Hi Money Minder,
I’m 23 and just graduated college in December. I’ve got 32k in student loans and a hefty 8k in credit card debt. But hey, I do have a bit of a cushion with 5k in savings, and I’ll be getting another 5k for my relocation payment in 2 weeks. I’m planning to use that to knock out half of my credit card debt.
My rent plus utilities comes to about 1500, and I bring home around 4500 a month after taxes. If I jump into the 401k with the company match, I’ll be netting around 4150 a month.
Honestly, I don’t think it’s the right time to start investing, even just a little bit with the 401k. I really need to focus on paying off this debt first. Every extra penny is gonna make a big difference for me. I can think about joining the 401k program down the line, maybe in about a year. But for now, I’m all about getting rid of that debt.
Once that’s all squared away, I’ll have a solid emergency fund ready to go. Then I can start thinking about investing for real. I know I could use my savings to tackle that credit card debt right now, but I need to have that safety net in place.
Take care, Livin’ Debt-Free
Response from THE MONEY MINDER:
Hello There,
Congratulations on graduating college and landing a job! It sounds like you have a solid plan in place for tackling your student loans and credit card debt. It’s understandable that you want to prioritize paying off your debts first before focusing on investing. It’s a wise decision to use your relocation payment to pay off a portion of your credit card debt – reducing that burden will give you more financial flexibility in the future.
Having a chunk of emergency savings is crucial for peace of mind, so it’s great that you recognize the importance of building that up first. Once your high-interest debts are paid off and you have a comfortable emergency fund, you can shift your focus to investing for your future.
Regarding the 401k with the company match, it’s worth considering the long-term benefits of saving for retirement early. While it’s tempting to put all extra funds towards debt repayment, taking advantage of an employer match is essentially free money that can significantly boost your retirement savings in the long run. However, if you feel more comfortable waiting until next year to opt into the 401k, that is a reasonable decision as well.
Overall, your approach to prioritizing debt repayment and building up emergency savings is sound. Keep up the good work, and remember that financial stability is a journey. Feel free to reach out if you have any more questions or need further guidance. Best of luck on your financial journey!
Farewell from THE MONEY MINDER.
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