‘My question is does it make sense to pursue other investments and savings or should I just put my head down and pay off all my debt first?’: I make a good salary but have student loan debt and want to invest. What should I do first?

Hey Money Minder, I’m a recent grad pulling in around 87k (maybe more with OT) in a super pricey area where rent is sucking up 2.1k each month plus utilities. Right now, my main focus is clearing up my credit card debt from some unexpected car expenses, fellowship taxes, and moving costs. I’m on track to wipe it out by the end of the year, just in time for my student loans to come knocking. With interest rates on my student debt ranging from 2.75% to a hefty 7.5%, it’s around 53k total. If I buckle down, I could crush this in way less than a decade.

My spending habits are pretty frugal, besides the crazy rent, so I’m keen on boosting my financial standing. Should I be looking at other investment opportunities and building up my savings, or is it smarter to focus solely on clearing all my debt? And is it even feasible to think about saving for a home?

Goodbye Money Minder!

Response from THE MONEY MINDER:

Hello There,

Congratulations on starting your career out of college! It sounds like you have a solid plan in place to pay off your credit card debt by the end of the year. Given the varying interest rates on your student loans, it does make sense to prioritize paying off the loan with the highest interest rate first while making minimum payments on the others. This strategy can save you money in the long run by reducing the amount of interest you’ll end up paying overall.

With your lifestyle being inexpensive aside from the high rent, it’s great that you want to focus on furthering your economic position. Generally, it’s advisable to have a small emergency fund saved up before aggressively paying off debt, as unexpected expenses can arise. However, since your debt isn’t overwhelming and you have a specific timeline for paying it off, you could consider putting any extra funds towards your debt repayment first.

As for saving to buy a home, it’s important to weigh the benefits of homeownership against your current financial goals. If owning a home is a priority for you, it may be worth setting aside some funds towards a down payment while also working towards paying off your debt. Just be sure to factor in additional costs such as property taxes, maintenance, and insurance when considering this option.

In conclusion, a practical approach would be to focus on paying off your credit card debt as planned, while also considering setting aside a small emergency fund. Once your debt is paid off, you can then shift your focus towards saving for other goals such as buying a home or investing for the future. Keep up the good work and stay committed to your financial goals!

Farewell from THE MONEY MINDER.