For a large part of this year, I have been regularly adding money to my Prosper account. I’ve enjoyed lending money to other people and I think I’ve done fairly well making money. I stress the “think” because it can be difficult to quantify exactly. On average, I seem to be making around 7% there. I would be doing much better if I didn’t make some poor decisions early on taking on too much risk.
So why am I stopping my contributions? I looked at my 401k contributions for this year, and though I’ve stepped it up significantly over the last month, I’m still further behind than I’d like to be. I spent a large part of the year saving for the wedding, so I have a lot of catch-up. If I’m going to meet my goal of contributing the full amount for the year, I’m going to have to make some cuts.
Along with the 401k goal, I have is to finish paying off my HELOC. I set it up nearly two years ago to pay for the ring to ask my wife to marry me. I then did something a little unorthodox and used some of the funds to temporarily allow me to live while I maxed out my 401k plan back then. I wouldn’t recommend that course of action, but I should explain why I did it. At the time, I could borrow money from the HELOC at around 6% after tax deductions. I calculate that my 401k will make 9% over the long term. That’s around a 3% gain in my pocket. Lastly, I figured this would be tremendous motivation for me to live frugally. It was very much a forced savings plan.
Today that HELOC is a burden that I want to be free of. I’m no longer able to deduct the taxes which means that I pay more in interest than I used to. I’ve made some great strides in paying it off over the last couple of months, but it’s time to double the efforts.
I’d like to invest more in Prosper. It’s still new and exciting to me. However, sometimes you have to go with the boring mainstays such as investing in a retirement plan and playing down debt. I won’t eliminate loaning on Prosper completely, I’ll continue to reinvest the payments that borrowers make into new loans. Maybe by the start of next year, I can begin again without having to worry about saving money for a wedding or a wedding ring.