| 21 y/o with 20k debt..diagnosis of whats good or bad |
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Sdubz
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| 21 y/o with 20k debt..diagnosis of whats good or bad |
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currently 21 y/o with 20k debt worth of student loans
one is 18k at 6.5% interest and 2k at 5% interest
I currently make $3k/month and net about $1900 after 401k (15% with no match), taxes, etc
i put $200 to the 18k debt and $100 to the 2k debt each month and have no other expenses
i save at least 1k a month and currently have 6k in savings.
should i pay more or less on my student loans?
am i saving enough?
a general diagnosis of how im doing would be great and ways to be more efficient
i currently live at home with my parents and do not have a car payment.
goals in the future would be to move out, get a new car, invest..
looking to increase my salary within the year.
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Wed Jun 01, 2011 3:44 am |
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littleroc02us
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knock those school loans asap, you don't realize how nice it is to not have any debt and tons of cash. I use to hate making a budget back in the day when I had debt, but now I enjoy every two weeks because I'm watching my money work for me, some goes to Roth IRA's, some towards our baby fund, extra towards the mortgage and some towards the EF fund. When you aren't borrowing money you are constantly worrying about who you owe next.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Wed Jun 01, 2011 1:42 pm |
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serenamp
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yep take out those loans.
For one you don't know who you'll marry and what sort of financial shape she'll be in.
I can't imagine if I were currently paying student loans right now along with my husband.
While you have the help of your parents I'd knock out every bit of debt you carry, even though it doesn't seem like the interest rates are terribly high and that it's OK to carry some debt. You'll regret later on if you're carrying them when you'd previously had the money to pay them off and you blew money with nothing left to show for it.
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Wed Jun 01, 2011 4:35 pm |
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oldguy
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quote:
goals in the future would be to move out, get a new car, invest..
looking to increase my salary within the year.
Will you be staying on San Fran? I ask because it will be tough to get an apt, get a car, etc, on a $36,000 income. So your comment on salary increase is key and geographic location is key. A $1500/m apt, plus util, takes about $20,000/yr net, ie about $26,000 of your gross income (70% of the $36k). So you'll need a few roommates to make it work - and reliable roommates are hard to come by, they move out, their friends move in - ie, they cost money instead of saving money for you.
And hopefully, by 'new' car you mean 'newer', maybe a 4 or 5 yr old reliable car with only 60,000 or 70,000 miles that will serve you for another 100,000 miles?
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Wed Jun 01, 2011 4:37 pm |
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Sdubz
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Thanks for the insightful responses.
I do plan on getting a 'new' used car in a year or so and will be stayin in the Bay Area.
increasing my income is key and my main goal currently.
i do receive quarterly bonuses so on average earn about 48k a year (most likely will be around 52k)
How would you suggest budgeting my 3k a month check to cut down my loans?
Currently have 15% going into a 401k with no match and with health insurance etc I am left with 1900.
Would it be best to stop putting money into the 401k and put $1500 towards the loans each month and not put anything into savings?
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Thu Jun 02, 2011 1:02 am |
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oldguy
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quote:
How would you suggest budgeting my 3k a month check to cut down my loans?
Currently have 15% going into a 401k with no match and with health insurance etc I am left with 1900.
Your $5400/yr going into the 401k extends to $1,800,000 at age 55 if you use their 11%/yr investments. Some of the $12,000/yr that you are saving could be placed in a taxable fund at 11%, that would grow tax deferred and it is not tied to retirement, it is immediately available if needed. Later you will want to build another million or more in a taxable account, this will be a start.
I would be in no hurry to cut down the loans, why not keep them? Be careful not to derail your $1.8M Plan just to prepay a $20k low interest debt.
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Thu Jun 02, 2011 1:29 am |
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littleroc02us
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quote:
Originally posted by swpga88
Would it be best to stop putting money into the 401k and put $1500 towards the loans each month and not put anything into savings?
Great idea it will only take you 13 months to retire the 20k student loans, that's not that much time at all. When thats done you can invest as old guy stated in the previous post and by age 56 or 57 have 1.8 million going by his math. What's one year of paying off debt?
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Jun 02, 2011 2:14 pm |
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littleroc02us
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[quote="oldguy"] quote:
I would be in no hurry to cut down the loans, why not keep them? Be careful not to derail your $1.8M Plan just to prepay a $20k low interest debt.
Please explain to me how he would be derailing the 1.8 million plan by paying off the 20k loan using his $1500 a month towards school loan plan which could pay it off in just over a year and he would only be 23 at the most? If he did your suggestion starting at age 23 until he was 57 would he not still have around 1.8 million or more... Not sure why you used the word derailing???
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Jun 02, 2011 2:17 pm |
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oldguy
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Please explain to me how he would be derailing the 1.8 million plan by paying off the 20k loan using his $1500 a month towards school loan plan which could pay it off in just over a year and he would only be 23 at the most? If he did your suggestion starting at age 23 until he was 57 would he not still have around 1.8 million or more...
The $20,000 in 34 yrs amounts to about $700,000. That's the cost of skipping, or postponing, for 2 yrs. Each of us has a 30 or 35 yr window (hopefully) available for wealth building. And then it is necessary to transition to wealth preservation, ie at age 55 or 60 you must move into safety such as CDs and bonds, you no longer have the time or earning power to risk market volitility. The longer you delay your the wealth building, the higher the risk at the other end. Do you think that a 57 or 60 yr old should fully invest his $1.8M at that point? - I don't. Remember all of the 'boomer stories' in 2008? How the 60 yr olds cried because their 401ks became 201ks?
Risk analysis is the key to wealth - it requires the wisdom to take risks early, and avoid risks after you are rich.
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Thu Jun 02, 2011 3:48 pm |
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littleroc02us
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quote:
Originally posted by oldguy
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The $20,000 in 34 yrs amounts to about $700,000. That's the cost of skipping, or postponing, for 2 yrs. Each of us has a 30 or 35 yr window (hopefully) available for wealth building. And then it is necessary to transition to wealth preservation, ie at age 55 or 60 you must move into safety such as CDs and bonds, you no longer have the time or earning power to risk market volitility. The longer you delay your the wealth building, the higher the risk at the other end. Do you think that a 57 or 60 yr old should fully invest his $1.8M at that point? - I don't. Remember all of the 'boomer stories' in 2008? How the 60 yr olds cried because their 401ks became 201ks?
Risk analysis is the key to wealth - it requires the wisdom to take risks early, and avoid risks after you are rich.
You didn't answer my question, because what you said isn't true about paying off the 20k will derail you from getting 1.8 million from investing. You can pay off 20k in student loans and have 1.8 million if you invest from age 23 to 57 making 11% interest. I just wanted to make sure the readers know that it isn't true that if you pay off your debt that you cannot save up well over a million for retirment. It's just not true. As OldGuy stated in his posts that if the poster paid off his 20k in 13 months as I stated before, then he could invest from age 23 to 57 he would have 1.8 million in tax free money. IMO I'd rather be debt free and have minimal risk with Roth IRA's.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Thu Jun 02, 2011 7:27 pm |
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oldguy
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quote:
I just wanted to make sure the readers know that it isn't true that if you pay off your debt that you cannot save up well over a million for retirment. It's just not true.
You've missed the point. If you change the time period from 'now' to age 57 instead 'now' to 55, the $1,800,000 will be $2,300,000. Or, if you want to go out to 59, the fund is $2.8M, and so on. But each time you push the age farther out, you are greatly increasing the risk of losing wealth that you do not have time to recover.
Eg, I'm age 72 - if I put a couple million into an 11%/yr fund and then it fell 40%, I most likely cannot live long enough to recover - my kids & g-kids would lose their inheritances. So I keep my funds protected in income accounts (except for some inflation-offsetting funds).
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Thu Jun 02, 2011 8:11 pm |
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littleroc02us
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quote:
Originally posted by oldguy
quote:
I just wanted to make sure the readers know that it isn't true that if you pay off your debt that you cannot save up well over a million for retirment. It's just not true.
You've missed the point. If you change the time period from 'now' to age 57 instead 'now' to 55, the $1,800,000 will be $2,300,000. Or, if you want to go out to 59, the fund is $2.8M, and so on. But each time you push the age farther out, you are greatly increasing the risk of losing wealth that you do not have time to recover.
Eg, I'm age 72 - if I put a couple million into an 11%/yr fund and then it fell 40%, I most likely cannot live long enough to recover - my kids & g-kids would lose their inheritances. So I keep my funds protected in income accounts (except for some inflation-offsetting funds).
That's fine, but my original question that you are still bypassing is that you stated that one would derail a million dollar plan by paying off their debt. That isn't true and anyone with a compound interest calculator can see that. You do things your way where you leverage everything and have much higher risk and possibly higher rewards, whereas I do things my way debt free and I can still save well over a million dollars and have much lower risk. I prefer my method to wealth 10 out of 10 times. One thing you need to understand is that I follow a very biblical method of achieviing wealth and it's God's money not mine. Proverbs 22:7 states that "The borrower is slave to the lender". Or Luke 14:28
"Suppose one of you wants to build a tower. Will he not first sit down and estimate the cost to see if he has enough money to complete it?
These are just values that I feel comfortable with and they are proven to work. Both my wife and I are very frugal and we live well within our means and have a goal and plan in mind where we plan to have several million and no debt (paid for house included) by retirement by using low risk cash methods. It can be done and for all those who read this post know that you can be debt free and easily save millions for retirment making under 100k a year. Those say you cannot achieve this haven't done the math.
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Fri Jun 03, 2011 12:29 pm |
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ttammie98
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Yes, I would definitely get rid of the student loans as well. While you are living with your parents, take every opportunity available to save and then reduce your debt. You never know what will happen in the future once you decide to move out.
How To Stay Out Of Debt
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Mon Jun 06, 2011 3:58 am |
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Sdubz
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thanks for the advice..
i have a $500 I bond that i receiveds a gift in May '10
Would it be a good idea to use this towards paying my loans down now?
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Tue Jun 07, 2011 3:52 am |
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littleroc02us
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For sure, once you pay off your school loans you'll say to yourself, "why in the heck did I keep those stupid things around so long". It feels great to get them out of your life!
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
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Tue Jun 07, 2011 2:07 pm |
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