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Financial plan for recent graduate
Posted on 6/19/15 at 12:11 pm
Posted on 6/19/15 at 12:11 pm
Just want to double check that I'm making the correct decision here.
I have ~22K at 6% in student loans from undergrad, which I finished a year ago. I've been paying since November, so I have about 9.5 years left on my current plan. My employer matches 5% 401K, so that's a no brainer. I am also contributing 10% of every paycheck to a stock heavy Roth IRA. Over 10 years, my money will be better served in the Roth IRA than paying off my student loans early, correct?
Any additional comments on financial strategy for someone my age are also appreciated.
I have ~22K at 6% in student loans from undergrad, which I finished a year ago. I've been paying since November, so I have about 9.5 years left on my current plan. My employer matches 5% 401K, so that's a no brainer. I am also contributing 10% of every paycheck to a stock heavy Roth IRA. Over 10 years, my money will be better served in the Roth IRA than paying off my student loans early, correct?
Any additional comments on financial strategy for someone my age are also appreciated.
4
Posted on 6/19/15 at 12:14 pm to DallasTiger45
6% is kinda steep. Id throw more at that if you could still manage to put a good chunk in the Roth
Posted on 6/19/15 at 12:19 pm to DallasTiger45
quote:
so I have about 9.5 years left on my current plan
Yea I would try to cut the 9.5 years at least in half. There is no reason it should take 10 years to pay down 22k in debt for a college graduate.
Posted on 6/19/15 at 12:23 pm to LSUTOM07
You can write off the 6% so make sure you throw that 300$/year or so at the loans when the tax man apologizes
Posted on 6/19/15 at 12:24 pm to LSUTOM07
quote:
Yea I would try to cut the 9.5 years at least in half. There is no reason it should take 10 years to pay down 22k in debt for a college graduate.
It's just the default plan, I left it alone to start so I could see how it affects my budget.
Posted on 6/19/15 at 12:25 pm to GenesChin
quote:
You can write off the 6% so make sure you throw that 300$/year or so at the loans when the tax man apologizes
Good call, I'll definitely be writing it off next year
Posted on 6/19/15 at 12:30 pm to DallasTiger45
quote:
I left it alone to start so I could see how it affects my budget.
I picked a target date I wanted to be debt free and budgeted around my monthly payment and 401k contributions (max company match). If you start with the 10yr plan monthly payment to build your budget, you will find a way to spend the money if it's there.
It's hard to give specific advice without knowing location, salary, etc.
Posted on 6/19/15 at 12:34 pm to LSUTOM07
quote:
I picked a target date I wanted to be debt free and budgeted around my monthly payment and 401k contributions (max company match). If you start with the 10yr plan monthly payment to build your budget, you will find a way to spend the money if it's there.
Makes sense. You're right about spending the money if it's there. I save a good amount but I also blow more money than I should. I'm now in the process of building a fairly detailed budget to alleviate some of that.
quote:
It's hard to give specific advice without knowing location, salary, etc.
Dallas, 50K, may be getting engaged within the next year
Posted on 6/19/15 at 12:56 pm to DallasTiger45
quote:
may be getting engaged within the next year
Just think it through....that's all I'm saying....just think it through.
Posted on 6/19/15 at 1:09 pm to DallasTiger45
quote:
may be getting engaged within the next year
If she doesn't know how to cook.. learn to cook. Eat at home as much as possible.
Posted on 6/19/15 at 1:12 pm to DallasTiger45
Consider refinancing with SoFi to lower that interest rate. I know many posters will tell you to pay off that 6% rate very quickly, but the one thing to consider with student loans is that you can but them in deference if something happens, like going back to school or unemployment. That kind of flexibility is vital at an early age. I'd establish a strong emergency fund before dumping excess into the student loans. All of this also depends on your current and realistic near future salary, amount of money your parents can afford to give you in a pinch (or have already given you), and a variety of other factors. The main thing to do, is avoid credit card debt.
Posted on 6/19/15 at 1:19 pm to LSUAfro
quote:
If she doesn't know how to cook.. learn to cook. Eat at home as much as possible.
quote:
Just think it through....that's all I'm saying....just think it through.
Haha I figured I would get responses like this...I understand the potential financial ramifications of marriage. Thankfully she also has a steady job making around what I make. She is also a fantastic cook
Posted on 6/19/15 at 1:26 pm to DallasTiger45
quote:haha. I kid. Congrats.
Haha I figured I would get responses like this...I understand the potential financial ramifications of marriage. Thankfully she also has a steady job making around what I make. She is also a fantastic cook
Sounds like you're on a fine track.
Posted on 6/19/15 at 1:27 pm to blackoutdore
quote:
Consider refinancing with SoFi to lower that interest rate. I know many posters will tell you to pay off that 6% rate very quickly, but the one thing to consider with student loans is that you can but them in deference if something happens, like going back to school or unemployment. That kind of flexibility is vital at an early age. I'd establish a strong emergency fund before dumping excess into the student loans. All of this also depends on your current and realistic near future salary, amount of money your parents can afford to give you in a pinch (or have already given you), and a variety of other factors. The main thing to do, is avoid credit card debt.
Good stuff. I have an emergency fund established already, so it seems that the consensus is to start attacking the loans pretty heavily...
Posted on 6/19/15 at 1:45 pm to DallasTiger45
quote:
She is also a fantastic cook
We're the same age. My SO is a great cook also and loves to do it. My ex loved to eat out.. probably spent at least $1,500 on just eating out over a 10 month period.. That is almost what I spend on groceries for myself over a 10 month period now. That is where my advice stemmed from.
This post was edited on 6/19/15 at 1:48 pm
Posted on 6/19/15 at 1:57 pm to DallasTiger45
quote:
Dallas, 50K, may be getting engaged within the next year
With similar situation in two years out of school debt (less than yours though), paid for good engagement ring, saving a lot for housing downpayment, saved for planned honeymoon and afford a new car (accident
) I eat out 1-2x/week with fiance, go on some vacations and fund my tailgate. Despite my "shoestring" budget, nobody would think that cause I did the following (car after 1 yr)
-Get YNAB app/program (YouneedABudget)
This is probably one of the best budget tools out there if you use it correctly and helps a new person who doesn't really know what their budget will look like be good
Get a cheaper phone plan
Having worked for a cell carrier in school, I realized that living in a major metro like Dallas, you have a ton of options. A carrier like TMobile made cost value assessment and built their service for major metro areas and not in the boonies. So a place like Dallas will have great service. I get unlimited 4GLTE with Tmobile for 50$+tax a month. Is no unlimited and an extra $40 worth waiting an extra 5 seconds to FAP?
Start saving every month for big one time expenses: Car/Renters insurance, car tires/repairs, birthday gifts etc
What will absolutely mess with your savings/budget is if you don't include infrequent /non monthly expenses. Once you get behind because of these, it affects all future months.
-Don't buy a Car
Almost everyone you graduate with who got a job will do it. In 5-10 years when you are financially stable, these will be the people who complain about money. Understand that driving an avg/crummy car when 22 with a fiance is expected and you will be glad when driving nice cars at 35 with no payments
-Only eat out/entertainment when you get a deal
It is absurd to "always eat at home" in your 20s. Just be smart and suggest places with specials/deals/coupons for friends. Big cities like Dallas have thriving Groupon/LivingSocial/Amazon Local deals for cool things. For example, my local newspaper does $25for$50 at local upscale restaurants which is where fiance+me go on dates
-Learn to cook at home for cheap
When you cook at home, look for easy cheap recipes that repurpose food. A ton of people throw away food, buy a million spices or foods with expensive ingredients. Ton of websites out there that will have you eating delicious food for $2.00 or less/meal
Cut the cord on cable
You can save about $30-35/month by cutting out TV and replacing with Roku. Not only are you likely to live a more active lifestyle building good habits, you will learn that you won't miss it in the slightest
Don't buy expensive furniture
You likely won't end up in the place you are living in out of college long term. Save that for when you are buying for your actual long term living situation
This post was edited on 6/19/15 at 1:59 pm
Posted on 6/19/15 at 2:09 pm to GenesChin
quote:
It is absurd to "always eat at home" in your 20s.
My advice to him originally, before he posted that he was engaged, was actually going to be just not to eat out by yourself. That is something that I, as a recent graduate with a long distance SO, follow pretty well. Adding in a fiance obviously changes that a little bit..
Posted on 6/19/15 at 2:34 pm to yellowhammer2098
I do have a slight hijack/question. I will, when I get done grad school in a year, need a new truck. Strongly considering a Tacoma for their reliability. Will it be better to get an older (~100k miles) for $15-18k or just bite the bullet and get a new one? They hold value extremely well.
Posted on 6/19/15 at 2:42 pm to yellowhammer2098
quote:
yellowhammer2098
I agree with you. I've noticed too though that you can guide your group/friends to a good deal restaurant too to help your cause even more.
For example, we go to lunch at Mellow Mushroom on Mondays since it $1 slice day. Wednesday is $5 Burger Day at a local bar that serves great burgers. It has become "tradition" and a very affordable "eating out" tradition at that
From my observation, most people would be happier with their income/budget if they had better cost control on budget categories, not increased their income.
Posted on 6/19/15 at 2:50 pm to jimbeam
quote:
I will, when I get done grad school in a year, need a new truck.
Here is the difficult question, why do you need a truck? I asked myself that when I bought a new vehicle. This is different for everyone since what you value/where you value allocating your money is different
Here's what I came up with
Reasons to get one
-I'm a guy. Guys drive trucks
-Utility of owning a truck
-Reliable in my experience
Reasons not to
-Trucks carry a significant premium
-Bad gas mileage
-Borrow friends/Rent for 19.99$ when I actually need one
-Ego is a way to spend money on things I don't need
-I can always buy a truck when I have real money if I need it as a 2nd vehicle and have it long term
Essentially what I realized was that my major goals right out of college wasn't to drive a truck, but to get myself on a solid financial footing and succeed in my career. I could always buy a truck when I am at that point, but buying a truck at that point in time held me back from getting there
****ETA: Buy a new Tacoma. The used market is so incredible hot right now, you really don't get a used vehicle discount buying a tacoma when you value the new Toyota Warranty + Lifespan + featuers
This post was edited on 6/19/15 at 2:53 pm
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