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.

Arizona Business Bank
(602) 240-2736
2600 N. Central Ave.
Phoenix, AZ
 
Desert Hills Bank - Sedona
(928) 282-7440
2785 W State
Sedona, AZ
 
Chase Bank - 8978
(623) 362-3735
8978 West Union Hills Dr # 106
Peoria, AZ
 
Meridian Bank
(602) 212-3999
1675 N. 95th Ln.
Phoenix, AZ
 
Washington Mutual
(623) 435-5314
5849 W. Northern
Glendale, AZ
 
Chase Bank - 9790
(602) 589-3603
9790 W. Peoria Ave
Peoria, AZ
 
Buckeye Checksmart
(480) 917-3100
135 E Ray RD
Chandler, AZ
 
Wells Fargo Bank
(623) 875-0720
9901 W. Thunderbird Road
Sun City, AZ
 
One Stop Check Cashing Payday and Title Loans
(480) 726-1509
940 N Alma School RD
Chandler, AZ
 
Meridian Bank
(623) 972-1740
13373 N. Plaza Del Rio Blvd
Peoria, 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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