - and that’s JUST payment and insurance.  That doesn’t include gas, maintenance, etc.  This likely puts you closer to 30%-35%+.

To be blunt, it sounds like this car is a cash flow killer for you.  I would strongly consider a different vehicle; maybe not a $2K beater as suggested, but something reliable, with lower insurance, and minimal, or in your case based upon the 11% interest rate, NO payment.  

11% interest rate on a car loan says your credit profile isn’t where it needs to be.  

I would read a few books and realize the impact of these early financial decisions.  Set for Life by @Scott Trench is excellent, as mentioned.  Your Money or Your Life by Vicki Robin is also a good one.  Right now, in my opinion, you need to focus on financial education, eliminating that auto debt, building your credit profile, etc.  Once you have all this in place, those reserves will serve you well but I wouldn’t be in a rush to invest cash while you’re paying 11% interest on a car loan.  Not trying to be harsh.  Hopefully this is helpful for you.