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.

Parkway Bank
(623) 487-1119
7581 W. Thunderbird Road
Peoria, AZ
 
Eazy Pickn Pawn
(480) 964-8701
118 N Alma School Rd
Mesa, AZ
 
Arizona Central Credit Union
(602) 264-6421
6901 W. Bell Road
Glendale, AZ
 
One Stop Check Cashing Payday and Title Loans
(480) 726-1509
940 N Alma School RD
Chandler, AZ
 
Meridian Bank
(623) 932-4000
11 W. Van Buren St.
Avondale, AZ
 
Bank of America
(480) 365-7280
8750 E Raintree DR
Scottsdale, AZ
 
Desert Hills Bank - Sedona
(928) 282-7440
2785 W State
Sedona, AZ
 
Arizona Equity Loans Inc
(520) 887-2000
2900 N Swan Rd
Tucson, AZ
 
Cash Time Title Loans Inc
(480) 733-0300
1133 W Broadway RD
Mesa, AZ
 
Credit Union West
(602) 631-3200
13708 W. Glendale Avenue
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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