No Clue What to Do. Help

[hokies2688]

Ok, I'm gonna lay it all out and see what you all think. I'm pretty financially savvy, but I really don't know what to do here. I plan on going back to get my MBA and I believe I will have to take out loans. Therein lies my quandary. I am currently putting in 6% to my work IRA because they match up to 6%. I'd like to build my online savings account up to about $10,000 for emergencies but I feel like that will be gone as soon as I go back to school. Should I still build that up? The main question is do I put the rest of my money in the market or into my Roth IRA. If I put it into the Roth, I can't touch it when I go back to school. However, if I put it into stocks, I can sell it and take out less in loans. Any and all advice would be appreciated.

Age: 23

Location: Washington DC

Income: $60,000 annually/financial consulting

Debt: zero

Expenses: rent+utilities:$1000

Assets:
Checking: $1000
Online Savings: $1000
Roth IRA: $1000
Work IRA: $4000
Stocks: $6000
Car: $6000

[bjl584]

Do you think going back to school will earn you enough income in the future to justify student loan debt? Do you have to go back to school now? Can you wait a few years until you are in a better position financially?

[disneysteve]

How much will school cost?
What will your income be while in school?
Will you qualify for any financial aid other than loans?
What will your projected income be after getting the advance degree?

[hokies2688]

I'll try to get into a top 10 MBA program probably in about 3 years. I'd guess the loans would probably be around $150,000 at the end of the program assuming my parents don't help me out. When I graduated, I'd hope that my salary would be no less than $125,000 with bonuses.

[hokies2688]

Also, I'm not going to work while in school unless I can get some of part time bartending gig. I have no idea if I'll qualify for aid, but I'll definitely apply. I didn't in undergrad because everything was through my parents, but maybe if it's with my salary, I will get aid.

[YLTL_Dan]

What are your motives for the MBA? Is it to get a job you really want, or do you just see it as more money and a way out of what you're doing now? I fought through that decision through my 20s as I had a great job at a consulting firm, but I wasn't satisifed with my work or what I had accomplished. I felt the MBA or law degree was my way out.

I left the consulting firm for a better job, but I'm working on my 'side hustle' that I eventually want to take full time. I'm glad I didn't go into massive debt to help me find my way.

I just wrote a whole blog article on this... it might be worth reading.

[snafu]

It would be in your interest to use the 3 yr. period to determine the value vs cost of higher ranking MBA programs. Unless you have very specific goals, most clients don't ascribe value to specific schools; they are more interested in deliverables.

Time well spent researching scholarships you would qualify for. Many excellent schools offer 'distance Ed' MBA programs or on-line courses which have been designed so that motivated individuals can remain in their positions while completing course work using employment experiences

[bjl584]

I have my MBA, but I worked while obtaining it. I took night classes. You may want to consider this option, as there is no way that I would have been able to stop working for the 3 years that it took me to get my degree.

[hokies2688]

Hey everyone, I appreciated all the responses, but I'd rather get advice on what I should do with my money now. I've gotten different responses from family members so I'm looking for other peoples' ideas. I do plan on going to back to school full time because it's something that I just need to do to fulfill my career objectives. The loans I have to take out are just a worst case scenario in case my parents decide they don't want to pay for all or part of my degree. I'm not worried about any debt I'd have because I'd be able to wipe it out in five years or so anyway. So back to my main question. Should I be putting money in my roth, the market, or just an online savings account/CDs for the next few years. How would you break up the extra $1300/I have a month to invest. Thanks everyone!

[snshijuptr]

1) Your workplace most likely offers a 401k not an IRA. There is a big difference there.
2) If you put your money into a Roth IRA, you can withdrawal your contributions, but not your gains at any time. It just takes a little bit of paperwork. If you are maxing out an IRA, you cannot also contribute to a Roth IRA. I'm pretty sure your employer offers a 401k.
3) As a graduate student, I highly, highly recommend working through your degree. You will want the extra years of work experience and the networking available from continuing a job. Consider taking an internship through your school or finding a job now that will work with you to pursue your MBA. No student should graduate without a job already lined up. The easiest way to do this is to work while you go to school. You can go to school full time and work part time, but it just takes commitment.

[artwest]

To answer your specific question, I would throw everything I can into an online savings account. Then use it so you don't have to take out as much in loans.

Now for my opinion, I would explore other options rather than taking out loans. $150,000 in debt is a lot. I know you think you will get a good paying job, but you never know what might happen.

Be careful and good luck.

[hokies2688]

snshijuptr - I'm already contributing the 6% that my company matches to my 401k through work. You can still contribute up to $5000 to a Roth IRA every year which I have not done. As for working, I will definitely do internships in the summer and things like that. What I meant by not working was that I am not going to do an evening MBA program while I'm still working my 9-5 during the day. I'll also pick up any side jobs I can to make extra money. I'll hustle any way possible, but I just don't want a full time job to go with my full course load.

[LMA]

Originally Posted by hokies2688

Location: Washington DC

Income: $60,000 annually/financial consulting

Debt: zero

Expenses: rent+utilities:$1000

Assets:
Checking: $1000
Online Savings: $1000
Roth IRA: $1000
Work IRA: $4000
Stocks: $6000
Car: $6000

If you live in DC and your rent is just $1,000 you must be doing something right...

A car is not an asset IMHO

When you say work IRA what do you mean? Are you referring to a 401K instead?

If you have an IRA some withdrawals are allowed for qualified education expenses, you might want to check that.

Have you quantified the cost of school? How much is it going to cost you per year/total?

Once you do that then I would recommend putting all your savings towards paying for school. You don't want to pay for school with debt or at the very least take the minimum amount of debt you absolutely have to. School loans will be with you for a very long time so if you can avoid them that would be better.

[hokies2688]

Yea I live in a 4 bedroom house with my fraternity brothers and rent is $850 + utilities. I'm actually in Arlington, but it's almost just as expensive.

A paid off car is definitely an asset. It's just a depreciating one.

Yes, I am talking about my 401k

I have heard about the education tax credits so I will be looking into that.

I believe school will cost around $150,000, but I have no idea what portion I will pay, my parents will pay, and grants/scholarships I will receive.

So I'm guessing all my savings should go into CD's or my online savings account as it is the least risky investment for the short time I'll be holding it?

[riverwed070707]

Originally Posted by hokies2688

Yea I live in a 4 bedroom house with my fraternity brothers and rent is $850 + utilities. I'm actually in Arlington, but it's almost just as expensive.

A paid off car is definitely an asset. It's just a depreciating one.

Yes, I am talking about my 401k

I have heard about the education tax credits so I will be looking into that.

I believe school will cost around $150,000, but I have no idea what portion I will pay, my parents will pay, and grants/scholarships I will receive.

So I'm guessing all my savings should go into CD's or my online savings account as it is the least risky investment for the short time I'll be holding it?

I guess what I'm struggling to understand here is why you're parents paying your school is in question. Why would you expect them to pick up the tab for your masters? You are an adult -- plan to pay your own way and if they happen to offer a gift to help, they you're very lucky.

What should you do with your money? Definitely savings. Don't worry about investing/interest, just be putting away as much as you can so you can graduate with minimal debt. I think $150k for a masters program is ridiculous, but if that's what you're set on then you need to start saving now. I'd cut expenses like you're already in school and put all that excess away. There's no reason why you couldn't save up a fairly significant portion of your expenses in 3 years. I think the problem is you're already set on taking out loans and accepting handouts from mom and dad that you don't really care about being proactive in figuring out how to pay for it. You have a good opportunity here, be smart about it. Regardless of whether that $150k could be repaid in 5 years after you graduate, think about all the other ways that money could be working for you -- house dp, investing and earning more interest than your paying on your loans, traveling, etc.

[disneysteve]

Originally Posted by riverwed070707

I guess what I'm struggling to understand here is why you're parents paying your school is in question. Why would you expect them to pick up the tab for your masters? You are an adult -- plan to pay your own way and if they happen to offer a gift to help, they you're very lucky.

accepting handouts from mom and dad

I disagree with this comment. Yes, OP is 23 and an adult but that doesn't mean he can't still be getting help from his parents. When I was 23, I was in medical school and I can certainly tell you that my parents were helping out. I had no money and no time for a job. I did borrow about 85K to get through med school but I would have needed to borrow a lot more had they not helped out.

[riverwed070707]

Originally Posted by disneysteve

I disagree with this comment. Yes, OP is 23 and an adult but that doesn't mean he can't still be getting help from his parents. When I was 23, I was in medical school and I can certainly tell you that my parents were helping out. I had no money and no time for a job. I did borrow about 85K to get through med school but I would have needed to borrow a lot more had they not helped out.

I wasn't saying parents shouldn't help, I'm saying kids shouldn't expect it. I think the fact that he does is skewing his view of what he could be doing now to prepare. He doesn't start school for 3 years -- by then he will be 26 and had more than enough time to save up for at least a portion of that schooling but I think we can reasonably assume that won't happen as long as he's feeling like there is a good chance mom and dad will take care of it.

[hokies2688]

I'm not trying to start another topic or I don't even mind if it goes that way but in regards to the comment by "riverwed070707" about my parents helping me, they value education. I'm not saying other parents don't, but they would like me to go back to school as would I. That's just the way my friends and I were all raised. The kids that don't go to graduate school are almost looked down upon. Is that bad? Maybe? I will say that I am VERY fortunate to come from a family where this is the case. My undergrad was paid for before I graduated college. Does this make me not appreciate it as much? Does it make me not work as hard during school because I'm not paying for it? ABSOLUTELY NOT. I watched my dad bust his ass everyday working to provide everything he could for my family. Am I greedy or spoiled? I began refereeing hockey when I was 10 because I liked making money. Did I need the money as a 10 year old? Of course not. I used my Bar Mitzvah to invest in Detroit Tigers seasons tickets (because they were an up and coming team) that I still have and resell every game on ebay, stubhub, and craigslist. I shoveled snow in high school when my friends were playing football. I hustle no matter what and I always will because of my work ethic. I plan to pay for my kids' education just like my parents did so that hopefully they will be set for a great future just as I was fortunate enough to have been. They had always planned on paying for my graduate school, but my dad's business took a bit of a hit in the recession and is not completely recovered yet. Therefore, that's why they don't know how much they can afford. It doesn't affect the way I'm going about my savings. I'm the stingiest of my friends because I'd rather have the money later for my family then have the new BMW/Audi now that all the kids I work with are buying. I'm sorry for the rant; work sucks today. In the end, I realize I am VERY FORTUNATE and BLESSED and my parents have already done plenty for me. If they choose to do more, that's amazing. If not, that changes nothing. I am saving mentally as if I get nothing else.

[riverwed070707]

Didn't mean to offend, I was merely suggesting you take that help out of the picture as you decide how to move forward. Instead of going into this thinking "I might come out of this with $150k in debt", why not think "how much can I reasonably expect to put away now to offset these costs?"

How much do you plan to put away? How much are you saving on a monthly basis now? What portion of your school expenses do you anticipate being able to take care of on your own without loans if your parents choose not to/are unable to help you out?

[hokies2688]

No it's fine no worries.

Income: 3300/month
Rent and utilites: 1000
Gas: 150
Breakfast/Lunch work cafeteria: 50
Other Food: 150
Weekends/Alcohol/Going out/Random Expenses: 300
Gym/Supplements: 50

I think that's pretty tight if I may say so myself. That leaves me with $1600 invest...