Hi all,
Just want to double check that I'm not overlooking some glaring error in logic or financial planning in how I'm approaching paying off my student loans. I'm prioritizing paying off student loan debt instead of investing heavily. I'd love any thoughts on how to be more efficient in my finances. Here's a brief overview of my financial situation:
Me: 32 years old
Net Monthly Income: $4660, after all healthcare, Roth 401k, taxes, insurance, etc.
Roth 401k contribution: $400/mo. into VFIFX, for now, with no employer match. Employer will match 50% up to 6% of my income starting in December. I will be increasing my contributions next year, still figuring out the percentage, though.
Total current monthly expenses: ~$2600
Savings per month: ~$2000
Savings rate: ~43%
Emergency Fund: $20,000 in a "high interest" online savings account... at 1%. This is a little more than 7 months of expenses. Seems a little high to many people, but I work in a fairly volatile industry and layoffs are common. Finding a job isn't too difficult at this point in my career, but I highly value the peace of mind this provides, especially after having gone through a layoff last fall.
I'm in the middle of tackling student loan debt and also voluntarily help my wife with her student loans as I can, though it's not absolutely necessary that I help her. My rationale for helping my wife is that while she makes her minimum suggested payments on her own from her job just fine, that will only last until we have kids someday, at which point she'll probably have to stop working (we have no family nearby to help) and I'd take over paying her loan payments with my income. So I'd rather help her knock down her debt as much as possible now, while we can afford it, and before kids happen so that I have less debt to pick up from her later down the road.
Anyway, here's my student loan situation:
Loan 1: $2551.50 @ 3.4%. This is my lowest priority, as the interest rate is somewhat reasonable.
Loan 2: $11250.37 @ 6.8%. This is my top priority.
I am currently paying $1000 toward my Loan 2 every month (as well as the $30 minimum on Loan 1), and putting $500 toward my wife's student loans. The ~$500 remaining of our excess monthly income is reserved for unexpected expenses during the month, which has been needed lately. But if it goes unused, then it is used at the beginning of the following month as a cushion to get us from my paycheck at the end of the month to my paycheck in the middle of the following month without reducing principle capital in my checking account (I like to keep a baseline amount in it, just in case). Any remaining money from the $500 at the end of the following month goes to student loans.
Does that approach to our student loan debt sound reasonable? I go back and forth so much about just completely paying off my debt with our emergency fund, but I don't think I'm willing to take that risk.
Any thoughts?
Thank you!
Updating to add:
My student loan minimum monthly payment is $220, so I am overpaying quite a bit with this plan.
Besides our student loans, we have zero debt.