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I am 22 years old and am going to college for accounting and will graduate in 2012. I work a part time job and contribute 6% of my income to my 401k which is the max that my employer matches. As of now I have $2000 in my account after about 14 months. My question is should I increase my contribution rate now or should I wait until I graduate and get a better job.
I have $5000 in credit card debt from books and car problems as well as some stupid purchases by me which I am also paying down. The interest rate is 12%. I will have about $70,000 in college loans since I had to go to school an extra 2 years since I changed my major to accounting in my junior year.
I plan on living below my means once I graduate and pay off as much of my loans as possible in the first few years after I graduate before I start looking for a house. . Is this situation going to be manageable once I get my card payed off assuming I get a job paying about 30-40k after I graduate and contribute about 15% to my 401k?
Agree. Make a goal to bump it up to 10% AFTER you've paid of credit card debt and have about 6 months of living expenses (emergency fund) in liquid savings. You're doing great for 22!
Do you know what your monthly loan payment will be after graduation? I would try to pay off all your credit card debt in the grace period before your loan payments start as they will take a good chunk of your take home every month.
My loan payments will be about 800-1000 but I plan on paying as much extra cash as I can. I plan on paying off my card by the time I graduate with my tax refunds. Perhaps I will pay the minimum and put about at least 3000-5000 away in an online high yield savings account first. I also plan to start contributing to a roth IRA once my school loans are reduced to a much lower level. I guess it all depends on how quickly I find a job.
My loan payments will be about 800-1000 but I plan on paying as much extra cash as I can. I plan on paying off my card by the time I graduate with my tax refunds. Perhaps I will pay the minimum and put about at least 3000-5000 away in an online high yield savings account first. I also plan to start contributing to a roth IRA once my school loans are reduced to a much lower level. I guess it all depends on how quickly I find a job.
This doesn't make sense if you're paying 12% interest on your credit cards and only making 2% MAX in a "high-yield" savings account. Pay off the credit card debt first......unless you won't have any money to live off of between graduation & finding a job. In that case, save what you need for a few months & then put all your extra money towards the cc debt.
There were no such thing as a 401k plans until I was in my 40's, and I still managed to accumulate around $200k by retirement time, so if you are starting at 22, and stay diligent, you'll have a crap pot full of money by the time you reach retirement... That extra 20+ years you have on me will make an incredible amount of difference by retirement time....
You sound like you have a good head on your shoulders, stay away from CC's and unnecessary debt and you will end up financially secure...
I agree you are doing quite well to be building up a 401K while still in school.
Offhand I would say contribute to the 401K only up to the employer match and use the extra money to pay off the CC debt. Look around, you may be able to find a 0% transfer for that $5K of CC debt, Capital One is good for this sort of thing.
$70K of student loans sounds like a lot to me, but at least you are getting a major that should get you a decent job - step daughter is in accounting, and doing well with it.
Donn makes a good point that getting the money into your 401K now while you are still quite young will make a lot of difference, letting the compound interest work for you for over 40 years.
Of all the terms that could have been used to describe a quantity....
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