Student Loans Vs. Investing Sedona AZ

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

Desert Hills Bank - Sedona
(928) 282-7440
2785 W State
Sedona, AZ
 
M&I Bank
(928) 204-8802
2010 W State Route
Sedona, AZ
 
National Bank of Arizona
(928) 204-1060
1470 W State
Sedona, AZ
 
Copper Star Bank
(623) 643-0800
7655 W. Thunderbird
Peoria, AZ
 
Loan Mart
(480) 812-0955
985 W Elliot RD
Chandler, AZ
 
Wells Fargo Bank
(928) 282-7145
2201 W State Route
Sedona, AZ
 
Arizona State Credit Union
(928) 203-7552
140 Coffee Pot
Sedona, AZ
 
Chase Bank - Village of Oak Creek
(928) 284-1030
6666 State Route 179
Sedona, AZ
 
Loan and Go
(480) 833-9820
2011 E University DR
Mesa, AZ
 
Wells Fargo Bank
(928) 282-7145
2201 W State Route
Sedona, 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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