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.

ACE Cash Express
(480) 456-2959
2722 S Alma School Rd
Mesa, AZ
 
Meridian Bank
(623) 972-1740
13373 N. Plaza Del Rio Blvd
Peoria, AZ
 
Southwest Student Services
(480) 461-9830
1555 N Fiesta Blvd
Gilbert, AZ
 
Wells Fargo Bank - Bashas
(623) 842-6080
5503 W. Northern
Glendale, AZ
 
Loan Mart Payday Loans
(520) 407-9566
5095 N La Canada Dr
Tucson, AZ
 
Washington Federal Savings
(623) 334-9724
6895 W. Bell Rd
Glendale, AZ
 
State Farm Ins. - Maria Casebeer
(623) 412-2770
8392 W. Thunderbird Rd. # 101
Peoria, AZ
 
Arrowhead Community Bank
(623) 776-0800
17235 N. 75th Ave. Ste. # B-100
Glendale, AZ
 
Bank of America
(480) 365-7280
8750 E Raintree DR
Scottsdale, AZ
 
Chase Bank - 8280
(602) 589-3039
8280 W. Lake Pleasant Parkway
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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