Well, I didn’t want to have to make this decision, and I know that all of you smart people will think I’m making a mistake, but I’ve decided for the time being to stop making pre-tax investments into the 401(k)-like thing that my company operates.
Over the last year I’ve directed $1,879.18 out of my paycheck into that IRA, and as of yesterday the account was worth $2,181.61, which is an increase of $302.43. That’s an overall return of just over 16%, which is well outperforming the Dow Jones and the S&P 500.
Unfortunately, I’ve still got this credit card debt hovering between $5,000 and $6,000, and the finance charges are easily outstripping any benefit from investing in the IRA. I feel like I’ve made a terrible mistake by taking the advice of the CPA I consulted, and that I could be feeling a lot better about my future right now had I not started investing.
This decision was made easier for me when I remembered that the main benefit of contributing to the IRA was that my employer was also contributing free money in my name, and that they stopped last year around the same time all of our salaries got a 10% reduction. What’s more, this particular investment comes with a front-loaded 5.75% transaction fee. When my employer was contributing, this fee was annoying but not enough of a deterrent. Now, if I felt like I should be contributing any pre-tax money, I could find a better option just about anywhere that didn’t charge me that much.
So, I’ve stopped. And now I can pay off my credit card at a rate of $1,000 per pay period instead of $900. Of course, I’m still using this card for daily purchases, so it won’t be paid off in three months, but I have managed to start making lunch instead of buying it every day. If it weren’t for the ever-present vet appointments, car maintenance ($518 for new tires), out-of-the-blue-surprise dermatologist bills ($178 for stuff I thought was already paid for a year ago, because we have the best health insurance in the world), and of course the dentist (nearly $800 so far), I’m sure that debt would seem a lot more manageable.
I’ll probably have to stop making dentist appointments, too.