How to allocate my money during gap year?

[moneyq1]

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Hey all, I made a new account for privacy.

I have already been accepted to a few medical schools. One of my top choices has offered me a $35,000/year scholarship, so it is very likely that I will end up there (just waiting to interview at my top choice next week).

After subtracting the amount of the scholarship from the cost of attendance of the school, I would have about $110,000 in loan debt. Plus $15,000 in undergraduate loans.

Right now I'm in my gap year working a pretty good job that gives me $2,500/month. My expenses add up to $1,500/month. This leaves me $900-1000 that I could potentially save over the next few months.

My question is: Assuming that I could save nearly $10,000 by the time I start school in August- should I keep this money in a savings account until school starts and use it to lower my loan debt? Or should I pay off my undergraduate loans as much as I can? (I'm paying a little more than the minimum right now)

Should I even worry this much about loans? Of course, I could think of more than a few ways to blow off all this money before school starts...

I realize that I'm in excellent shape right now, as this is substantially lower than the average debt for a med student, so I am in no way complaining. I am just wondering what others would do in my situation, if they had money coming in prior to medical school.

 

[SN12357]

I'm a cautious person, but my advice is to have several thousand in an emergency fund. It's a hedge against having to take out more loans if something goes wrong, and having a pool of liquid money to draw on in an emergency (ie, car breaks down, death in the family) makes bad times a lot easier.

Paying down loans or reducing the amount of loans you need to take out are also good ideas. I've been working for several years and I will draw on that savings to reduce the amount of loans I need to take my first year of medical school (while still maintaining a healthy emergency fund).

...I will *also* use it to take several months off before the start of medical school and travel. Also not a bad use of the money, considering what comes next!

 

[moneyq1]

How much would you say is enough for an emergency fund?

 

[SN12357]

How much would you say is enough for an emergency fund?

This varies a lot from person to person and depends very much on what you're comfortable with. Tradition says 6 months of living expenses, which is based off the idea of losing your job and having to find another. Doesn't apply as much to medical students. I'd say anywhere from 3k-8k depending on your level of paranoia.

This of course applies if you are fortunate enough to have the resources to build up an emergency fund; obviously a lot of people aren't that lucky. But having money will save you money if it means you don't have to put things on credit cards or take more loans whenever something unexpected comes up.

 

[Jabbed]

If your undergraduate loans have an interest rate >3% consider paying them off now. If its >5.5% definitely pay them off before saving for med school.

 

[Jabbed]

The 6 months wages rule tends to apply more when you have larger financial obligations and/or depend on salaried income. Imo you should be fine with a few grand in the bank if you're a traditional pre-med with minimal assets and expenses.

 

[darkjedi]

Because your student loan rates are relatively low, plus the fact that the loans themselves can be deferred until graduation, it might make more sense to save up that money and keep it liquid.

 

[mvenus929]

I recommend saving at least 5K for a couple reasons: first, you're probably going to have moving expenses, and may want to buy some furniture for your new place. I spent roughlyl $1K moving across the country and buying new furniture (I brought with me what could fit in my car, and bought bedroom furniture from IKEA... all the other furniture in my place was provided by the landlord or my other roommates).

Second, though it's many years down the line, it's nice to have a little extra cushion during fourth year. Depending on your school and financial aid office, you may not be eligible for as many loans during fourth year, and you will have additional expenses (applications, travel to interviews, possibly double rent if you're doing an away and keeping your main place, plus moving expenses once you do find out where you're going to match), and you don't get paid until about a month or two after you graduate.

Third, if something catastrophic happens during medical school (I've had friends who have had everything from surgery to having to buy a new car because theirs was totaled), then that extra cushion will be nice as well. Chances are, you'll be able to take out extra in loans because you won't be meeting the cap for loans, but they can take a little bit of time to get processed, so having some liquid assets is useful.