I want financial advice.

[gremcint]

So the end of this month will result in something that I have not expected to happen for a while. I will have my credit cards paid off, my current tuition will be covered and next years' is already taken care of. See I'm a teaching assistant as well as a grad student. Scholarships and tuition and salary have equated to getting 880 a month for the last 8 months (not during summer), plus what I make at my part time job that averages 8 hours a week. I live with my parents and I do help out but basically assume that the part time job will be my pocket and fun money with the big paycheck being what I want to save/invest. Now next year it's only going to be 630 a month (entrance scholarship gone). This is a great situation, I have an opportunity to save some money for once.

Here's the problem somewhere within the next 1.5-2 years I need to start dealing with student loans, a lot of them. 55000 dollars worth. I'm not going into it. No interest right now and not growing. But it's there.

So what should I do with some money?

I'm thinking tax free savings account but is there an investment option that would provide a return that would be worth it with minimal risk?
This whole thing is new to me.
assume I have 400 to work with each month for 8 months next year (I'm debating whether my part time job is sticking around when I hit september)

[Aethian]

Start paying down on your student loans now so that when you get the interest it will be less. Put some of the money into a emergency account and the rest to another account to just let it grow to save up for your next step. And get rid of those credit cards, you don't need them.

[Chanlin]

Honestly one of the best things I ever did before starting college was ask around freinds and fam and talk to a financial adviser and set up an account through them. Between some starting money my grandparents gave me and being able to set aside $100 a month for a time I saved up a decent amount that is now my emergency cash fund.

Are your student loans FAFSA? If so, check into whether you qualify for any of the reduced payment plans. There are all sorts of extended repayment plans for FAFSA loans. For instance I qualified for the income contingent repayment plan which means my payments are next to nothing right now since I haven't had a job in the last year. These plans require you to reapply yearly, but they are well worth looking into.

Also... what Aethian said. Anything you can afford to pay down now will help in the long run.

[KhirasHY]

Some quick notes...first, I agree that doing what you can to pay towards the loan is going to help a lot down the road. Lower interest rates will screw you over less long term, and this country is horrifically in debt with student loans right now...not to scare you, but you need to be aware of the matter to be prepared for it.

As far as investing, you have a lot of decisions to make there. The younger you are, the more beneficial it can be to play around with investments like stocks and bonds, but you again need to understand the risks. Even the best analysts out there occasionally lose, such as when people harped about investing in real estate and banks a few years back, because they looked stable. The younger you are, the less a loss will hurt in the long run, because you have time to make up the difference as you get older. The best way to get started investing is through a 401k program, as those are usually through companies such as RW Baird (which I use), Oppenheimer, and so on. The best 401k programs are those run through specific companies, as many of them offer "matching" to a certain percentage (ie, one job I had would match up to 5% of your paycheck if you invested it...so if you got a $100 paycheck and had it set to send 5% right to the 401k - $5 - the company would add another $5 in on their own).

Before you make any sort of investment decisions, you need to heavily research the matter to make sure you understand the risk vs reward potential. You also need to be willing to both take a hand in your account, AND to be patient with the rapid fluctuations that will occur. IE, you may put $1,000 in, and look back later to see it's dropped to $750 value...then be up to $1250 the next day.

Now, the important thing with all of these options is you need to commit to one quickly, and keep yourself held to it. IMO, your loans need to be the number one priority, or they will come back to haunt you later. The more you can pay off before interest kicks in, the better. Just think of it as money you won't have until later, even if you never notice the difference.

Investment options are important too, but make sure that you can safely add to them over time, and keep the investment with someone you trust. The people I work at with RW Baird, for instance, have known my family for almost 35 years, longer than I've been alive. It's safe to say we've met. If you're starting your own investment account (as opposed to a 401k, which is easier to leave on its own), you need to do a lot of research and ask a ton of questions. If you don't understand what to look for, there are plenty of good guides out there in Internetland, so use them!

Good luck, and through everything, remember this one piece of advice...the best I can pass on

"Anyone who sees life as anything other than pure entertainment is missing the point." -George Carlin

Don't fret about it so much it ruins your day. Do what you can with it, but then live your life

[Tama]

I agree on the paying down the loans thing. Put some money in a 401k as well, so you'll be at least a little ahead when you finish paying your student loans.

Check fastweb, see if there are any scholarships that can help lessen the huge dent in your paychecks.

[taxguykarl]

Agreed with paying down that student loan. I see 50 y.o.'s who are still paying on them. As most can't be discharged in bankruptcy and tax refunds can be intercepted towards them, you'll pay one way or another. Keep it on your terms.
Come to think of it: Pay more than the minimum for all debts. Concentate on the one that you will be happiest to pay off--it will keep you excited about paying off the rest.
Definately some kind of emergency fund: somewhere between $1K and 8 months expenses...depending on the financial guru you consult/watch/listen to.
As for retirement: Definately look into matching from your work org--it's free money...and not taxes 'til you draw on it.

[PepperElf]

if anything you may want to talk to a financial specialist. perhaps someone from your bank?

[gremcint]

I probably will talk to someone but I just wanted some ideas.


I'm in Ontario Canada and loans are OSAP entirely.

A lot of people are telling me to put all the money in the loan, here's the thing the loan is not accruing interest until school is done. So even if I invest for a year and get 50, that's 50 more than I had before to put towards it.

Further this money is not just purely for loans but for me to get an apartment after I graduate and move out.

[Aethian]

No...start paying on it now, you don't want to have the interest go on a higher amount. You can put a 1/3 into the loan, 1/3 into a emergency account, 1/6 into regular savings, and a 1/6 into a well managed fund that could get you on average 10-12% IF you can leave it alone for more then 5 years.

[Tama]

No...start paying on it now, you don't want to have the interest go on a higher amount. You can put a 1/3 into the loan, 1/3 into a emergency account, 1/6 into regular savings, and a 1/6 into a well managed fund that could get you on average 10-12% IF you can leave it alone for more then 5 years.

I agree with that entire suggestion. Pay a little on the loan as you can and you'll have less to pay.

Say you have minimum loan payments of, oh, $200 a month. That's 275 payments, 22 years, just on the balance, not even counting interest.

If you're able to pay $100 a month on the loan for 18 months, you cut the amount to 266 payments.

But again, that's just the balance, not even touching interest.

[TawnyMyst]

The other thing you may want to check is if you can even pay down the loan. When I lived in Ontario and went to college there, I literally could not pay any money to my OSAP loan while I was in school, the bank and the government would not accept it. I put money in a separate account that would amount to the payments and as a consequence, was able to pay the full amount once the six months had passed after I graduated and I was finally allowed to pay.

[Chanlin]

A lot of people are telling me to put all the money in the loan, here's the thing the loan is not accruing interest until school is done.

See that's where Canada's Federal assistance is better than the USA. The USA has an interest deferred loan under FAFSA similar to what you have, but that is a smaller amount that you can borrow than the non-interest. You can borrow from both, but one of them starts accumulating interest from day 1.

There is a Repayment Assistance Plan you can qualify for if you feel you will have difficulty repaying the loans. I'd check with your school's financial aid office (or equivalent, eg the department that deals with the OSAP program at your school) and ask about what you can and can not start repaying now. EDIT: Looks like Tawny replied while I was typing. Tawny's response is the exact reason I made this second suggestion. You may not be able to start paying on the loan since it is interest deferred.

[Seshat]

See a financial counsellor.

Have the financial counsellor explain compound interest to you - and how taking money off the principal of the student loans (the initial loan) will amount to an awful lot of money saved in the long term. Probably more than you can make in interest if you save the money.

Probably, not certainly: which is why I suggest seeing a professional.

As for investments, here's a rule of thumb:

The higher the return, the greater the risk.
The lower the risk, the less the return.

You'll often hear the word "diversification" while you learn about financial matters. Diversifying investments spreads the risk...

For instance, if you have some investments in the mining industry, and some in the software industry, some in media and some in retail; then if one of those industries runs into trouble; you only have lousy returns on one quarter of your total investments.
But you have to be careful about diversifying: some people 'diversify' by buying four different companies in the same industry - which winds up with them being surprised when all four tank at the same time.
Or if you diversify into interrelated industries, the tanking of one can cause the other to tank.


All of that said: read good books written by people who aren't trying to sell you anything (well, except their book). And please please please, get professional advice.

[Aethian]

Just don't keep the student loan around like it was a pet. I got rid of mine as fast as I could and still had problems because the way a payment we t in and interest accrued they owed me 41 cents. I still haven't seen it and I still get random calls about it every so often.

[gremcint]

I'm not planning on keeping my debt as a pet. The way it works is until I'm out of school no interest is gathered and I don't have to make payments, and there is no retroactive interest. so if I can invest that money and make a little bit more then I have that much more to pay with later.