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Hi everyone, I am new to the forum but it seems as though everyone here is pretty knowledgable and helpful- and representative of the general public so I would love your guidance/advice.
I just finished graduate school, my Master of Accountancy in particular, and am currently studying to take the CPA exam. I am starting a new job in Dallas as a Financial Analyst for a large corporation, making $81k plus bonuses and profit share. I am single, currently have about $26k in student loans to pay back, about $1k in cc debt, and hardly anything in my savings.
What do you think the smartest thing is that I do with my money? That salary is 5 times more than what I made all through college every year working in the mall so i know I will be set- I just wanna make sure im not reckless with it either. I really need a new car and was also considering saving for a home down payment. But I really am concerned as to whether I should hurry and pay down my student loans or spread it out. My employer will match up to 4% in 401k, dollar for dollar.
Holy crap. $81k? That is significantly more than most MSA grads make right out of school. Great job.
My advice:
-Get rid of the credit card debt. You should be able to do this quickly given your income.
-Establish an emergency fund. 6 months of living expenses is a good goal, in my opinion.
-Max out your 401k, a dollar for dollar match is awesome. Make sure you check to see what the vesting period for the match is, if any.
-In terms of your student loans, I would say that it depends on the interest rate. My boyfriend's are fixed at 2%, so we never pay extra on it--invest instead. Some people feel more comfortable aggressively paying them off in full for the piece of mind though, even when the interest rate is very low. Mine, on the other hand, average around 5.5%, so I pay extra towards the principal every month since I haven't been getting much more of a return than that on investing.
The car buying situation is up to you, I would personally buy used since new cars lose so much of their value so quickly.
Good luck passing the CPA exam! I'm studying too...
I second Billiken's sage advice. The only thing I would do differently is make paying off the student loan a priority. I would build a three month reserve since you are single and pay off that student loan as fast as I could.
The other thing I would recommend is that once you get rid of your current debt is to save 20% of your income between a Roth IRA (max) and the rest into your employer's 401(k).
Buy the cheapest car your ego can afford and have some serious fun!
Read Suz Orman's book about being young, single and broke. It is a great read for fresh out of college students with or without a job. It gives you lots of advice on how much to save, where to put it,etc. I bought it for my daughter who is a senior in high school.
I agree on the Dave Ramsey Plan. If you follow it all your working life, the retirement will be awesome!!!!!!! Debt free is the best feeling in the world.
As for a car, I bought used cheap for cash as I could afford it. I saved in a special account and upgraded cars as possible with cash. This week, I paid cash for the Mercedes I always wanted. I want to stick the free and clear title in the window becasue it feels so good.
Hi everyone, I am new to the forum but it seems as though everyone here is pretty knowledgable and helpful- and representative of the general public so I would love your guidance/advice.
I just finished graduate school, my Master of Accountancy in particular, and am currently studying to take the CPA exam. I am starting a new job in Dallas as a Financial Analyst for a large corporation, making $81k plus bonuses and profit share. I am single, currently have about $26k in student loans to pay back, about $1k in cc debt, and hardly anything in my savings.
What do you think the smartest thing is that I do with my money? That salary is 5 times more than what I made all through college every year working in the mall so i know I will be set- I just wanna make sure im not reckless with it either. I really need a new car and was also considering saving for a home down payment. But I really am concerned as to whether I should hurry and pay down my student loans or spread it out. My employer will match up to 4% in 401k, dollar for dollar.
Any advice or input is appreciated! thanks!!
I was in your shoes 18 years ago VERY similar when adjusted for inflation etc.
1) Your first year out of school, live CHEAP. Don't get an awesome apartment, new car etc. (Can you get just one more year out of your current car? Get a used one?) Unless you can get a cosigner or have good credit, that new car for 20k might wind up costing you 30k.
Living arrangement and car are your 2 biggest areas to save $$$. I lived in a metro area so I got rid of my car and had roomates. I killed my student loans off in 1 year and 2 years after that got married and was able to make the downpayment on my first home while paying for some of the wedding costs.
2) Pay off your student loan in <2 years via autopay and then keep that level of savings towards your own house etc. It's not tax deductible, get all that bad debt retired before doing much savings.
3) Taxes are going to kick you in the stones, consider a larger 401k contribution now (>10%) and then you can lower it down to just the company match as you get older and can itemize home interest and have dependent deductions. Obviously, putting <4% in is not even on the table and with your degree you are no dummy.
FYI - My student loan interest rate was 8%, not tax deductible. Paying it down was the same as finding a risk free investment offering an 8% after tax rate of return. NO BRAINER.
I agree on the Dave Ramsey Plan. If you follow it all your working life, the retirement will be awesome!!!!!!! Debt free is the best feeling in the world.
As for a car, I bought used cheap for cash as I could afford it. I saved in a special account and upgraded cars as possible with cash. This week, I paid cash for the Mercedes I always wanted. I want to stick the free and clear title in the window becasue it feels so good.
Damn Straight!
I turn 40 in a month and only owe about 30% of my house value in terms of mortgage). I can pay it off if I want but want to stay liquid and ZERO other debt and retirement, college etc. in great shape. If I do nothing more it will be paid off in 6-7 more years.
I too splurged on a sportscar I'd been eyeing after my wife died. Wandered in with my gradeschool aged kids in tow, wearing sweatpants etc. as I'd been mowing the lawn. The look on the salesmans face when I told him I wouldn't be financing it was priceless.
I just finished graduate school, my Master of Accountancy in particular, and am currently studying to take the CPA exam. I am starting a new job in Dallas as a Financial Analyst for a large corporation, making $81k plus bonuses and profit share. I am single, currently have about $26k in student loans to pay back, about $1k in cc debt, and hardly anything in my savings.
What do you think the smartest thing is that I do with my money? That salary is 5 times more than what I made all through college every year working in the mall so i know I will be set- I just wanna make sure im not reckless with it either. I really need a new car and was also considering saving for a home down payment. But I really am concerned as to whether I should hurry and pay down my student loans or spread it out. My employer will match up to 4% in 401k, dollar for dollar.
Any advice or input is appreciated! thanks!!
You are in a great position.
1) Rent--Dallas is cheap and property taxes are high. Rent simply in a safe 'hood.
2) Pay down CC debt immediately
3) buy a good used car
4) Max out 401K plus IRA--invest in a broad mutual fund from a place like Schwab with plenty of international exposure. Avoid the fads.
5) When you feel the urge to splurge, do so with intelligence
Fixed price lunch rather than dinners out
More home cooking
Wine rather than hard liquor or beer
Forego electronic toys
Buy 2-4 year old technology--don;t chase the cutting edge.
Good smart clothes--avoid the top retailers
Pay down your student debt--but after the CC
DO NOT let your cc bill top 1000 for longer than one month. Discipline.
Try to save 30% of your gross salary inclusive of the IRA & 401k. You are used to living on peanuts--take advantage of that default austerity.
Use that high savings to pay down your student debt.
You should be able to pay it off completely within three years.
You are in a great position. The next three years are critical. You have a chance to exit with considerable cash and freedom from debt. DO it right and you'll be in a great position going forward.
Congrats.
S.
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thanks!!
