Hey folks, first of all, I’m F22 working in sales and trying to prepare for the future. I’ve been staring at my budget for hours, trying to find ways to put more money toward my student loans and save for the future, but I think I’ve squeezed every last dollar I can. Before I accept that, I’d love a fresh set of eyes—maybe someone here will catch something I didn’t. Right now, my top priorities are paying off my debt as quickly as possible and saving as much as I can. My biggest focus is my $74K in private loans at 7.2% interest, which I’m aggressively paying down. I also have $21K in federal loans at 4.11% interest, spread over six loans, and I’m applying for forbearance on those so I can direct all my extra cash toward the higher-interest private loans. Over the past 10 months since graduating, I’ve managed to pay off $26K in student loan debt, and I want to keep up that momentum. My income fluctuates since I work on commission, but I had a few really good months last year, which helped me make bigger payments. At the same time, I’m trying to balance saving for the future. I have a high-yield savings account where I’m setting aside money for different long-term goals: $50K for a future home, $30 a month toward baby expenses (not expecting for many years, just planning ahead), and $7K for a used car down payment. I’ll never buy a new car, so I just want something reliable when the time comes. Once my loans are paid off, I also want to open a Roth IRA to start saving for retirement, but right now, every extra dollar is going toward debt. I’m new to this forum and don’t know how to add photos to the post, so I added a link for pictures of my budget, which includes my savings goals and spending plans. I’ve already cut out unnecessary spending and moved money around as much as possible, but if anyone sees something I might have overlooked or has suggestions on how to optimize my approach, I’d really appreciate it.
The Reddit prime directive would suggest you stop saving for stretch goals to tackle high-interest debt, and I would agree. You’d save up about one month of your minimum fixed costs—groceries, housing, transportation, minimum debt payments—and then start tackling the debt aggressively. The one month fund will protect from smaller emergencies and make sure you don’t have cash flow or overdraft issues. After the debt is gone, save up an emergency fund of six months’ expenses. Then start saving for a house. If you feel there would be a need for a car purchase in there, you can pause to save up for that. I like that you have a buffer line for unforeseen expenses. I don’t mind the gifts as it’s a pretty small portion; I think 5% or so going to discretionary spending is fine even when paying down debt and building an emergency fund. Also, take any 401(k) matching if you’re offered it. After you have the six-month emergency fund and high-interest debt gone is when you add in retirement investing, at least 15% of your income. You can also add in discretionary spending at that point; how much of that you do versus saving for a house down payment is up to you.
@Baylen
I really appreciate your insight—thank you. This approach makes a lot of sense. I’ve struggled with the decision to allocate money toward savings while still carrying high-interest debt, but after giving it more thought, it’s clear that focusing on debt repayment is the more strategic choice. Preparing for the future is important to me, but it’s ultimately more beneficial to eliminate the financial burden of high interest rather than contribute to savings goals that don’t need to be met for years.
@Yani
Glad to hear that. It’s tough to balance everything, but focusing on the debt will give you more freedom later.
As for retirement accounts, I’ve been hesitant to contribute to my company’s 401(k) since it has a five-year vesting period, and I’ve been job searching since the moment I was hired. I also lean toward a Roth IRA because I hope to increase my income over time, and while I’m in a lower tax bracket (earning $42K a year), it seems logical to contribute post-tax now rather than pay taxes on withdrawals later. That said, I recognize that I may be naive in my thinking, as I don’t have a deep understanding of government retirement accounts like 401(k)s and Roth IRAs. I’m actively doing more research to ensure I’m making the most informed decision.