Assume you have graduated from college and have a good paying job. If you had to commit to investing regularly right now, how much money would you put away every month? How does your view compare...

Assume you have graduated from college and have a good paying job. If you had to commit to investing regularly right now, how much money would you put away every month? How does your view compare with the views of other members of your class?

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gsenviro's profile pic

gsenviro | College Teacher | (Level 1) Educator Emeritus

Posted on

Well, an interesting question and the answer depends on a number of factors. The most important factor is any liability I may have, especially in terms of education loan or car loan or credit card bills. The first priority is to get rid of all the loan since the interest rates are fairly steep. However, I would try to put away as much money as possible every month (after taking care of my liabilities). 

At the very least , I would like to invest 20-25% of my paycheck every month. An early start is always useful in investing, since it provides a longer time frame and is aided by power of compounding (returns are compounded). And I would hope that this investment is apart from my 401 (k) contribution. 

My classmates would have their own opinions on this. Some may have much higher loans and credit card bills than I do or other liabilities (mortgage, etc.). Some of them may be saving for short-term goals such as marriage or further education or a new car/truck. I would say that, in comparison to my peers, 20-25% savings is a pretty good number and would put in the top investing echelon among my peers.

hope this helps. 

medinamc's profile pic

medinamc | High School Teacher | eNotes Newbie

Posted on

My brother came out of pre-med studies with an overwhelming pressure to work until his loans were paid off until he took on another loan for a graduate degree. It does seem like an endless race to the finish line, but I always believe in stopping to smell the roses (enjoy life and spend the money you do have.) 

A good rule of thumb is to have at least 3 months of expenses saved in case of emergency. So if you have $1000 worth of bills, then $3000 is a good cushion to have put away in an accessible account. The next step is to pay off high interest and/or smaller loans. Consolidate loans from low interest borrowers if need be, and always pay more than the minimum if possible. 

The goal is to tackle one loan at a time like a domino line, and to maintain the same budget until the debt remaining is paid off, and larger investments are more manageable. So it looks a little like this:

September Budget

  • Car Loan- $200 $800 remaining balance
  • School Loan- $500 $25,000 remaining balance
  • Total monthly expenses= $700

December Budget

  • Car Loan- $0 remaining balance
  • School Loan- $700 $23,000 remaining balance
  • Total monthly expenses= $700

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