Refocusing Financial Goals

• Refinance current mortgage. Parrish suggests that Hoosier seek a lower interest rate through the Home Affordable Refinance Program (HARP). “It is essential that he refinances and reap the savings,” says Parrish. Although Hoosier’s home is underwater, he could still qualify for the HARP program, which would adjust his rate to the market rate of around 4%, versus the 6.25% he pays now. If Hoosier sees his current home as a potential investment property in the long term, he should take advantage of this interest rate reduction now so that he can increase his rental profit for the future.

• Take your time paying student loans. “I would suggest not rushing to pay off this debt. Tax-deductible debt with low interest rates can be considered ‘good debt,’” says Parrish. “Hoosier can allocate the money not used to pay off this debt [quicker] toward his retirement savings.”  Hoosier is currently paying $216 a month on his federal student loans. Parrish suggests that he aim to pay off the loan over the next 10 years, increasing his monthly payments as his income allows.

• Pay off other debts. Hoosier should use the $2,000 black enterprise winnings toward his car loan or credit cards, and use half of his current savings to pay off the total balances on those debts. “If his credit card debt of $2,000 is an ongoing balance that he carries, then he should pay it off out of his savings account,” advises Parrish. “And, assuming the interest rate he pays on his car loan is higher than what he earns on his savings account, he should also pay it off out of his savings account.” Hoosier currently pays $350 per month on his car note.  “He can plow that to the home he’s looking to buy in a few years,” advocates Parrish.

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