The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Zarakava on March 20, 2017, 12:45:16 PM
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Hello everyone. I'm a 23 (almost 24) year old, trying to get a handle on money, because I really don't know anything about it. I've been very lucky that I have a fantastic job, and no major debt, so I've been pretty carefree about money. Doing reflection on this, I want to step up my game and figure out how to actually make money work for me.
So, some details and a question.
My Job
$102.5k gross, as a software engineer.
My Debts
~$20k car loan on a 2016 Jeep Wrangler (yes, I know. But it was my dream car forever, and a year ago, without thinking a ton about money stuff, I made the plunge)
$4k student loan at 0% (to my parents. The only "requirement" is $1k per year)
Savings
$2k in savings
$10k in a CD - inheritance from Grandfather
$20k in 401k (Fidelity)
The question
So originally, I'd thought about keeping inheritance from my Grandfather as a start towards an engagement ring and wedding costs. I have a girlfriend, and we've talked about getting engaged in about a year, married in about two.
So what should I do with the $10k? I imagine my options are investing it, or putting it into the car loan. If investing, should I use Vanguard or Betterment? Or should I just let it sit in the CD (jack shit interest there)
I'd like to get my debts paid off as soon as possible, as my salary allows me pretty huge leeway in terms of doing things.
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I think it would be easier for people to give you advice if you posted a case study:
https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/
It's hard to say what you should do without your budget, interest rates, etc. The only thing I can say now is maybe you could sell the Jeep and get the same one, but used for like $5-10k. Especially since you have that extra money. Your payments are probably barely covering depreciation right now. I wouldn't get married or spend a ton on a ring/wedding with debt like that hanging over my head but that's just me personally.
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You make $102.5k at 24, congrats!
While we do need a case study to understand better, I find it incredibly hard to believe that you should have even a remotely hard time paying off this debt extremely quickly. However, I presume you live with parents still, your parents paid for your college, and you are very fortunate to have had all your shit paid for until now.
My only piece of advice is that you are on frugal forum and you will hear frugal opinions, you need to pick the advice that helps you come to conclusions. You are going to get tore apart by 90% of the forum for buying a brand new car and looking to get married.
Either way, you are in a great position, don't screw it up, be diligent with your money, don't overspend on the wedding, don't overspend on your housing, contribute to your 401k, and stay out of debt. You win.
Your question: Keep the money in the CD unless you are making less than 1% interest. At your stage of the game, I would stay liquid. If you do put it into the Vanguard, it can act as forced savings though.
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You've got plenty of income to pay off your debts, save for retirement and buy an engagement ring. Not really enough info to give you specific recommendations.
With inheritances I always suggest pondering what the deceased might "appreciate" you doing with the money.Was he a big proponent of owning a house? Consider saving for a downpayment. Hated debt? Pay some off. A savings freak? Fully fund your 401k. Or??
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Personally, I'd use the $10k pay off your parents and put the rest on the car loan, but I'm very debt averse. It sounds like you and your parents are on great terms, but I would feel weird getting engaged/making my own independent family while still owing that money. YMMV.
I think you realize this now, but why, oh why, if the Jeep was your "dream car forever", did you not just save up the cash to get one at that salary??! You have to think about the money stuff!
Also, having finally bought my own dream car this year (a used one, in cash), I got a lot of enjoyment out of the whole process, from saving up, to picking a color, to looking at all the possible features, test driving, etc. I think sometimes just "taking the plunge" and throwing money at something robs people of some of the fun! Same thing with weddings.