What to do with extra money??

**ESMonitor** · 09-07-2013, 09:26 AM

Pay off student loans in bulk payments each month until they are eliminated.

Darth Vader represents your student loan debt...you are guy with green life saber...your income.

**snafu** · 09-07-2013, 04:59 PM

I think you should apply for a obtain a CC. Several have cash back scenarios of you have routine bills like utilities, cell phone, auto operational & maintenance etc. just pay off the balance one business day in advance of due date. Should you ever need to book a flight, you'll need a CC.

What are you holding in your employer's retirement program? You need to know what the fees and expenses as well as specific products. You could read The Wealthy Barber or Millionaire Next Door type book to lay a framework for getting your savings to work for you.

**dojo** · 09-08-2013, 12:26 AM

If you still have to pay student loans, I'd focus on really getting out of debt. Then you can find some good ways to invest the money, while also securing your savings.

**md0127** · 09-08-2013, 04:18 AM

I have ~$17K in my employer's 401K with T.Rowe Price. I contribute 6% to get my employers max match, 50% of my contributions up to 6%.

Wouldn't the compounding interesting earned by investing money now eventually outweigh the interest i'll keep on my existing student loans?

**AbbyTN** · 09-08-2013, 05:28 AM

Pay the loans so you are clean. As for investment I would recommend to start your business online.

**asmom** · 09-08-2013, 07:08 AM

1. Pay off student loans.
2. I didn't read anything about a Roth IRA; you should definitely have one but not with T.Rowe Price as they tend to have higher expense ratios.

**snafu** · 09-08-2013, 06:56 PM

md0127 Good to capture employer's contribution but you need to know what specific holdings comprise your 401K currently at $17K? What are the fees? What is the Management Expense Ratio [MER].

You are paying 5.5% - 6.5% interest on student loans while savings generate .10% and chequing are losing buying power to inflation.. Once you know your retirement holdings you can work out a supporting allocation for ROTH

**md0127** · 09-09-2013, 06:38 AM

401K goes to my Target 2055 fund, Top 5 holdings are:
T. Rowe Price Growth Stock 22.84
T. Rowe Price Value 20.69
T. Rowe Price Equity Index 500 7.48
T. Rowe Price International Stock Fd 7.14
T. Rowe Price Intl Gr & Inc 7.02

Net expense ratio: 0.78%

Is that good?

**parafly** · 09-09-2013, 02:19 PM

It looks like you are in a very good financial position.

Your goal for retirement savings should be 15% of your gross income. In your case, that's $10800 per year for retirement. Personally, I would open a Roth IRA and fund it fully every year with $5500. Ramp up your 401K contributions from 6% to 7.5%. Your choice of a Target 2055 fund is a good one. This combination of moves will get you to your 15% goal for retirement savings, and you will have a good balance between pre-tax and post-tax accounts.

Take $16K out of your savings account and pay off your student loans immediately. This will free up monthly cash flow, and it automatically gives you a guaranteed 5.5 - 6.5% return on your money. You will no longer have any debt hanging over your head, and your emergency fund is still in very good shape.

Your extra monthly cash flow moving forward should be saved for big ticket items down the road (grad school, home purchase, wedding). If the money is not needed for a few years, you should look into some combination of savings accounts, CD's, and mutual funds in a taxable investment account.

**ideasonfinancing** · 09-09-2013, 06:58 PM

You have to work on your liabilities first before doing anything else so I suggest settle your debts on your student loans.

The stock market is a tricky business. Do not involve yourself in it unless you completely understand how it goes. You will just end up betting your money if this will be the case.

**BMEPhDinCO** · 09-10-2013, 10:54 AM

Originally posted by parafly View Post

It looks like you are in a very good financial position.

Your goal for retirement savings should be 15% of your gross income. In your case, that's $10800 per year for retirement. Personally, I would open a Roth IRA and fund it fully every year with $5500. Ramp up your 401K contributions from 6% to 7.5%. Your choice of a Target 2055 fund is a good one. This combination of moves will get you to your 15% goal for retirement savings, and you will have a good balance between pre-tax and post-tax accounts.

Take $16K out of your savings account and pay off your student loans immediately. This will free up monthly cash flow, and it automatically gives you a guaranteed 5.5 - 6.5% return on your money. You will no longer have any debt hanging over your head, and your emergency fund is still in very good shape.

Your extra monthly cash flow moving forward should be saved for big ticket items down the road (grad school, home purchase, wedding). If the money is not needed for a few years, you should look into some combination of savings accounts, CD's, and mutual funds in a taxable investment account.

Yeah... that! At your age, no reason to keep the debt, even if mathematically it *MIGHT* make sense. Pay it off with your account, put $5.5k into a Roth for 2013, with the remaining $9,700, fund a car account (next car, maintenance, repair, registration, etc) of $2,700. Fund a medical fund of your deductible. Fund a I want ___ fund of $1k (ie, new phone, computer, tv, gifts for others, clothes). Fund a travel/hobby fund of $1k. With the remainder, decide if you have anything big coming up (ie,wedding, grad school, house) and if not, open an investment account and put that in there... long term holdings.

Next year, the first $5,500 extra goes into your Roth, then same idea as the rest of the paragraph above.

**md0127** · 09-10-2013, 01:19 PM

Originally posted by BMEPhDinCO View Post

Yeah... that! At your age, no reason to keep the debt, even if mathematically it *MIGHT* make sense. Pay it off with your account, put $5.5k into a Roth for 2013, with the remaining $9,700, fund a car account (next car, maintenance, repair, registration, etc) of $2,700. Fund a medical fund of your deductible. Fund a I want ___ fund of $1k (ie, new phone, computer, tv, gifts for others, clothes). Fund a travel/hobby fund of $1k. With the remainder, decide if you have anything big coming up (ie,wedding, grad school, house) and if not, open an investment account and put that in there... long term holdings.

Next year, the first $5,500 extra goes into your Roth, then same idea as the rest of the paragraph above.

My health insurance plan includes a Health Savings Account that has a current balance of $1,350 and my employer contibutes $150 per quarter.

And I have a company car so I don't pay for any gas, maintenance, repairs, etc. My 2002 Honda Civic is sitting in the driveway extending it's life.

I appreciate all the advice. Looks like I'll start knocking off those student loans.

**Nocrash** · 09-12-2013, 05:17 AM

Step One is ALWAYS remove debt.ALWAYS.

**Nocrash** · 09-12-2013, 05:22 AM

Originally posted by md0127 View Post

401K goes to my Target 2055 fund, Top 5 holdings are:
T. Rowe Price Growth Stock 22.84
T. Rowe Price Value 20.69
T. Rowe Price Equity Index 500 7.48
T. Rowe Price International Stock Fd 7.14
T. Rowe Price Intl Gr & Inc 7.02

Net expense ratio: 0.78%

Is that good?

Yes but at 65 I have this thought about target funds, first they are a good idea but 2055 is 40+ years away and portfolio adjustment is always wise from time-to-time. Imagine what changes will come in the next 40 years. I have been with TRP for ages and Vanguard and am worry free because of them both. I would add their Small Cap Value to your holdings.

What to do with extra money??