'For the first time in your adult life, you can focus on your future instead of paying for your past.' charlottecowles writes
I need your help. I’m 38 years old, have never made much money, and always lived paycheck to paycheck. I also finished grad school in 2008 with close to $120,000 in student loans. Even though I made every monthly payment, those loans still grew to nearly $200,000 with interest over the years. Then, in 2020, they were forgiven as part of the Public Service Loan Forgiveness Program. Earlier this year, I received a big promotion at work and am now earning $160,000 a year with a bonus.
Thankfully, my rent is affordable. I was awarded an apartment in the NYC housing lottery years ago, and my rent, utilities, and internet expenses are about 15 percent of my income. I am trying to save $1,200 a month, with $500 going to my investment account and the other $700 to my savings account. Whatever is left at the end of the month, I move to savings.
First of all, congratulations on being one of the notorious few to claw your way through the Public Service Loan Forgiveness Program. If you managed to navigate that, you are practically superhuman — the very opposite of a failure. Your next steps may seem daunting, but they’ll be a piece of cake compared to the last decade of bills and red tape.
To figure out that plan, I talked to two certified financial advisers: Shannon McLay, the founder and CEO of the Financial Gym, and Bryan Stiger, a financial planner at Betterment. Both agreed that your next big goal should be to pay off your credit-card debt, but also to zoom out and look at the bigger picture.
The payment plan provided by your credit-card company isn’t a bad place to start, but you can fast-track it by taking a multi-pronged approach. Stiger points out that it could be worth cashing out some of your investment portfolio to pay off this debt more quickly — not all of it, but a significant chunk. Even with compound interest, that investment portfolio is never going to grow as fast as high-interest credit card debt.
As for your savings: One thing you should absolutely do — at the same time that you focus on your credit-card debt — is look into your retirement plan options. If your employer offers a matching program, take full advantage of it . That’s an efficient, effective way to start saving for your future without much effort.
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