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Student loans and finacial planning

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  • Student loans and finacial planning

    I have been reading this site for the last couple weeks in hopes for some ideas for my current situation. I am 26 years old and I finished college in 2010 and took 6 months to find a position due to a lot of luck and networking. I finished my degree in Industrial Management with an emphasis in construction and Lean/Six Sigma. Switched my degree from Construction Management and took a year off of college due to health issues, Insomnia and sleep apnea I am sure depression was mixed in there but I have currently worked on all those issues.
    I finished with school loans starting out between 30 and 35k and a car which was a necessity from my old car since my job is a good half hour commute. I got more than I should have with a 10k car loan. I received a gift of 6k from my grandparents which was awesome. I recently got engaged and the ring was 2,600. I have been trying to work on everything and have made pretty good work with what I have had but itís far less than what I could have I think but that in the past and I hope to make better decisions in the future.
    I have paid off my 10k car loan and the 2,600 ring as well as making 2,200 off of my student loans in the last I would say 8 months. My last yearís income is what I will go off of since it was my only full year of work and I grossed 45k(overtime included). I am currently approaching the 2 year mark and I contribute 7% into a 401k 6% company match which will go up 1% until 15% (my contribution) and I have 5,600 or close to it invested in this account. I rolled over a previous 401k into a Roth IRA and that currently has around 1,150 in it adding 100 a month to this account for retirement. Below are my loans and monthly budget while living at home I was looking at saving and buying a house with what I believe was a FHA home loan but decided I wanted to try to have a 20% down payment and think about getting a 15 year ARM since it is early in my life and donít know what I will be doing in 5-10 years and I could use this as an investment property but this has changed. I have a little over 2,000 in my savings as an emergency fund and a credit card through my bank that I never hold a balance on.

    Student Loans
    Private: 4,649@ 5.50 Variable interest rate on prime but not exceeding 8%. 102/mo.
    Great Lakes: 3,801@6.55 53/mo.
    3,860@ 4.25 and
    2,589 @ 6.55 84/mo. (grouped together)
    7,091 @ 6.55 97/mo.
    NelNet: 2,647 @ 2.14 30/mo.
    1,217 @ 6.55 57/mo.
    2,901 @ 6.55 57/mo.

    For a total of 480/mo. In student loans.
    Phone: 98
    Gym: 36
    Car ins: 12
    Roth: 100
    Gas: 70 (estimated average some weeks less some weeks more)

    I am currently trying to pay down my private student loan since it is a variable rate putting an extra 200 per week or 800 a month give or take, leaving me with close to nothing. Is there something I am missing or is there a better way you would recommend my path going forward? I have about 6 months or so until I will be moving out of my parents house and in with my fiancť and I would like to be in a better position to absorb the cost and be as debt free as I can be until I can reassess my budget then and make a plan going forward at that point in time.
    I am sorry for such a long post and I thank you all for posting in response in advance.

  • #2
    I think you're doing pretty good (congratulations on finding full time work 6 months after graduation during a time of such high unemployment), and it is a good plan to keep making extra payments on the student loans while you are living at home. Once you leave home, your expenses are going to increase a lot and you aren't going to have as much "extra" money to put toward the loans.

    Not only will living on your own change your financial picture, so will possible future events like home ownership, children, illness, etc. While you are young, healthy, and without attachments, keep attacking those student loans.

    Does your fiance already have an apartment, or will you be looking for a place to live together? If you'll be renting a new place, you will want to start saving up now for move-in costs: first & last month's rent plus security and other deposits (for keys, pets if you have them, etc.), possibly deposits or hook-up fees for utilities, application or credit check fees, etc. Lots and lots of fees associated with renting an apartment, and they add up fast. If there is a particular complex you like, you could go to the rental office now and ask them "If I were to start renting tomorrow, what would the total upfront costs be?" Whatever number they give you, add a few hundred dollars to it since it will probably be higher 6 months from now.

    Will you have out-of-pocket wedding or honeymoon expenses? If so, you'll want to be saving for those now too. I don't know how far you are in the wedding planning process, but keep it as simple as possible. It's just one day; it's the rest of your lives together that really matter. (That's not just a cliche. I've been married for 20 years myself, and have never regretted that our wedding was relatively simple.)

    Finally, and probably most important, if you haven't already done so, take time to discuss the state of your current finances with your fiance and talk about how you'll handle your finances in the future as a couple. Will you combine your finances after marriage or keep them separate? Who will pay the bills? What are your long-term goals? Being on the same page as your spouse will do wonders for the state of your finances down the road.


    • #3
      I agree with scfr, pay as much as you can on your student loans while living with your folks. The less in in principle, the less you will flush your money away in student loan interest.

      Make sure your fiance is on board with your finances before yall move in together.

      Lastly, follow this longe range plan -


      • #4
        I have talked with my fiance about the finaces and we have to make the evaluation on our situation at that time. She will be finishing up college in december and we will have her student loans, as well as seeing if she will be able to transfer cities with work or look for work in the new city. She also has some money to put to her loans from her parents that was set aside for her education. We have been saving for the wedding I have that in a seperate account that I have not mentioned becaues its not enough to mention at this point as well as its over a year away anything from 5 to 50 bucks a week goes into this account. We have discussed having the wedding at a chapel under 800 and then having a reception at a later date to help us save money. Her loans will be well under mine with the money she will get but she may have to go back to school for an assosiates degree as she re-evaluated what she wants to do but she could go back to school to finish going to school as a teacher she needs to do a little soul searching on that account.


        • #5
          Good job so far. This is what I would do to for the next six months to pay off as much debt as possible.

          Month 1: put full 800 extra on the small %1,217 loan bringing it down to 400.

          Month 2: Pay off above loan and put remainder (400) into $2,589 loan.

          Month 3: increase payment to 857 with savings from paid loan and hit above loan again.

          Month 4: Repeat

          Month 5: Pay off above loan (~400) and put remainder (457) into $2,901 loan.

          Month 6: Roll savings from above loan into payment for a total payment of $941 towards above loan. Balance after 6 months is ~1500 and if you keep this up it will be paid off in under two months freeing up another 57 bucks.

          The beauty of attacking the smaller balance loans with the highest interest rate is that after 6 months you have an additional $141 bucks in your budget to use as you wish. Once you move out from your parents house the extra cash might come in handy.


          • #6
            The reason im attaching the private loan is because its a variable rate which is low now but also could go up as well as I cannot defer this loan if I lose my job or something unforseen happening. If I pay it off early which could happen with an extra week in August I could then attach another loan smaller in amount. I did the same with my auto loan and then gave a little boost to my morale with 2 smaller loans with high interest rates which I was able to take away I believe over 250 from my monthly payments. Is it the wrong way of thinking by going after this private loan first because it has a lower interest rate right now?


            • #7
              It doesn't matter much either way. Right now you are paying 21 bucks in interest each month at the current rate and if it jumps to the full 8% then your interest increases to 31 bucks a month. Paying the adjustable loan off instead of you higher rate will cost you 4 bucks a month at the current rate or if the rate spikes you save 5 bucks a month. Either way, it doesn't really matter so do whatever makes you sleep better.

              I'd still pay off the small loan first for the quick win then move to either the adjustable or the next highest rate loan.


              • #8
                Moving foward from paying off my loans I will be attaching them still after I finish this loan but should I keep as aggressive as I have or should I invest more into my 401k or Roth?


                • #9
                  I also have a mutual fund that has around 1100 but has not seen much growth since it was opened at least 10-15 years ago. When I talked to one of the guys at my bank they said that I could cash this out and invest in something else like my roth or I could use it towards my student loans and get a tax break because of doing that. Would this be a good idea to help pay down my loan or should I cash it out and put it towards my roth?


                  • #10
                    Well I wanted to let everyone know that I did recieve my first confimation that a student loan was paid in full today. I did not mention it because there was .41 cents that collected on the interest and it wasn't worth mentioning before. To date I have recieved 3 confirmations of loans paid off. 1st was for the engagement ring, 2nd my auto loan, and finally 3 my SL. Only about 6 more to go and it feels great seeing that on paper that its done.


                    • #11
                      That is great! Keep up the good work!!


                      • #12
                        heh, congrats man


                        • #13
                          Well I have wittled my SL down to 1,600 today and I have made up the decision to cash out my american funds to pay for my smaller balanced loan I stated earlier. My EF has been depleated to 600 and change but that will be my first thing to get back up. I used a portion of this to pay down my SL and pay for my new phone and pay my first bill, the new phone plan will lower my monthly phone bill by 45 dollars about which will help me in the long run as well as my cancelation of my gym membership soon here will free up an additional 36 dollars a month. I am tempted to pay 100 each week to my SL and the 100 I would normally put towards the loan to start saving for the appartment and upcoming wedding. (Just booked a chapel and a pavillion for the reception as well as have a DJ picked out which in all is about 1700 right now)


                          • #14
                            Thanks for the update. You're doing great. It sounds like you are doing a good job of balancing both "big picture" and "little detail" things. It sounds like you and your fiance decided to go with a somewhat "low key" wedding after all, and I'm sure it will be lovely.

                            Not sure what your living situation is, but when you guys go looking for your first apartment together remember that an apartment is just temporary. If buying a home is something you think you'll want to do down the road, remember that the less you pay in rent now the more you'll have to finish paying off those student loans and then start saving for a down payment.


                            • #15
                              We do plan on moving into a house someday but with my fiance getting out of college and me possibly looking at expanding into better job prospects. An apartment is the safer move for now and trust me we are going to be looking for cheaper apartments. She will not have a job right away unless she can transfer which does not look good right now.