Hi Money Minder,
Yo, I’m 35 and finally graduated college at 28. Covid messed me up with all the layoffs, but I’ve managed to save up some cash along the way. Here’s where I’m at and I could really use your advice.
I know I’m not the youngest graduate, but I’m proud of how far I’ve come in the past six years since college. I started with nada!
- $18,000 in savings
- $10,500 in current 401(k)
- $12,000 in a rollover IRA
- $53,000 in Roth IRA
- $8,000 in HYSA
I’m bringing in around 85k per year now. I used to make 96k, but I took a pay cut for a more stable gig.
I’ve got about 50k in student loans, mostly at 3%. I’m stuck between using that 8k in HYSA to save up for a house or paying off the small portion of my loans at 4%.
Feeling like I’m lagging behind for my age, but hey, what you see on social media isn’t always the real deal.
So, should I knock out those low-interest loans or shove all my extra cash into the market where I could earn more over the next decade???
Catch you later,
Budding Investor
Response from THE MONEY MINDER:
Hello There,
Congratulations on your achievements since graduating college! It’s clear that you’ve made great strides in building your financial stability over the past six years. Despite facing challenges like Covid-related layoffs, your disciplined approach has resulted in significant savings and investments. Your current financial snapshot is impressive, especially considering where you started from.
Given your current financial standing, it’s understandable to feel torn between paying off the small amount of student loans you have at a 4% interest rate or continuing to invest in the market for long-term growth. One practical approach could be to evaluate the opportunity cost of each option. While the 4% interest on your student loans is relatively low, paying them off would provide you with a guaranteed return on investment by reducing your debt burden and freeing up additional cash flow in the future. On the other hand, investing more in the market could potentially yield higher returns over the long run, but it comes with inherent risks.
One suggestion could be to prioritize paying off the student loans with a 4% interest rate using the $8,000 you have in your High-Yield Savings Account. By eliminating this debt, you can ensure a solid foundation for your financial future and reduce any lingering interest costs. Once you’ve cleared this debt, you can shift your focus towards increasing your investments in the market, taking advantage of your stable income and growth potential in the coming years.
It’s essential to strike a balance between debt repayment and investment to optimize your financial position. Your cautious approach of seeking advice is commendable, and it shows that you value making informed decisions about your money matters. Remember that everyone’s financial journey is unique, and it’s never too late to make strategic choices that align with your goals.
Best of luck with your financial decisions, and remember that taking small steps towards your financial goals can lead to significant progress over time.
Farewell from THE MONEY MINDER.
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