Got out of college, looking for some advice on student loans and investing

**Coronet** · 06-13-2011, 09:17 AM

Congrats on graduating!

I'm sure you're going to hear this from someone else, but since you have so much in loans and your income is $65k a year I think you bought too much car ($25k). I make about the same as you ($62k/year) and am also a year out of college and I wouldn't buy a car that expensive... and I have no academic loans! I think you probably should have gone with a $10-15k used car instead to save on that monthly car loan payment. Is it possible to do so now to pay off your loans faster?

Edit: I guess it also matters a bit how much your living expenses are. Since you said California I'm going to assume your cost of living is pretty high?

**lightbulb8817** · 06-13-2011, 09:59 AM

Thank you!

I used to have a VW that I was spending more money on to repair than new car payments. I got rid of that and since bought a Toyota Tacoma. I'm open to the idea of selling it and getting a used car to save on car payments but I'm already eating the cost of depreciation (not that much since its holding is value relatively well) and sales tax. Maybe this wasn't the wisest financial decision but it's done and I can't turn back time.

So I have 2 options:

1) Sell my car and get something around $15k and deal with possibly unreliable car and/or additional maintenance costs
2) Tough it out and pay off my Tacoma. Keep it until the wheels fall off.

My rent is about $1500 / mo for a studio. My GF is currently living with me which helps out alot but she's considering moving closer to work.

**Frugal** · 06-13-2011, 12:03 PM

I think you are right to pay down your student loans as fast as possible. My younger sister is currently in graduate school, and I hope she does the same thing as you when she gets out with a lot more loans than I have. I have loans and am trying to pay them down, despite it being difficult most of the time.

I agree with what someone else said, I would have gotten a used car in your situation (just my opinion). I waited until I was out of college about three years (maybe it was two), and bought a used car from my family...for more than it was worth, but at least it was an affordable, reliable car! It gets me where I need to go!

**snafu** · 06-13-2011, 03:20 PM

Kudos for being aware of the need to reduce the amount of interest you will be charged and your willingness to get those debts off your back as quickly as possible. As a new employee in a ghastly economic environment, I think you also need an emergency fund. All those goals will necessitate firm control of spending this 1st year.

If GF moves out,I suggest you try to find a cheaper share situation as near to your work as practical, meanwhile create a budget for living expenses. Take advantage of the generous matching 401K monies, an early start makes a huge difference long term. Pay off that Tacoma as fast as you can; a lesson learned the hard way. Examine the details of these loans. Can extra payments for vehicle and student loan be applied directly to the principal?

Working with a simulator is a great idea as there is so much to learn during this choppy market. Compare your mature market to BRICC or newly emerging markets and try to work out the risk ratios. Does your 401K program allow you any input on allocation? You need some fun too so I suggest giving yourself a fun fund each pay...when the designated sum is gone...so is the spending in that category.

**jerrycates** · 06-14-2011, 06:45 AM

I assume your price of residence is quite substantial, so you bought a pricey automobile. 2nd hand vehicle would simply be great. However, hold off on investing in stocks right up until you spend off your car. When your vehicle is paid off, then you can start developing a lot better even though you're continuing to pay off your college student loans.

**snafu** · 06-20-2011, 04:25 PM

lightbulb, saw a demo of app i-awoke, app for people wanting to make good decisions follow-up of book by qualified specialist, pretty impressive

**dczech09** · 06-20-2011, 06:16 PM

If I were you, I would try to sell the car. Of course, I would only sell it if I could get more than what the loan is.

What is your rationale for saying that a $15k car might be less reliable and more costly for maintenance? I graduated from college 2 years ago. I got a car that was about $10,000 and the car is the most reliable thing ever. My job has me on the road CONSTANTLY and my car holds up great. It is a 2005 Toyota Corolla.

I make $45,000 in Wisconsin. I have less loans and significantly lower costs of living. Ultimately, I would be willing to bet that you and I have the same amount of free cash flow after essentials are paid off. So I can speak to from experience that you should either A) sell the car and get an affordable one, or B) pay minimums to the student loans and pay off the car as quickly as possible.

I have student loans as well, and paid off my car first. Believe me, getting the car out of the way makes a HUGE difference. I much prefer having student loans over anything else.

As far as investing goes, I would pay off the car first and then invest a little while paying down student loans. The reason why is that with your student loan size, I don't think its worth it for you to sacrifice retirement just to pay off student loans quicker. I would even consider investing up to the match in your 401k. You mentioned 15%? I'm assuming that that isn't dollar for dollar?

**Frugal** · 06-21-2011, 09:31 AM

I personally had a similar situation with student loans (just not as many, since i did not do graduate school), and while I could not pay them off so fast, I am still trying to pay them DOWN at least as quickly as possible to save on interest paid over the life of the loan.

p.s. I did not do the 401-K matching as much as I should have, but 15% sounds like a good matching rate on the part of the employer. I would also consider adding to my contributions if I had such a good job that offered those benefits!

**debtelim** · 06-21-2011, 11:43 AM

Don't want to sound like a broken record but I agree with what people are saying on here about the car. I graduated college 6 years ago and had a lot of friends that went-off and bought fancy cars.

What I decided to do was lease a VW Jetta, the total payments were $218/month which was really reasonable.

After three years I starting making over 100K a year and I ditched the VW and bought a BMW. Before buying my new car though I switched my lease to a regular loan so I could use that as a trade-in when I bought my new car.

I think that when you get out of college you should really start-out by saving as much as you can and spending as little as possible. $65K doesn't got very far especially with $1,500 in rent. I'd wait until your salary goes-up and you have some money in savings and then spring for a more expensive car.

Hope this helps!

**debtelim** · 06-21-2011, 11:49 AM

Don't want to sound like a broken record but I agree with what people are saying on here about the car. I graduated college 6 years ago and had a lot of friends that went-off and bought fancy cars.

What I decided to do was lease a VW Jetta, the total payments were $218/month which was really reasonable.

After three years I starting making over 100K a year and I ditched the VW and bought a BMW. Before buying my new car though I switched my lease to a regular loan so I could use that as a trade-in when I bought my new car.

I think that when you get out of college you should really start-out by saving as much as you can and spending as little as possible. $65K doesn't got very far especially with $1,500 in rent. I'd wait until your salary goes-up and you have some money in savings and then spring for a more expensive car.

Hope this helps!

Got out of college, looking for some advice on student loans and investing