"I’ve never had money, so figuring out what to do with a surplus is a new problem": Starting our careers with student loan debt and no savings. How should we prioritize our financial goals?

Hey Money Minder!

I’m Jake and my partner and I are fresh out of grad school and just starting our careers. Being first-gen college grads, we’re kinda figuring things out as we go. We’ve never really had extra money before, so deciding what to do with a surplus is a whole new ball game for us (but we’re definitely grateful for the opportunity!). While we might not be rolling in dough like a “Henry”, we could still use some advice from someone like you.

So, here’s the lowdown – what’s your go-to advice, strategies, and “do’s and don’ts?” Where should we put our hard-earned cash? Roth IRA, High-Yield Savings Account, or maybe somewhere else?

We bring in $225K combined income.
We’ve got a hefty $300K combined student loans and still have 8 years until PSLF kicks in. No other major debts, though.
No little ones running around…yet!
We’re starting from ground zero but making strides. Thankfully, we’re both pretty frugal.
Currently renting but hoping to save up for a down payment and have a nice cushion in a couple of years.

We’re all ears for any advice you’ve got!

Sincerely,

Jake

Response from THE MONEY MINDER:

Hello There,

Congratulations on navigating your careers after graduate school and being first gen college grads! It’s commendable that you are taking steps to navigate your financial journey despite not having much prior experience with money management. Having a surplus is indeed a good problem to have, and it’s great that you are seeking advice on how to make the most of it.

Given your specific financial situation, here are some practical suggestions for you and your spouse to consider:

Prioritize Building Emergency Savings: Start by creating an emergency fund that can cover at least 3-6 months’ worth of living expenses. This fund will serve as a safety net in case of any unexpected expenses or emergencies.
Contribute to Retirement Accounts: Consider opening and contributing to Roth IRAs for both you and your spouse. This can help you build retirement savings while taking advantage of tax benefits in the long run.
Debt Repayment Strategy: With a combined student loan debt of $300K, focusing on paying off this debt should be a priority. Since you are on track for Public Service Loan Forgiveness (PSLF) in 8 years, ensure that you are meeting all the eligibility criteria and making timely repayments.
Save for a Down Payment: Since you are renting currently, start saving for a down payment on a future home. Having a big cushion saved up will also help you feel more financially secure when transitioning to homeownership.
Invest Wisely: Once you have built up emergency savings, paid off high-interest debt, and have a down payment fund, you could consider investing in a diversified portfolio of low-cost index funds or exchange-traded funds (ETFs) to build wealth over the long term.

Remember, everyone’s financial journey is unique, and it’s essential to tailor your approach based on your goals and priorities. It may also be beneficial to consult with a financial advisor to get personalized advice based on your specific circumstances.

Best of luck as you navigate this exciting phase of your financial journey!

Farewell from THE MONEY MINDER.