Advice for a 25 Year Old

[surethang]

Hi everyone,

I recently graduated college and took employment.

I have saved some money over the past few year and feel that there could be something better to do with it besides sit around. My current situation looks like this;

$7k in bank accounts

$32,000 student debt (low interest rate) $350/mo 9 years left
$181 a month car payment
$487 Rent

This leaves me with some money at the end of the month. Is there something I can do with the money I have saved?

[bjl584]

How much do you earn?

Before doing anything, you need an emergency fund. What are your monthly expenses? If 7K represents 3 months worth of living expenses, then you can start saving elsewhere.

Does your employer offer a 401K?

Have you looked into setting up a ROTH IRA?

[snafu]

It helps to have goals and a plan to get there....kind of a financial road map. You list a few regular expenses but I'm sure you have other expenses like vehicle operation and maintenance, insurance, food, entertainment and more. While retirement is very far in the future, you're in a perfect position to use the magic of compounding to turn a small monthly sum into truly serious wealth. 1st, does your employer offer any matching retirement dollars? That's free money you don't want to ignore.

There are lots of good ideas but more information allows suggestion that serve you, do-able and are in your best interests.

[CashUp Sammy]

congratulations on getting yourself a job post college.

'tis a great time to be compounding. Look at newly listed and longly listed companies. DYOR and invest following revenue.

[tripods68]

Hi everyone,

I recently graduated college and took employment.

I have saved some money over the past few year and feel that there could be something better to do with it besides sit around. My current situation looks like this;

$7k in bank accounts

$32,000 student debt (low interest rate) $350/mo 9 years left
$181 a month car payment
$487 Rent

This leaves me with some money at the end of the month. Is there something I can do with the money I have saved?

Congratulations on getting a new job!

First thing you need to do is PAYOFF your STUDENT LOAN using all your available cash that include your $7K savings. Once that is paid off....PAY OFF your CAR next--using debt snowball. You will get this paid off in no-time.
I don't recommend your invest in any retirement until you are debt free. You have plenty of time to invest in retirement in a year or two. But your main goal should be pay off your Student loan + Car. Once those are paid off, start saving 3-6 months of EF. Then start investing towards your company retirement like no other.

Good Luck and Congrats!!!

[surethang]

How much do you earn?

Before doing anything, you need an emergency fund. What are your monthly expenses? If 7K represents 3 months worth of living expenses, then you can start saving elsewhere.

Does your employer offer a 401K?

Have you looked into setting up a ROTH IRA?

I currently earn $32,000 for the first few months until I get put up for a raise.

I was wondering what to do with the $7,000. It is hard because I am young and would hate to see all that money disappear, but I know that I can earn it back with my technique for saving.

Does anyone have a thought about potentially investing in a small house to start the mortgage? I have 8 1/2 years left on my student loans at $350 a month

[autoxer]

Does anyone have a thought about potentially investing in a small house to start the mortgage?

I wouldn't consider my home an investment, unless I had tenants paying rent. There are so many ongoing expenses (like insurance, taxes, interest, utilities), no cashflow and no liquidity. I'm certainly not against home ownership, just don't get in over your head for the wrong reasons.

I agree with the others, watch your spending and figure out an appropriate size emergency fund. Learn about 401k's, IRA's and Roth IRA's. Live below your means. Go to the library and read some books about money (Your money or your life, Richest man in babylon, millionaire next door, the automatic millionaire). Learn to track your cashflow and your net worth.

Your investment could be as simple as paying off the debt ahead of schedule. It might not be as sexy as investing in the stock market or real estate rentals, but freeing yourself from those monthly obligations, can be very rewarding even if you sacrifice some return in the process.

[electric_mikey]

i couldn't agree more with people here, especially with always do your research. investment is not rocket science, as a matter of fact, even rocket science is not rocket science, if you catch my pun.

it's all about getting on with the times, gathering data and making decisions based on that data.

[dczech09]

Hi everyone,

I recently graduated college and took employment.

I have saved some money over the past few year and feel that there could be something better to do with it besides sit around. My current situation looks like this;

$7k in bank accounts

$32,000 student debt (low interest rate) $350/mo 9 years left
$181 a month car payment
$487 Rent

This leaves me with some money at the end of the month. Is there something I can do with the money I have saved?

From the sound of things, you can make your payments on your debts and still have money left-over. Suffice it to say, you are in a comfortable place, which is great!

You have gainful employment. So we do not need to worry about that.

You need a balanced budget. If you are not already living on a budget, get on one! A budget will help you manage your money well. And it is not difficult to do at all.

You have saving, which is great! To answer your question, you should keep upwards of $3,000 of your savings for emergencies. You need a small emergency fun to keep you out of trouble while you pay off your debt.

After that, I would focus on paying off debt. Use any of the extra savings, as well as your income to pay off your debt. Focus on the car loan first and pay it off as fast as you can. Aside from it being your smaller type of debt (and probably your higher interest rate debt), a car loan is one of the worst types of debt to have hanging out. Consider this- you pay off your car, then you free up $181 per month to put towards your loans (or savings for a new car if need be).

Once you car is paid off and all you have left is your student loans, you could consider investing a small amount for retirement. Enough to get your match on your 401k, or maybe even $50 per month or so in a Roth IRA. I would not go crazy with investing at this point, but do just enough to get started. Build the habit of investing, and take the time to learn how the market works so that you can gain some comfort.

Focus on paying off the student loans. Becoming debt-free is one of the best things you can do for yourself and it will put you in a better position to consider home-ownership.

DO NOT rush into home-ownership. Renting is okay for a while. Pay off your debt first. After you pay off the debt, build up the emergency fund to equal 3 to 6 monts of savings. After that, save up for a down-payment on a home. Just do not do these things out of order!

Be patient. You will get there, but enjoy the ride!

[dczech09]

I would really appreciate if someone can explain one thing for me. By the time we (I'm also 25) get to retirement, $ are going to be worth a lot less then they do now (we'll be able to buy will with $10) then what is the point of putting off small amounts this early on? Sure it makes sense but just don't seem that it will give us much once we get there....

The general inflation rates runs at about 3% per year. So this means that money that we have today will be worth approximately 3% less in one year. By investing in some decent mutual funds, you could see a return on investment much higher than 3% per year (which would mean you money would grow faster than the rate that its value is decreasing). This is basically the premise of investing - make your money grow!

At the age of 25, you want to be making steps to improve your finances. Essentially, you want to build habits that will help you become a financial success in the future. I personally recommend that people build on these habits while in their 20's (Disclosure: I am in my twenties too )

Thinking long-term by investing is something I recommend you do while in your 20's. Not necessarily to make a lot of money. You want to do this so that you can start building that good habit while young, that way it carries through while you are older. Remember, every dollar that you put into your 401k or IRA cannot be spent on other things. So when you invest for retirement, you need to get used to living on less!

This is why I teach something called EASE into retirement investing. You can to EASE into the process by starting out small and building up. For example, I invest over $700 per month these days. However, when I started out, I was only investing $50 per month. I built it up over time and got used to living on less and less in the process. It also helped me establish a habit of investing.

This is why I recommended that the OP invest a small amount while paying off student loans. It won't make them wealthy, but it is a start on a good journey (a good habit) that will eventually make them wealthy.

[AlexM1359]

paying off that debt as soon as possible is what i suggest!
where do you work? do you have any income and if so how much...because ud need to create a plan based on your money coming in too

[AlexM1359]

Make bulk payments on your loans, and then you can save all you could possibly want. Also jelous you only pay less than 500$ a month in rent, its about $1800 for me haha. Best of luck!