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I have $72k in student loan debt and $90k in savings. What should I do?

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    #16
    Ashley, welcome to SA. We're all from different backgrounds and experiences so you'll get a variety of views and responses. What is driving the idea of buying a house? Have you both considered all the pro and cons which extend far beyond initial costs and monthly mortgage, tax and insurance payments. It is such an illiquid 'investment.' So complicated to buy and even more complicated to sell. Taking a negative stance... I ask... There is so much work, maintenance and dollars involved in home ownership. Who will do the work, how will it be divided up? How will you manage if the house loses value as we saw 2008-2012? What happens if one or the other loses employment or becomes ill?

    I'm more concerned about your view on money management. You identify yourself as a saver with $ 98K earning 1% in a traditional saving account while inflation seems above 3%, food and rents going up and most worrisome, part of student loans nearing 7%. 1% insures you are losing out to inflation, buying power is diminishing.

    You are smart but you offer no information about how you allocated your 401. What is your employer buying for you? What is the management expense fee being charged? How much do you contribute each year and how much does your employer contribute? What does that save you in come tax and most important of all...how much income is added for your benefit each year? 7%?

    I hope you'll get in touch with HR and access this information after the holiday weekend. Your partner needs to do likewise if his responses are similar.
    Can you list Student Loans, interest and balance remaining on each? I too like the idea of paying off at least the smallest balance. What are the rules for paying sums directly to principal?

    Compliments on your savings, lets move your money management skills forward with the least possible risk.

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      #17
      Hello. Here is what I would do in your situation:

      1. Have an emergency fund of $1000-$2000 for when life throws a wrench at you. Sounds like you are already there with you savings account.

      2. Back off on your 401(k) to the largest amount that your employer matches.

      3. Throw everything else at your student loans. With your salary and bonus you will not take long to pay these off.

      In my 50+ years of life, I can guarantee that 401(k) values go up and down, house values go up and down, but debt remains a constant until you decide to get rid of it.

      Imagine how it will be to pay off your home in 5-7 years instead of 15-30 years because you won't have those student loans hanging around your neck! We paid off our mortgage in 30 months after our other debts were paid...rolled all those monies (plus bonuses) to our mortgage.

      Good luck!
      Phil Danley
      100% Debt Free since 2014
      http://www.ConsumerDebtCoach.com

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        #18
        Originally posted by PhilDanley View Post
        2. Back off on your 401(k) to the largest amount that your employer matches.
        In the 25% tax bracket, I would max out the 401k and then throw everything else at the student loans.

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          #19
          Originally posted by autoxer View Post
          In the 25% tax bracket, I would max out the 401k.
          Can you explain why? Always curious.
          Kill the debt, before it kills you!

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            #20
            Originally posted by Randomsaver View Post
            Can you explain why? Always curious.
            In the lower tax brackets, you are probably better off just using a taxable account, because the capital gains rate is 0%, but once you hit the 25% bracket, you are better off deferring the tax for long term investing. If you have a good growth rate and a long enough timeline, you can even come out ahead if you slip into a higher tax bracket in the future. You also have a good chance of withdrawing some of the money in a lower bracket than your current marginal rate and the biggest jump from one bracket to the next is 15% to 25%.

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              #21
              Originally posted by Ashley1987 View Post
              Thanks for the advice! Should I invest the $90k in my savings if I don't pay off loans?
              I think you should pay off your loans first.

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                #22
                Please! Please! don't purchase a house jointly unless you are married. I made that mistake and will have to deal with that accordingly. As mentioned in previous posts no one goes into a relationship and expects it to end badly. Especially if you have been together for several years. Things do happen! I never thought I'd be where I'm at now and I wish I listened to my family and friends.. Even my real-estate lawyer said it was a very bad move. I ignored them all.

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                  #23
                  You should seriously try this!

                  Look man i was in the same situation and then i found out a way to get rid of it all! Try this website out. im completely serious!

                  wilkesco.com/debt

                  If you do this i promise you will find out getting rid of debt couldnt been more easier.

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