I know you mentioned it in your post, and I’m certainly on the side of “no monthly debt payments feels pretty good”. What Amanda did had a guaranteed return, although not potentially the highest.

I guess it comes down to the simple fact that we all have different personality types and goals. Some people like security and freedom. Others have a strong stomach for risk with potential returns.

I’d guess that Amanda is more in it for security and freedom. On top of that, once she gets all her debt paid off she can put a lot more toward investment than she could if she had debt.

2/ Mr. Contrary: Lord save us: people are still saying how splendidly they could be doing, if they invested all this money in stocks and it went up 30%?!

Hello?! Are you watching the financial markets, Mr. Contrary? This lady has achieved almost financial certainty, as she paid off almost all her loans.

Whereas under your advice, she’d still be foolishly risking her loan payments to go speculate in the markets, in one of the most extraordinarily volatile period in recent years. Yes, you’re right – maybe she could make more money, maybe she could also lose her shirt. This way, she’s set, once she gets that last US$8,000 paid off.

This is why so many retirees and pre-retirees are wracked with fear, as they head into what should have been their golden years, because they gambled the rent money on foolish speculative bets, and stocks
got crushed in 2008. They weren’t stupid, they just never expected such a terrible stock slide, and they also held out for the last dollar of gains. It has been a terribly painful lesson for many pre-retirees who were mainly invested in stocks.

Mr. Contrary: did you have student debts and did you pay them off and if so how quickly?

People, there are still some harsh economic winds blowing. Don’t be 100% in stocks, and certainly, as you get older, ratchet down the stock portion a bit.

Keep an emergency fund. Suze Orman says make it 8 months.

that’s my thought! Go Amanda! SPM

I can appreciate another point of view at anytime. I do have some money in the stock market etc that I didn’t outline there because it’s not secure – plus I have to focus the article somewhere and I wasn’t going after investment strategies in this article.

Furthermore, the going rate on student loans is definitely not 2%, try almost 7% for Staffords.

Finally, I’m looking to eventually buy a house so that E-fund will turn into a house down payment. I also recently switched jobs (higher paying, less hours, sweet!) but wanted to have a little more in the bank so I could feel comfortable making a big switch (just in case it didn’t work out.) Finally, I did max out my Roth in 2009 and while I didn’t max out my 401k, I don’t want to lock away all my money for those golden years.

So, while I understand where you’re coming from, I am very comfortable with what I’ve decided to do with my money.

Always happy to hear opinions contrary to my own though and always happy to hear about investment strategies.

Thanks!

37-8=29.

In a lot of cases, I’d a agree: To each his/her own. But there’s not alot of subjectivity in this one.

Amanda indicates in her story that she’s putting money aside in a 401k and Roth IRA, so I am guessing that part of the $29k is stashed there. Not knowing her future plans, she may have her ING account set up for short term savings goals as well as an emergency fund. To each their own, I suppose.

Here’s the problem: In your zeal to pay down debt, you cost yourself thousands of dollars. I’m sure you had a finance class or two in your MBA program. Your student loans were probably at 2% (after you factor in the tax deduction for student loan interest). In 2009, the market returned ~30%. An expected return for an asset allocation appropriate for you age should generate at least 10%.

You should have maxed out your 401k and a Roth IRA and funded a regular brokerage account before making any additional prepayments on your student loans.

2% of $29,000 = $580 (amount you saved)
30% of $29,000 = $8,700 (amount you would have made)
10% of $29,000 = $2,900 (amount expected)

Also, your emergency fund is more than 20 months’ worth of expenses. Given your work ethic and personality and education, you shouldn’t need more than 6 or 7 months to find a new job in the worst case. The rest of the money should be in the market.

You can argue that you feel better by paying down debt and having a massive stockpile of cash, that you derive utility from it. But it doesn’t make good financial sense. You’re an MBA, you should understand the opportunity cost of capital.

P.S. I’m not trying to be harsh or mean or pick on Amanda. She’s way ahead of the game and ahead of where I was 6 years ago. I just felt this needed to be said (in case anyone else is scrolling down this far).

I agree with your logic on higher education. My sister went to a private school to eventually become a elementary school teacher. Her annual salary starting out was nowhere near the total cost of her 4-year tuition at that school. I went to a public college to become an engineer, and my salary after 4 years of school justified the cost of the education, and then some.

I read a year or so back that the average college grad makes $1M more in a lifetime than his/her peers without a college degree. With future rising education costs and stagnant salary growth in the business world, I forsee a time when the cost/benefit analysis of a college education will shake out in favor of less education.

Another consideration, holding off on higher education until getting a few years of work experience. Many employers are willing to help with the financial burden of tuition for their employees. Heck, I have physician friends who had 100% of their med school costs paid by the military, for 5 years of service afterwards. After that service, they go into the private sector student-loan free and making 6 figures.

@#83 – a former friend of mine, who graduated from two Ivy League Schools, Columbia(NY) and University of Chicago still had trouble landing adequate employment. we need to all re-consider debt and the role of education in our lives. education facilitates critical thinking, it can be a pathway to a promising career, but no school can guarantee a certain rate of return in terms of salary. some people teach their children that a college education should be pursued above all else and that your success is imminent once you secure a degree- nothing could be further from the truth. college is but one component of success and not even an indispensable one.

on a related note, i want to make a point not directed at a specific poster – financial security, balance, harmony, peace, health – collectively these things represent the end game – to be able to use the most precious resource humanity has, time in any way you see fit. there are a lot of legitimate and rewarding paths to get to that same place – college is but one path, but like with any path you can get derailed, with lifestyle inflation, life hampering debt – prospective students need to be mindful of these things and make conscious choices regardless of where they go to school

Dollars Not Debt

@Alex(45), Dave (77) I agree with Dave. I have 120k in student loans and I pay 830k a month on them. It’s a mammoth amount of debt and I have to admit I very foolishly acquired it. Luckily I make enough to cover it, but if I didn’t have the debt I’d be racking up the savings right now. And let me tell you, I make 70k in an expensive city and I find it hard to make the payments.

@83 – This is excellent advice! I realized this in my 2nd year of law school, that a good portion of the evening students were working full-time (and therefore not experiencing a 3-year hole in their income) but they were also getting free law school from their employer!!

For all the pessimists reading this blog, why don’t you try setting financial goals and living to it. Best case you get out of debt and become wealthy, worst case you revert to what you were!

I think Jim and others took exception to your posts because some of your words can be inferred as arrogant, or at the very least not very polite.

But the advice within the 5th paragraph of your original post (#30) is worth its weight in gold. Even in this current economy, interviewees should research the heck out of their local market salaries, position description, and competition in their field; and should have an active game plan for how to discuss the inevitable “what salary range are you interested in” conversation.

Since Amanda went straight from undergrad to her MBA program, she was just starting out with this first job of hers. If she kicks butt in the office and can quantify the benefits she’s bringing to the company (added profit, improved efficiencies, or cost savings through her work), then that’s fuel for the fire during her next performance review… and well worth a solid raise.

Still, a very nice achievement. There are so many people out there who have the same loans and income and REALLY struggle, big city or not. Unfortunately, many folks bite of more than they can chew, esp. if they go to a sub-par school.

My general advice on biz school, law school is that unless you can get into a top 15 program AND really have the drive to capitalize on that degree, you should avoid full-time programs. Instead get a part-time degree at a strong state school, ideally paid for by your employer. Avoid for-profit schools like Phoenix Online at ALL COSTS (low graduation rates, no respect for degree). If you ignore my advice, you run a high chance of ending up with more loans than you can reasonably stomach based on a graduating salary.

@74 – Just ask. Find people in the industry, at the company you are interested in, develop a relationship with them, invite them for coffee for lunch, and just ask … “What kind of starting salary should I expect”. Also look at glassdoor.com.

There have been numerous comments relating to educational choices, so, Re: entry level jobs and higher education … I’d just like to point out that corporate offices in general don’t have to consider anyone without some kind of bachelor’s degree; they have plenty of applicants for every position.

A lot of firms only look at candidates with college degrees, because they can’t count on high-school graduates having ANY applicable skills and it’s a big time suck to interview those candidates.

IF you can establish that you have collegiate-level language, writing, and tech skills, you MIGHT be able to get an entry-level clerical position with the opportunity for advancement. Typically, income goes up rather fast once you start to master different proficiencies in your workplace and once you have established your professionalism.

I think the keys are, as others have said, not digging yourself in deeper, and not letting your lifestyle increase along with your income.

Cancelled trash about five months ago. As far as I know this is not illegal and we are not living in filth. I’m frugal but I do have standards.

We are very green and recycle a lot and are very conscious of what we are buying. When we did have service, we were averaging one can every 3-4 weeks — and it wouldn’t even be full. So we decided it wasn’t worth it.

The biggest blessing has been a recycling dumpster at a local school less than a mile away. They are also having a paper drive for charity as well, which I wouldn’t have known about had I not done this.

As far as actual trash goes, we have usually a plastic grocery bag a week which we just throw away when we get gas. That has been the biggest challenge.

You don’t have trash service? Interesting. That’s illegal around here. I wonder how much the sanitation companies slipped to our town officials to get that passed.

I really hope you’re in med school, or something else that will pay at *least* $65k/year. If you consider $65k a “huge” salary, and you’re about to find yourself well over $100k in debt… it’s going to be a long fight.

And how can you make the below comment and STILL be racking up student loans?

“I guess my point is, a great way to pay off this kind of debt more quickly would be to eliminate all those people who tell high schoolers that they can do something they love and make money at it.”

There’s nothing wrong with deciding to get a PhD in Basket Weaving if you love it and don’t care about the paycheck, but don’t dig yourself a hole and then whine that someone gave you bad advice while you dig yourself deeper.

Regarding cooking at home saving money, I agree wholeheartedly. I guesstimate that we’ve probably saved in the neighborhood of $10,000 by cooking at home. And that isn’t living off of Hamburger Helper, either.

My husband and I are self-taught chefs (we have a couple of well-worn cookbooks, and also use allrecipes.com, or foodnetwork.com recipes). We make fantastic meals with the freshest ingredients right in our own kitchen. Buying produce in season, and learning proper methods to freeze ingredients and finished meals has translated to real dollars saved, and the prep time is about the same as if you would get into a car and drive to a restaurant (bonus – you save gas by eating at home, too).

Not only that, but our young children (ages 4 and 6) have learned to enjoy actual “real food” meals (yes, even those with visible “herbs” – LOL), and they rarely get hot dogs, canned pasta meals or frozen chicken nuggets, which also saves us money…

We’re just getting started teaching them to divide all money they get into three categories: Save, Spend and Give. They loved having *their own* money to spend on souvenirs when we went on a recent weekend trip.

I think that in this economy, people should just be grateful for what they can get and be happy not to be laid off. Last year, I had a fabulous interview at a company that I really wanted to work for and was offered the job. I had done my research and knew exactly what I was worth to them, but when the offer came in, it was $10k/year lower than what I was expecting. I tried to negotiate for more and they refused to pay more and then added numerous conditions for employment with them that did not exist before I tried to negotiate. I decided not to take the job.

For a while, I was really torn up about losing such a great job over money, but then I heard that some shady people at the company made up data and that the place I was going to work might not survive the year. If I had taken that job, I would be unemployed right now.

Right now, no company in the US values what people are actually “worth”. They will just go to the next lowest bidder if you think you are worth more, so take what you have and be grateful for it!

(2 years out from graduating, I am making $28k. When I started school, companies were hiring at around $40k, but they found out they could low-ball people and so they do.)

In the mean time, I am very interested in Tyler’s comment(#30), especially in this current economy. I constantly go back and forth wondering if I’m being drastically underpaid for my first “real” job out of college ($40,000)or if I should just be greatful considering how many of my peers are still working at Target or Starbucks unable to find employment with their degrees.

It just seems impossible to tell what is a good offer, given how many variables there are (industry, geography, etc.). Almost all jobs are listed as DOE, so I don’t know what the norm in my area actually is and I’m not confident enough in the internet salary calculators to waltz into an interview spouting off those numbers with any assurance that I won’t get laughed at and shown out the door. J.D., I would REALLY appreciate a post on this!

I echo previous posters advice that the most important thing you can do in the future is remember the importance of marrying someone with the same financial values that you have. My ex had no respect for money or finances, which was one of the many downfalls of our marriage. My current husband (and love of my life) has the same financial goals as me and that makes it very easy to work as a team in setting goals and doing what it takes to attain them.

Congratulations on your achievements!

I haven’t paid down my loans as much as you, but I have been employing the same strageties. I haven’t had cable or a home phone in 6 years.

Child care costs is what eats up my salary.

Good Luck, you are doing a great job.