Lauren interviews Kristen Robinson from Fidelity Investments
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How To Invest When You Have Student Loans
For many college graduates, the burden of student loans can feel overwhelming. It can be disheartening to see a significant portion of your income going towards loan payments, making it difficult to think about investing for the future. However, with the right approach and mindset, it is still possible to invest and build wealth while managing student loan debt. Here are some strategies to consider:
1. Understand Your Student Loans:
Before you start investing, it’s crucial to have a clear understanding of your student loans. Familiarize yourself with the interest rates, repayment terms, and monthly payment obligations. This knowledge will help you prioritize your financial goals and determine how much you can comfortably allocate towards investing.
2. Build an Emergency Fund:
Before jumping into investing, it’s wise to establish an emergency fund. Aim to set aside three to six months’ worth of living expenses in a separate savings account. Having this safety net will provide you with peace of mind, as unexpected expenses can arise at any time.
3. Take Advantage of Employer Matching:
If you have access to an employer-sponsored retirement plan, such as a 401(k), contribute at least enough to receive the full employer match. Employer matching is essentially free money added to your retirement savings. Even if you have student loans, it’s essential to take advantage of this benefit to maximize your long-term wealth-building potential.
4. Prioritize High-Interest Debt:
If you have high-interest private student loans, it may be more beneficial to prioritize paying them off before investing. Interest rates on these loans can be significantly higher than potential returns from investments, making it a wiser financial decision to pay down this debt first. Consider using the debt avalanche or debt snowball method to efficiently eliminate your loan balance.
5. Opt for Low-Risk Investments:
If you still want to invest while paying off student loans, consider low-risk investment options. Diversify your portfolio with low-cost index funds or exchange-traded funds (ETFs). These investments tend to offer stable returns over the long term and carry lower risks compared to individual stocks. Setting up automatic contributions to your investment accounts can help ensure consistency and discipline.
6. Seek Professional Guidance:
Investing can be complex, and seeking professional advice can help you make informed decisions. Consider consulting a financial advisor who can guide you through the investing process while taking into account your specific financial circumstances, including your student loans. They can help you strike a balance between paying off debt and investing for your future.
7. Continuously Educate Yourself:
Stay informed about personal finance and investing strategies. Read books, follow financial blogs, listen to podcasts, and attend workshops to expand your knowledge. By educating yourself, you can make more confident and informed investment decisions that align with your long-term goals.
Remember, investing while managing student loans requires careful consideration. It’s essential to strike a balance between paying off debt and building wealth for the future. By understanding your student loans, prioritizing debt repayment, and making informed investment decisions, you can navigate this financial landscape successfully. Take small steps towards your financial goals, and with time and discipline, you can achieve both debt freedom and financial security.
No one's rent is $700
would it make a significant difference if you spent one year of limiting your retirement contributions to just focus on student loan debt payment?
Having your employer's 401k is nice, but what if your boss signed up with a garbage investment firm with lousy returns and a lot of fees? If you have the necessary financial knowledge, then it's better to take matters into your own hand and sign up for your own investment account in an investment firm that you choose, not what your boss chooses. You can do both, of course: invest your own, and invest in 401k. If you are wary of your company's investment firm, then invest only a little in 401k in something safe such as bonds. Invest most of your money in a firm you trust more. The specific funds you invest in are also the key, so you've got to know each and every fund you put your money in. Some bad firms have good funds too, and almost all firms have bad funds. Even the venerable Vanguard Company has one of the worst funds I've ever seen: VGPMX Global Capital Fund, which never recovered after the 2008 recession. Look at every fund's historical data and see how they perform.
I’ve watched this video so many times. I’d love more videos like this from financial diet (i’ve also watched the hank green interviews multiple times) and less of those snappy, less helpful broke millenial videos…
What the f*** is she gonna do with $80 a month smh
With that percentage breakdown, what about having a life? how much percent to go out and have fun once a month or get your hair or nails done? I guess we have to deprive ourselves for years. Ugh sucks to be an adult sometimes lol
Also remember that saving 15-20% of your income is what most people do to retire in their 60's. If you want to retire earlier and enjoy your riches while you're young, put away more than the average person
Very good overview of things to consider. Very helpful. Thanks for posting this.
How does 33 dollars at 25 mean 3800 dollars at retirement age?
If someone retires at 65 (unlikely in this day and age, but…) that leaves us with 40 years for it to grow. That'd need an average annual return of ~12.6%! Where is that coming from? I want to invest in that.
Retiring at 70 means an average return of 11.12%
75 is 9.95%.
A more realistic long-term number of 7% means we have to wait a bit more than 70 years to retire. That means you're not going on that Caribbean cruise until you're 95.
People are walking around with 12% interest on their student loans? That's madness.
that women looks like pure evil
Hi Lauren, this was helpful. My issue is that I don't trust fidelity or other 401K managing companies with my money. A lot of 401Ks vanished as a result of the market crash in 2008 and that was because of unwise and risky investing by the managing firms. Markets are fickle, but firms like Fidelity make money by gambling my hard earned money. How do you get around that?
So do we invest from the 30% portion that is left over?
i was 24 making 12 an hour in nyc in thr middle of a recession. id like to see ways to lower studrnt loan payments without using pay as you earn which can extend the life of the loan and the amount that comes out of pocket
Thank you so much for making this video! I feel really inspired to start back up with saving. when I had my money up into another account automatically after every paycheck, I accumulated over 1k in a few months from an entry level low paying job lol!
wait.. what 25 year old is making 40k please let me know so my poor 29 year old ass can switch careers
I'm looking for retirement and I'm only in my mid-30's. Useful channel! Thanks for sharing your knowledge. 🙂
REALLY helpful. Thank you!
The only one that makes sense while in debt to me is the 401K match. I see what she is saying, but even she doesn't seem to promote much investing with debt. I wouldn't recommend to anyone to invest with significant debt. It's easy to point in how investing helps in the long run, but this is avoiding the rapidness that the debt also grows due to interest rates. That's a BIG deal!
my job doesn't offer a 401k. Where can i go to start a retirement savings account?
What 25 year old is making $40,000 a year!? I am 3 years out of my bachelors and I can barley fine a full time job.
I've got a question about the 15% of income which is here given as a guideline to put away for retirement. Here in Germany you pay about 10% of your brutto income in a compulsory retirement insurance. How much do you spent for that in the US and if you are handeling this very differently – would you still stick with this 15% or would you give a different suggestion? I love your videos by the way – they are fun to watch and at the same time so very helpful
This was a great interview, and very applicable to what I think is the majority of your audience! I love when you guys interview people on the show.
How do you find side jobs?
This was so helpful and informative! What a great guest to put things in perspective!
so I should borrow as much as I possibly can while I'm young to invest to capitalize on the time value of money by this logic? just as I'm spending money on retirement while interest is accruing on my student loans?
buy on margin. got it.
starting to put money into a savings account for retirement as a 20 year old?! not sure if I agree with that.. does superannuation count?
1. Very helpful video. 2. Congrats on your upcoming nuptials, Lauren!!
I would also be really interested in learning about how to actually invest things. Where do you even do that?
Can we get a video on handling side jobs like nannying or busking etc that aren't really easy to tax or retire from? obviously everyone wants the 50k a year office job, but how do you handle it when the budget is a lot smaller?
Yet I dream of getting a 40k job a year. I've barely been able to continually break 20k since graduating college and I've worked multiple jobs. I'd prefer to see more on quality resume stuff to
helpyou get job that gives you 40k, because those seem elusive in my neck of the woods.This was very helpful. Would you be able to compile a list of places with the best IRA or investment benefits?
I get the idea of compartmentalizing your debt and money, and taking steps to make sure you're going to be prepared for your future, but if you have a 30K student loan at 12%, putting an extra 10k into a savings account or other investment at 5% (if you're really lucky) is pretty counter-productive in my opinion. The thing about your employer matching your contribution is obviously a big thing, but other than that it's all about how you personally manage your money. Keeping a basic emergency fund in an okay-interest savings account and then dumping all of the rest of your money into paying off the loan in the long run is going to have you coming off paying less interest. Instead of putting that 15% into a rrsp and having the bank take the difference between that and your loan, why not pay off the loan with it?
This was really informative. Thank you!
The mhmms are really distracting!
Excellent video! It all sounds like very good advice 🙂
I really enjoyed this video and was really happy with the information provided! Thanks TFD!
Thank you very much! This was very helpful!
I found this extremely useful