Michigan State Senior, seeking wisdom from smarter people.

**bjl584** · 08-22-2013, 10:57 AM

Both the ideas that you have about saving and paying off debt are valid. I suggest that you find a happy medium and do some of both. It doesn't have to be all one or the other.

More info may help. Do you plan to get your own place upon graduation? A car? Anything else? Or, are you going to keep living at home?

**BMEPhDinCO** · 08-22-2013, 11:29 AM

First, good for you for looking out for yourself.

Second, here goes my thoughts...

1. Why are you only making $1k a semester? Do you qualify for work-study? Can you not put your "almost" education degree to use tutoring? See if you can do better!

2. Why do you have to take out $15k in loans? If you made $25k and lived as if you only made $15k (trust me, it's possible), you'd only add $5k to your debt, making it less than your expected first year full salary. That's the ideal position.

3. If you keep living like you only make $17k (let's give you a raise) and you make (after taxes) ~$34k (ie, you live on 50% of your income), you can then put $5,500 into the RothIRA and $2,500 into an emergency fund (first year) and pay off $9k of your loans. This would continue for 4 years.

Then when you were (around)27-28, you'd have a great retirement account, no debt, $10k in your EF and you'd be set! This assumes no major expenses... and no raises... hopefully those two would cancel out if they happened.

It would be a sacrifice for sure, but it would set you up wonderfully for the rest of your life.

**Bob B.** · 08-22-2013, 12:12 PM

Originally posted by awarner32 View Post

-I currently around $27,000 in debt and graduate in December this year.
-The following Fall semester I will begin my student teacher year, which will rack up approximately $15,000 more in loans.
-I am a Secondary Education major, and my dream is to become a teacher. I am guessing my salary will be around $40,000 to start.
-I currently have $1,500 saved in my personal banking (and feel extremely inadequate/poor because of the mountain I'm facing)
-I am working a small cafeteria job on campus making minimum wage. I am guessing to pull in about $1,000.
-Come January (once I graduate), I will have eight months until I begin my student teaching. I have a job as a salesman in which I am confident I can earn (and effectively save) about $25,000 through that job.

I plan on living extremely minimal until debt is paid off. I want to blast this ~$40,000 out of the water but I also have heard that a Roth IRA would be stellar. Should I put all of this cafeteria job money into an IRA? Should I start paying off my subsidized debt (the bad one) with it? What of the sales job?

I'm hoping that I can utilize the Internet so that I can learn from areas in my life that were never really developed. I have no wisdom with finances and my hearts desire is to save, but I feel like I'm ignorantly running blind into something I know, honestly, nothing about.

Thanks ahead of time for any help. You guys are great! Sorry for spilling my mind out, I hope it made sense.

Andrew (Go Spartans!)

I just had to reply, because I am an MSU alumnus +17 years. Go Green!

When I graduated, I had about 8K in student debt. I did have help from my folks, some of my own savings, and a job on campus.

It sounds as if you have a solid plan. Live cheap, and retire the debt ASAP. As for how much to save in a Roth vs. save in an emergency fund, vs. pay off debt, is really up to you. As long as you stick to living cheap, and avoiding more debt after graduation, any decision you make will be a good one. A good bench mark is to save 15% of everything you earn into a retirement fund, employer sponsored or Roth.

**awarner32** · 08-22-2013, 12:17 PM

Originally posted by bjl584 View Post

Both the ideas that you have about saving and paying off debt are valid. I suggest that you find a happy medium and do some of both. It doesn't have to be all one or the other.

More info may help. Do you plan to get your own place upon graduation? A car? Anything else? Or, are you going to keep living at home?

I plan on living in a small apartment (or small home) for the rest of my life, to be completely honest. I am not swayed by large things and don't want to let material things take over my life. I was given a used Prius, as my grandfather passed away and gave me the car with around 100,000 miles, thank The Lord. So besides home expenses and loans, there won't be much I will be spending money on.

**MonkeyMama** · 08-23-2013, 05:40 AM

I completely agree with everything BMEPhDinCO said. I had most the same thoughts.

Having put myself mostly through college, it seemed to me most prudent to get out with as little debt as possible. IT seemed silly to start saving for the long-term future. Priority #1 was just getting a degree and increasing salary potential for rest of my life. Long-term financial goals and investing could wait. (My advice might be different if college was paid for, but is just my "doing it all on your own, without a penny to spare after the basics," perspective). I was actually able to get through college with -0- debt. IT was really hard work, and I wouldn't have beat myself up if I had to borrow a small sum. But, I do share, because 90% of the battle was just refusing to go down that road. It's in the mindset. I'd think through if you really and truly need to borrow another $15,000.

For those reasons, I would not do a ROTH or any retirement investing. Contribute to retirement early and often, after you graduate. Set a goal to always put 10% minimum to retirement, and you will do very well, starting at such a young age.

Other than that... I'd hoard cash for a rainy day, and to eventually put to student loans. Don't invest money that you will need in the next 5 years. I think you are in a save cash/payoff loans stage. I'd absolutely start chipping away at the loans. If no interest is accrued until later, save up the cash and you can make a better decision with time. (You don't want to put all your income to the loans, and then lose your job, is what I mean. So, when you have the chance to pay -0- interest and hoard cash, then just do it and see how things pan out). One exception - if you can't control yourself and will blow through the money, then just put it to the student loans. Do what works for you better psychologically. I am personally very disciplined financially, BUT I find it harder to be disciplined when I have piles of cash laying around. Everyone's psychological triggers are different, so pay attention to your own psychological triggers and make a plan to work around them.

You are asking the right questions, and I think you will do quite well just for thinking about it and wanting to do well. Blasting the loans and being done with them, that is a good plan.

**snafu** · 08-24-2013, 10:14 PM

awarner, Good on you for immediately understanding you need to understand finance and plan for your future. I'm surprised you haven't sought a more lucrative part time job since tips at a good restaurant earn staff $ 100. after tip-out after a 4-6 hour shift. If you can borrow less than $ 15K during student teacher segment you do yourself major good getting out with the least amount of debt. You haven't disclosed the interest rate which is critical. With the bank rate below 1%, I suggest you look at every option trying to keep it no higher than 4% over prime. Are there any Awards, Grants etc to help student teachers?

Is the salary grid any better in Private School, Charter School or Religious Affiliated Schools? Do only High Cost of Living area have higher salaries? How far are you willing to move? Wishing you ever success

**J.Apple902** · 09-16-2013, 02:59 PM

I think it's going to be more difficult than you imagine to "blast through" your $40k loan debt. I would not therefore "wait til later" to start the ROTH.

What're you student loan rates? If they aren't crazy, the money used for a ROTH vs paying extra on the loans is better off. Plus, 401k and ROTH IRAs grow on the interest too (tax free), so the earlier you begin this, the more it compounds.

If you have private loans like myself, you may then worry about interest rate hikes (federal loans are static rate). I am not sure what my plan is for that (it'll happen). Right now I cannot consolidate my $60k loan debt for under 8-9% APR so, I don't know what to do.

**LivingAlmostLarge** · 09-16-2013, 04:38 PM

Work as a nanny since your are an education major. Here they charge $25-30/hr one kid.

Michigan State Senior, seeking wisdom from smarter people.