Student Loans Vs. Investing Flagstaff AZ

A young grad wonders whether to start an investment plan or pay off her college student loan debts instead.

BNC National Bank
(602) 508-3760
20175 N 67th Ave
Glendale, AZ
 
TCF Bank
(602) 716-8955
7570 W Cactus Rd.
Peoria, AZ
 
Wells Fargo Bank
(623) 842-6080
5503 W. Northern
Glendale, AZ
 
Mutual of Omaha
(623) 815-4300
10220 W. Bell Rd.
Sun City, AZ
 
Mission Oaks National Bank
(480) 505-7060
1425 W Elliot Rd
Gilbert, AZ
 
Credit Union West
(602) 631-3200
20155 N. 67th Avenue
Glendale, AZ
 
Cash Time Title Loans Inc
(480) 733-0300
1133 W Broadway RD
Mesa, AZ
 
Bank of America
(480) 365-7280
8750 E Raintree DR
Scottsdale, AZ
 
Bank 1440
(623) 334-6048
14155 N. 83rd Ave. Ste. 117
Peoria, AZ
 
Wells Fargo Bank - Bashas
(623) 842-6080
5503 W. Northern
Glendale, AZ
 

Student Loans Vs. Investing

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Dear YOUNG MONEY,

I am a young grad now making $33,000. I have $26,000 in college loan debts and I am looking to pay off $100-$200 a month. I want to start investing in a mutual fund, contributing to a Roth IRA and investing in my company's 401(k) plan. Is this too much [at one time]? I want to start some sort of investing/savings for my future and need some help. Thank you.

Sarah Nickerson

Dear Sarah,

You are wise to begin your investment/savings plan at a young age. At this point it is not the amount that matters, it is having a plan and the discipline to stick with it that will pay off down the road when the numbers are larger. Start by identifying your financial goals. In your question you mention several:

  • Pay off the student loans.
  • Roth IRA (Retirement)
  • 401k (Retirement)

Keep in mind that with this type of strategy you will be assuming greater risk. If you prefer to manage risk and be more conservative, then a more balanced allocation of equities, bonds and money market would be advisable. In this case, more information is needed before specific recommendations can be made.

You probably have some shorter-term goals as well, such as saving for a home or car.

You should definitely participate as much as possible in your company's 401(k) plan. Contribution limits for 401(k) plans are currently: $11,000 for '02, $12,000 for '03, $13,000 for '04, $14,000 for '05, $15,000 for '06, and then indexed for inflation thereafter. Pre-tax dollars go in, and depending on the plan, your employer may match part of your contribution. Free dollars! A Roth IRA is a good idea, but you should first max out your 401(k) before contributing to a Roth IRA....


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