Preparing for life beyond college
I'm in college with a full scholarship. I work part time and
should be able to graduate with no debt. What can I do now to best
utilize the money I make?
You're in a fantastic position right now. First, I think your
main goal is to study hard and be 100 percent certain you're
graduating on time with no money issues. The next thing is to make
sure you have plenty of cash on hand to make the transition to the
real world. In a case like this, transition can mean anything from
moving to a new city to simply finding a different place to live.
You're coming to a time in your life where you really can't have
too much cash saved.
If it were me, I'd just save every penny I could and drop it in
a savings account. You can worry about investing and growing your
money later, after you've settled into your new life and have some
stability. Just think how cool it would be to graduate with $20,000
in the bank. Then, when you change gears and move out into the real
world, you can do some really cool things with the money that's
left. Set three to six months of expenses aside as your emergency
fund, then you can even begin to think about buying a home and investing in Roth IRAs and other pre-tax
But your biggest investment right now is making sure you finish
school and have the cash on-hand to transition smoothly afterward.
And you're in a great position to make that happen!
First the baby or the debt?
My wife and I are following your plan. We want to start a
family, but we're still in debt and still owe about $8,000 on our
car. Should we pay that off and fully fund our emergency fund
before we think about having children?
When two people who are married and love each other very much
decide it's time to share that love with a family, then it's time. You've done a great
job of managing your money, setting goals and formulating a game
plan, so there's no reason to wait.
If it were me, I'd begin aggressively paying down the car now.
Then, when the doctor confirms she's pregnant, you can temporarily
push the pause button on your Total Money Makeover. If you haven't
managed to pay off the car at that point, use the money you were
putting toward it to build up a big cash pile of savings, and go
back to regular payments on the car after the baby comes.
By doing this you really lose no ground on your get-out-of-debt
plan. You're just redirecting your resources in case you need
additional money down the road. But who knows? It may take you guys
a while to get pregnant. And if that happens, you could have the
car paid off and plenty of opportunity to save up more before the
little one arrives!
Dave Ramsey is America's trusted voice on money and
business. He's authored four New York Times best-selling books:
"Financial Peace," "More Than Enough," "The Total Money Makeover"
and "EntreLeadership." The Dave Ramsey Show is heard by more than 5
million listeners each week on more than 500 radio stations. Follow
Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.
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