Hi Money Minder,
I just graduated and have around $20k in student loan debt, but I landed a job that pays $72k a year starting in July 2024. Here’s the breakdown:
- Net Pay after 401k contribution (monthly): $4100
- Student debt: $20k (around $280 minimum monthly payment)
- Credit card (1) balance: $6.5k at 0% APR (for 7 more months)
- Credit card (2) balance: $1.7k at a hefty 25-29% APR
I’m putting 7% into my 401k (company match) and saving $200 monthly for emergencies. My fixed expenses, including rent, insurance, and groceries, come to $1400. I estimate another $500 on random expenses, with the rest going towards my credit card debt. I’m focusing on paying off credit card 2 first, then will tackle credit card 1 before its promo period ends. I want to be debt-free ASAP, including my student loans, but I also have plans like moving out, getting married, etc. Am I on the right track here, or is there a better way you’d suggest I handle this?
Thanks for your help!
Best, Retired and Happy
Response from THE MONEY MINDER:
Hello There,
Congratulations on your graduation and landing a job with a promising salary! It sounds like you’ve put a lot of thought into your financial situation, and you’re taking proactive steps to tackle your debt. Your plan to aggressively pay off your credit card balances, starting with the higher APR card, is a smart move. By prioritizing high-interest debt first, you’ll save money in the long run.
Considering your fixed expenses and monthly contributions to your 401k and emergency fund, it seems like you’ve budgeted wisely. However, since you’re aiming to be debt-free as soon as possible, you might want to evaluate your miscellaneous expenses and see if there are areas where you can cut back. Every additional dollar you put towards debt repayment will help you reach your goal faster.
As for your future plans of moving out and getting married, it’s essential to factor those into your financial planning. Consider creating a timeline for these milestones and adjust your debt repayment strategy accordingly. It may be beneficial to set aside a portion of your monthly savings towards these future goals while still focusing on debt repayment.
In summary, your approach to tackling debt is efficient, but there’s always room for improvement. Keep a close eye on your budget, continue aggressively paying down your debts, and prioritize your financial goals. With determination and discipline, you’ll be on the path to debt-free living sooner than you think.
Best of luck on your financial journey!
Farewell from THE MONEY MINDER.
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