Should you pay off your student loans or save for your retirement first? This question poses the trade-off: having less money to pay toward student loans or not contributing as much to your retirement account. Especially for young professionals who have less disposable income, the challenge is determining how best to designate those funds.
Here are some things to consider when deciding how to allocate your money:
- Before you make any other financial decision, set aside an emergency fund: This fund should amount to at least 3 to 6 months’ worth of your expenses.
- Prioritize creating a personal monthly budget: Evaluate your monthly income (based on take-home rather than gross) and estimate your monthly expenses. Subtract those expenses (including your student loans) from your total income and that difference will give you an idea of how much is leftover to put toward retirement.
- If your student loan interest is high, consider putting more toward debt: Paying more toward your debt will help you pay less in interest and more toward the principal loan amount.
- Contribute what you can: Many advisors can attest to the fact that steady contributions to a retirement fund (even $20 or $50 a month in the beginning) will build itself over time because of compound interest. Starting younger gives the account more time to grow with interest AND investment returns, plus having a retirement plan through your workplace could mean you’ll receive employer matches, which is basically “free money”.
In summary, how to handle your finances is based on a number of personal factors like your debt load and how much you’ve already saved for retirement. Balance your short- and long-term goals and set yourself up for a secure future. Need more advice? Contact our team at https://qualifiedplanadvisors.com/contact-us/ and someone will reach out to you shortly!
Advisory products and services offered by Investment Adviser Representatives through Prime Capital Investment Advisors, LLC (“PCIA”), a federally registered investment adviser. PCIA: 6201 College Blvd., 7th Floor, Overland Park, KS 66211. PCIA doing business as Prime Capital Wealth Management (“PCWM”) and Qualified Plan Advisors (“QPA”). Securities offered by Registered Representatives through Private Client Services, Member FINRA/SIPC. PCIA and Private Client Services are separate entities and are not affiliated