‘After reaching retirement "goals" this year, please help me with suggestions on allocating my income the rest of the year.’: I have student loans and a down payment goal. How can I prioritize and manage my finances effectively?

Hey Money Minder,

So, I’m 24 and thinking about buying a house. Should I focus on paying off my loans first or start investing in something like VOO?

Here’s my financial breakdown:

Monthly take-home pay after deductions: $4,208

Rent and utilities cost me around $500

I contribute 10% to my 401k with a 6% match. Can’t put more into my Roth IRA this year.

My HSA currently stands at $3,000 and I plan to max it out by the end of the year.

I have student loans totaling $24,000 (around $8,000 at 4-5% interest, rest at 2.2-3.3%)

My emergency fund in a CMA is invested in FDLXX, with a return of about 4.9% (I live in CA) and it’s sitting at $21,000

Farewell from the Mindful Spender

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the step towards financial planning at such a young age! It’s impressive that you are already thinking about purchasing a house and considering different investment options like VOO. Given your current financial situation, I would recommend adopting a balanced approach to address your student loans and investment goals.

Firstly, I would suggest prioritizing paying off your student loans, especially those with higher interest rates of 4-5%. By allocating some of your monthly income towards aggressively paying down these loans, you can save significantly on interest payments in the long run. However, it’s important to continue making regular payments on all your loans to avoid default.

At the same time, you could consider investing a portion of your remaining income into a taxable account and diversifying your portfolio with a low-cost index fund like VOO. This strategy will allow you to benefit from potential market returns while also reducing your student loan burden gradually. Given your solid emergency fund and retirement contributions, adding a taxable investment account can be a wise decision to build wealth for the future.

Remember to continue maximizing your HSA contributions and take advantage of your employer’s 401k match to enhance your retirement savings. Since you mentioned being unable to contribute more to your Roth IRA this year, focusing on other investment avenues like VOO can provide additional growth opportunities.

Overall, finding a balance between debt repayment and investing is key to achieving your financial goals. Keep a close eye on your budget, track your expenses, and make adjustments as needed to stay on track. All the best from THE MONEY MINDER as you navigate this financial journey!