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    Need advice with overall financial situation.

    Hello, just a quick (hopefully) rundown of what situation im in: Im almost done my 3rd year of college with roughly 2 more years to go. I am working on three degrees- one bachelors and two associates. Im am in about 21k in federal loan debt right now, so approx 40k when all is said and done. Which, after researching, is double the avg student debt....depressing to think about. I live on campus and earn about $200/wk while im in school, and make about $650/wk working summers at home.I recently have been reading about investing, money management, etc. I have been stupid with my spending and as a result have NO emergency funding, or savings of any kind at this time. The next school semester begins next week, which means I start work next week also, and I want to start getting into a good savings habit this year. Currently I have 3 subsidized direct loans (at the 3.4% interest) totaling $11500, 4 unsubsidized direct loans (6.8%) totaling $13800, a perkins loan (5%) totaling $1000, and a parent plus loan ("never exceeding 9%"). So, a total of 9 loans currently, which will probably rise to about 13 loans when schools over. First off, is 13 loans at those interest rates, and overall 40k student debt considered really bad?So now I am thinking about saving 10% of each paycheck for an emergency fund and throwing that money into a roth IRA, so I can pull out the contributions if needed. I looked at savings accounts and really dont see the reason to throw money in a account thats gonna give me like $5 interest every year. So if I do the roth IRA, should I put around 50% into stocks or mutual funds (when i confidently understand stock investing), and keep the 50% out of the market? Or would you guys just worry about paying off those student loans ASAP?Sorry for typing a book, just looking to start this year on a good foot. Thanks

    #2
    Just to add, the degrees im working on: B.S. Public Safety Administration (minoring in economics), A.A. Criminal Justice and A.A. Emergency Management. I am really interested in a emergency management career (FEMA,etc.) but jobs in that industry are pretty limited. Other than that, I honestly have no clue what I want for a career other than a high paying job. I would like to get into investing and developing a portfolio asap, but understand that getting out of student loan debt is important too. Also, before i forget, I will be making around 6k this summer and I need a decent car. Im thinking about taking a auto loan out from my credit union for like 5k for a used car, then using that 6k from summer (which would be in that roth account hopefully) to pay the loan back in order to build some credit. Should I bother trying to build credit with an auto loan or would just making payments towards those student loans be good enough for credit building? If thats the case, ill just buy the car with cash. I am 20yrs old, no children, and no debt other than those college loans.
    Last edited by lawsman92; 01-07-2013, 10:20 PM.

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      #3
      Do you really need all of those degrees to get a job once you get out of college? AA don't really hold much value-would you be better off graduating and then getting a job and doing tuition reimbursement.


      don't buy a $5k car to get to a $6k job. Buy a beater car that is $1k or so or maybe try to borrow from a family member or take public transportation.

      Comment


        #4
        If you think you can be responsible with it, you should get a credit card to help build credit. You can always decide to use it only for groceries, or only for gas or something like that if you're worried about not keeping track. Just make sure you pay the balance every month.

        I think the amount of student loan debt you're willing to take out should be partially based on the career field that you're planning to go into (keep in mind that you may not get your dream job right out of college, hence the "partially") If the types of industries that you're interested in working have a starting salary of around $50k, you can probably afford to handle a little more student loan debt than someone who wants to go into a field where starting salaries are only $30k.

        And while $40k of debt is somewhat high, it's not impossible to handle. Work the numbers to get an estimate of what you think your total monthly payments would be for all those loans and just keep that in mind.

        I agree with the previous poster about trying to find a cheaper car. You can always buy a beater just to get you through school. Ditto on the question "are 3 degrees really that necessary?" If you drop one, would that allow you to graduate a year earlier?

        Comment


          #5
          Rather than using your income to invest when you have significant debt, I would use the income to pay for school and living expenses so you don't need to take out as much in loans. Its not impossible to pay for school as you go. I took loans my freshman year and paid for the rest out of pocket by waiting tables. Graduated with $12k in debt. Its more work now, means less fun, less partying, less travel, but you'll be glad you did later. Theres no reason to put a minimal amount in an investment account when you're losing far more than what your investments are gaining in interest on your loans every year.

          Comment


            #6
            Thanks for the replies guys. Looking back, I didnt need all those degrees, but now im 4 classes away from getting the two AA degrees, so I feel it would be a waste to stop at this point. I already have a car that Ive had for the past four years, guess I am kinda looking for something different because I hate my car. Yeah I have been looking at credit card options, just not sure if I want to open that door right now because I feel like it would get out of hand. Still no clue really about what I want to do after college other than work in emergency management (jobs are hard to come by in that field). Yeah I think it would be to risky if i threw some money into stocks. Just some more questions:
            1. Should I put my savings into a roth IRA? I would be using that account as a savings account basically, since I could withdraw contributions as needed without fee/penalty.
            2. Should I start making monthly payments NOW on student loans? Or should I worry about paying my next semester off as much in cash as I can in order to stop taking more loans out?
            3. Does paying off student loans help build credit more so that an auto loan? Because if I did get that car, Id rather just pay it cash and have my student loan payments build the credit. Thanks again for the posts

            Comment


              #7
              Originally posted by lawsman92 View Post
              Thanks for the replies guys. Looking back, I didnt need all those degrees, but now im 4 classes away from getting the two AA degrees, so I feel it would be a waste to stop at this point. I already have a car that Ive had for the past four years, guess I am kinda looking for something different because I hate my car. Yeah I have been looking at credit card options, just not sure if I want to open that door right now because I feel like it would get out of hand. Still no clue really about what I want to do after college other than work in emergency management (jobs are hard to come by in that field). Yeah I think it would be to risky if i threw some money into stocks. Just some more questions:
              1. Should I put my savings into a roth IRA? I would be using that account as a savings account basically, since I could withdraw contributions as needed without fee/penalty.
              2. Should I start making monthly payments NOW on student loans? Or should I worry about paying my next semester off as much in cash as I can in order to stop taking more loans out?
              3. Does paying off student loans help build credit more so that an auto loan? Because if I did get that car, Id rather just pay it cash and have my student loan payments build the credit. Thanks again for the posts
              Worry about paying next semester in cash and stop taking loans. It doesn't do any good to take out debt in order to pay off debt. Don't buy the car. Stick it out until youre done with school. If you said it was undrivable that's understandable but getting a new car because you hate your old one when you're living off loaned money is a terrible decision. So many students seem to have this mentality that if you can get loans, take them and worry about how you're going to pay them later and it gets them in so much trouble when they realize the damage and the impact thats going to have on their future. Think about it -- the average student with $20k in loans pays about $400/mo on a 10 year plan. At your current rate you'd have a payment double that... THATS A MORTGAGE PAYMENT. FOR 10 YEARS. Its like a $10,000/year pay cut for whatever job you end up with. You need to wake up and realize that if you don't act responsibly with your money now you're (literally) going to spend the first decade or more of your career paying for it.

              Comment


                #8
                make that the next 20 years. Quite a few loans these days (depending on the amount) are 20 year loans.

                If you're worried about overspending if you get a credit card, then why not get a card to some place specific? Do gas stations these days still do their own cards that you can only use at their pumps? I dunno, but if so, maybe go that route and it would be a start.

                But honestly, if you want to learn to be financially responsible, part of that is learning how to have things like credit cards without going crazy. You can always keep it in your glove box and only use it for gas, or something like that so that you don't have it with you 24/7. Not that I wanna push anyone to get a credit card and then possibly lose control. I'm just saying, you'll probably get one eventually. And the kind of person who makes the effort to start financial planning while in college is usually the kind of person who is responsible enough to not get too crazy with credit card debt.

                Comment


                  #9
                  As I read your posts I wish I knew the words which would have you realistically examine the facts. Each of your career paths suggest government employment but government [Federal, State, Municipal] are downsizing. Staff are being released because of government debt and unfunded liabilities. Are you tracking employment opportunities in Emergency Management, Criminal Justice or Public Safety on LinkedIn or some electronic hiring site?

                  If you don't get a job in government, what is your backup plan to pay something between $20,000. and $ 40,000. plus interest? How will you deal with that debt albatross that will affect your every decision for ten or more years?

                  I sincerely hope you will manage your money carefully, sticking to 'needs,' avoiding 'wants' and any unnecessary debt for the short term until you have a job nailed down. It's very mature of you to realize you need an emergency fund, but a plain Jane saving account will do. A ROTH is an excellent option but takes years of contributions and compounding to prove it's worth.

                  Comment


                    #10
                    What Else?

                    Hi There Lawsman92.

                    First of all, kudos. Kudos to you for actually taking the time out to think about this stuff. I reckon this puts you into a small percentage of your peers who actually spend time to think this stuff through.

                    Second, as you read through the comments on here, you can get the passion that the posters are writing with, and sometimes that comes across as being preachy and bossy, but the points being made are honest and heartfelt and personally I agree with them. Especially the car thing. Although I also get that you need to reward yourself, and if you hate the car you will inevitably give in and get rid of it. My advice - don't spend all of your 6K on the new car. get the best car you can find for half of that and reward yourself, then do yourself a favor and throw the remainder at one of your smallest debts. It seems to me you are way too comfortable with being in debt and THAT is the habit you need to break.

                    Finally - you are running at breakneck speed into the rat race (with the rest of us). Mortgage, car, loans, debt etc - but you're still only 20. You need to consider postponing joining the rat race and see what else the world has to offer. on Youtube there is a clip called "if money was no object". This inspires me - hopefully it will inspire you too.

                    Good Luck.
                    Mark.

                    ps sorry for typing a book also!

                    Comment


                      #11
                      Had a nice post typed here, but lost it when the forum seemed to crash yesterday


                      Jist of it:

                      Credit Card: Who in their right mind would suggest a credit card to someone who has student loan debt, and is not in a stable long-term job?? Credit cards are for people who are in a good financial position, to be used correctly.

                      PLEASE don't use 'to build credit' mumbo jumbo, paying off those student loans ASAP should be first priority, you've taken the schooling, lets not keep paying for something you've already used!

                      Buy a cheap car until you are done your student loans, and then put that student loan payment into a savings account, and within 6 months to a year you should be able to afford a $3000 car pretty easily!




                      Please oh please don't recommend a credit card to someone that is still in college with student loan debt...

                      Comment


                        #12
                        Originally posted by lawsman92 View Post
                        Thanks for the replies guys. Looking back, I didnt need all those degrees, but now im 4 classes away from getting the two AA degrees, so I feel it would be a waste to stop at this point. I already have a car that Ive had for the past four years, guess I am kinda looking for something different because I hate my car. Yeah I have been looking at credit card options, just not sure if I want to open that door right now because I feel like it would get out of hand. Still no clue really about what I want to do after college other than work in emergency management (jobs are hard to come by in that field). Yeah I think it would be to risky if i threw some money into stocks. Just some more questions:
                        1. Should I put my savings into a roth IRA? I would be using that account as a savings account basically, since I could withdraw contributions as needed without fee/penalty.
                        2. Should I start making monthly payments NOW on student loans? Or should I worry about paying my next semester off as much in cash as I can in order to stop taking more loans out?
                        3. Does paying off student loans help build credit more so that an auto loan? Because if I did get that car, Id rather just pay it cash and have my student loan payments build the credit. Thanks again for the posts
                        Good advice already, but let me address your questions specifically:

                        1. NO - you are basically talking about withdrawing for sure, so what's the point? You can't take any interest so the money will be worth less anyway - pay off the loans first, or stop taking more.
                        2. Pay in cash - more loans = more problems later (learned this lesson the hard way myself)
                        3. Student loans and auto loans both factor into a credit portfolio as "loans" so don't worry about that - don't get a car, but if you have to, pay cash for it.

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