I’m 23, making around 105k before taxes in NY (that’s about $5700/month take-home). Here’s what’s going on:
Debts:
– Student Loan 1: $7000 @ 5.05% Interest
– Student Loan 2: $6500 @ 3.75% Interest
– Car Loan: $32000 @ 6.99% Interest
Monthly Expenses/Costs: Less than $4000
– $500 for each Student loan
– $1000 for Car Payment
– $550 for Car Insurance (3 cars)
– $1000 for Gas/Shopping/Eating out/Gym
Savings/Investment:
– $20,000 in HYSA @4.5% APY
– $3,000 in Stocks
– $12,000+ in 401k @ 6% monthly
Current Situation: Living with Parents, no rent or major expenses. Started working and got the car a year ago.
Questions:
1- Should I aggressively pay off my loans or focus on investing some money while paying loans slowly? I can pay off my car in 2 years with $1500/month or in 3 years and put $500 in a HYSA or brokerage accounts monthly.
2- If I had $2000 monthly for the loans, how much should go to each to pay the least interest over time?
3- Reached my 20k emergency fund goal, what next? Max 401k, open a brokerage account, or start a Roth IRA?
4- Currently at 6% in 401k due to employer match, should I put in more?
5- Employer offers a post-tax option (Roth 401k), is it better? Concerned about higher taxes now due to being single in NY.
6- Not a fan of retirement accounts, thinking of alternative investments like buying a house in cash at 35. What do you think?
Appreciate any advice you can give me.
Farewell,
Money Minder
Response from THE MONEY MINDER:
Hello There,
Congratulations on your achievements so far, and thank you for sharing your detailed financial situation with us. It’s great that you are actively thinking about how to manage your debts and investments wisely. Considering your circumstances and goals, here is a practical approach that you might find helpful.
Firstly, when it comes to paying off your debts, it’s generally recommended to prioritize higher interest debts to save on interest costs in the long run. In your case, that would mean focusing on paying off your car loan with a 6.99% interest rate first, followed by the student loans. You could consider allocating more of your $2,000 monthly budget towards the car loan until it’s paid off and then shift those payments towards the student loans.
Regarding your emergency fund and investment options, since you’ve achieved your goal of a $20,000 emergency fund, you could now consider diversifying your investments. It’s a good idea to take advantage of your employer’s 401k match, as that’s essentially free money. In terms of post-tax options like Roth 401k or IRA, they can provide tax advantages in the long run, and it’s worth exploring if they align with your goals.
As for your reservations about retirement accounts, it’s important to remember that investing for retirement is a long-term strategy. While it might seem far off, having a solid retirement fund can provide financial security and flexibility in the future. You can still invest in other vehicles like the S&P500 or brokerage accounts, but balancing them with retirement accounts can help you achieve both short-term and long-term financial goals.
In conclusion, finding the right balance between paying off debts, saving for emergencies, and investing for the future is key. It may be beneficial to seek guidance from a financial advisor who can provide personalized advice based on your specific situation. Remember, financial decisions are personal, and it’s essential to create a plan that aligns with your goals and values. All the best from THE MONEY MINDER!
Leave feedback about this