What would you do with $100k?

[TerryTerry]

Hi. I am new here, but I found the information posted here useful many times.
I know people here have good insight and sense of reality so I just wanted to ask people here something.

I have been a pharmacist for about 3 years now, and I have saved up about $130k(in savings account).
I must admit that I was lucky to be able to find an independent pharmacy position in this tough job market.

I am a single, but I may eventually have to support my parents who have no retirement plan whatsoever.
Currently, I live with them but I do help them financially each month paying few bills.
I have no intention continue to living in this condominium my parents purchased 10 years ago because the place was totally overpriced(my parents will never be able to pay it off fully while they are alive) and the HoA has been dissolved to nothing.

I have $160000 student loan (all federal) to pay back (which is the main reason I have saved up my money).

Assuming that I could be out of work tomorrow and have hard time finding a new job..
(Just assuming worst possible situation that can happen to a pharmacist. I did have really tough time trying to find a job first 6 months after graduation)

I wonder what other people would do if they were in my situation.
Would you pay off student debt first.. or purchase a home?

If you can share any opinion based on either my situation or your own,
I will greatly appreciate it when I make decisions in the future.

Please keep in mind that this is not a question about getting home mortgage on the top of six figure student debt. (I dread even to think about two six figure debt to pay back)
..but it could be a question asking which loan is better to have if I have to keep one of two for next decade.

Thank you very much and Happy new year to you all.

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[Mad Jack]

The financially smart thing to do would be to invest it.

The thing I'd do is pay off my loans, because you're paying a fortune in interest alone every year. Bringing your debt down to $60,000 would lessen the burden of compound interest substantially, allowing you to either pay off the rest of your loans within a year or two or to start focusing on other areas.

But hey, this is probably a better question for the financial thread, or more realistically, a financial advisor, because we're just people with opinions and not finance professionals.

 

[samven582]

Pay half your loan off and start investing

 

[TerryTerry]

Thanks, but I would truly appreciate any input. Thank you.

I did spoke to few financial advisors.. but you know how they just talk about investment is good for long term and risk is all on me alone. haha

I really wish I knew how to invest money properly. My family and I are all honest working simple folks and know very little about these things.

Currently I am on PAYE plan... I was thinking about having my own place would be nice since that way I can secure a roof not only for myself and my parents as well.

Even if I lose my job and suffer in tough job market.. I thought PAYE plan would be easier than dealing with bank coming after mortgage payment. haha

 

[gwarm01]

I'd use it as a down payment to buy an extravagant condo in downtown Miami.

 

[PharmDBro2017]

Throw 100% of that at student loans

 

[JMUDuke]

You'll get better responses if we know the interest rate on your loan. Also add in if you get a company match for 401k or not as I'm sure different independents have unique benefits.

 

[TerryTerry]

Student Interest loan is 6.5% or something? around there. Independent pharmacy I am employed at doesn`t offer 401k plan. They offer health insurance benefit which is still a big help.

 

[BMBiology]

First, don't talk to a financial advisor. No financial advisor will tell you to pay off your debt because then you wouldn't have any money to give them to invest = can't make money from you.

A lot of financial advisors don't even have a bachelor degree.

Second, $160 k x 6.8% interest is about $11 k a year just in interest.
That is two months of your salary!

Third, PAYE will let you pay less but in the long term, you will be paying more. In addition, you would need to pay taxes on any forgiven amount (unlikely in your situation)

Forth, debt is harder to pay off when you are older and you have a family to support.

Pay off your debt. If you want to live in somewhere nice for a while, get a roommate and rent. Get it out of your system. You deserve it.


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[TerryTerry]

If I was bit more confident about job security in pharmacist job market for future, I would be more confident about paying off my student debt first for sure. The initial job hunting experience I had was pretty brutal so I always assume worst possible situation.

Paying off student loan sure sounds like a no brainer to me as well.
If I only have to worry about myself things would be much easier. I am bit over 30 yo now and I am thirsty for my own place and independence. I still have to think about my parents though.. their bottomless mortgage, credit card debt and no retirement plan. haha

 

[TerryTerry]

I suppose Mortgage rate is lower than student loan interest generally. I won`t always have opportunity to purchase my own place though... so I might pay off portion of my student debt while saving some to use as down payment on mortgage. This might be best option...

 

[Momus]

If you can

A good start, read and do follow the teaching if you want to be wealthy

 

[pezdispenser]

I would use all of your $130k in savings except for a few thousand dollars to pay down your $160k in loans. Then pay it off completely in a few more months using your income. You said you saved $130k in 3 years so that's around $43k/yr, plus I'm guessing $8k/yr that you are currently paying towards your loans, which makes $51k/yr that you will have in free cash flow to rebuild your savings very quickly after your loans are paid off. So it's really only a few months where you'll have very little in savings. Then you can put that $51k/yr towards saving for a home downpayment or whatever.

Now here's a pearl: having debt makes you feel insecure. I can see it in you, and you can see it in your parents. Being debt free gives you tremendous security and confidence, and this makes you so much more marketable in the workforce that you won't even be worried about job security anymore.

 

[drakegrad2011]

First, don't talk to a financial advisor. No financial advisor will tell you to pay off your debt because then you wouldn't have any money to give them to invest = can't make money from you.

A lot of financial advisors don't even have a bachelor degree.

Second, $160 k x 6.8% interest is about $11 k a year just in interest.
That is two months of your salary!

Third, PAYE will let you pay less but in the long term, you will be paying more. In addition, you would need to pay taxes on any forgiven amount (unlikely in your situation)

Forth, debt is harder to pay off when you are older and you have a family to support.

Pay off your debt. If you want to live in somewhere nice for a while, get a roommate and rent. Get it out of your system. You deserve it.


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Set up a meeting with a fee for service financial advisor - you pay them for financial advice only, they don't make any money off any investment you make. You can find local a one in your area here... https://www.napfa.org

 

[TerryTerry]

Nice. I never thought of it that way. I guess it is very true that I am worried so much about my employment due to the amount of my debt. I want to at least save $170000 before paying off my debt though... so I can have some emergency fund. This may take at least 6-7 more months depends on what comes up in my life. Actually way more than 6-7 months. lol

 

[sosoo]

i would pay off a mortgage. the money will still be there, and the home value will increase! if something unexpected happens down the line, u can sell n make a profit on that investment. if nothing unexpected happens, kudos. use future earnings to pay student loans.

 

[Momus]

Nice. I never thought of it that way. I guess it is very true that I am worried so much about my employment due to the amount of my debt. I want to at least save $170000 before paying off my debt though... so I can have some emergency fund. This may take at least 6-7 more months depends on what comes up in my life. Actually way more than 6-7 months. lol

That's money you continue to lose to interest. Why do you need 150k in the bank sitting there doing jack sh1t 1% at most? Most people only need maybe 20k for the emergency fund to last them 4-6 months. Keep a bit over if you want to hold cash, but you keep missing the guaranteed return of debt repayment/expected stock return every day it's not invested/used to pay off loans.

Don't talk to financial advisor; that's one of the worst mistake you can make in your life if u get a bad one. Learn this stuff yourself.

Prepay mortgage/don't. For me I don't prepay mortgage, no reason to if u can make additional 5% of that money in stocks like me. I know some people like being debt free but in the long run you will lose out huge. Everyone is different in their ability to tolerate debt and not every debt is bad. Know thyself.

 

[TerryTerry]

Yeah. I agree that keeping money in saving account is really worst way of using your money.
But the cash is still cash though....

Just like what sosoo says... I am little bit cautious about whether to pay off my student debt 100% or buy a place for $150000. Each choice seems to have its advantage and disadvantage.

As a family, I can ask my parents to move out to new home and use their income to pay off my student debt as well. I really want to live alone, but I am in position where I have to admit that my parents will need my support for the rest of their life.

If anyone is wondering, my parents are using their income to payoff their mortgage, credit card and few living expenses every month. I cover anywhere they are short... could be anywhere from hundreds to couple thousands a month.

 

[fewaopi]

If your student loan interest is say...6.5%, then when you pay that off, that's a guaranteed 6.5% return. That's a way to thinking about it. You're guaranteeing you don't pay that extra, and more money goes straight to your pocket. Pay off the highest interest loan soon as possible. Probably student loans.

 

[TerryTerry]

I checked my student interest and it`s 6.8% - autopay bonus rate. Honestly speaking just up until last few months, I only thought about paying off my student loan and nothing else.

I am just trying to figure out the best option for my situation since I see this huge chunk of saving I have built. I know there is no easy answer or clear answer for this, but I appreciate all inputs.

I suppose
Option#1 - Pay student loan first. Continue live with my parents` place(worst house buying ever) then get my own mortgage to move out.
Opiton#2 - Buy a place for around $150000(mine). Move out with my parents, use as much money as possible to pay off student debt from there on.

 

[TerryTerry]

If I can`t pay back mortgage.. the bank will try to foreclose the house. If I can`t pay back student loan... they will just have to hope I make more money next year...

 

[Humble Sloth]

Hi. I am new here, but I found the information posted here useful many times.
I know people here have good insight and sense of reality so I just wanted to ask people here something.

I have been a pharmacist for about 3 years now, and I have saved up about $130k(in savings account).
I must admit that I was lucky to be able to find an independent pharmacy position in this tough job market.

I am a single, but I may eventually have to support my parents who have no retirement plan whatsoever.
Currently, I live with them but I do help them financially each month paying few bills.
I have no intention continue to living in this condominium my parents purchased 10 years ago because the place was totally overpriced(my parents will never be able to pay it off fully while they are alive) and the HoA has been dissolved to nothing.

I have $160000 student loan (all federal) to pay back (which is the main reason I have saved up my money).

Assuming that I could be out of work tomorrow and have hard time finding a new job..
(Just assuming worst possible situation that can happen to a pharmacist. I did have really tough time trying to find a job first 6 months after graduation)

I wonder what other people would do if they were in my situation.
Would you pay off student debt first.. or purchase a home?

If you can share any opinion based on either my situation or your own,
I will greatly appreciate it when I make decisions in the future.

Please keep in mind that this is not a question about getting home mortgage on the top of six figure student debt. (I dread even to think about two six figure debt to pay back)
..but it could be a question asking which loan is better to have if I have to keep one of two for next decade.

Thank you very much and Happy new year to you all.

Paying off the loan is the better choice. You will get a guaranteed 5-8% return doing that which beats the unpredictable housing and stock markets. A house is usually a bad investment. That being said I would not pay off the loan in this bad pharmacy market. I would hide the money from the IRS/government. If you default in your loans that is one thing but with the hidden money you will still have leverage to start up a pharmacy. I would start some kinda biz with the money that you think can earn you ROI such as a franchise or start up an independent.

 

[Humble Sloth]

If I was bit more confident about job security in pharmacist job market for future, I would be more confident about paying off my student debt first for sure. The initial job hunting experience I had was pretty brutal so I always assume worst possible situation.

Paying off student loan sure sounds like a no brainer to me as well.
If I only have to worry about myself things would be much easier. I am bit over 30 yo now and I am thirsty for my own place and independence. I still have to think about my parents though.. their bottomless mortgage, credit card debt and no retirement plan. haha

you have to ask yourself.

Why do you want to move into your own nice place?

Be honest. Is it to have a higher chance of meeting a romantic partner? status/prestige? You need space?

Otherwise not really a good idea to move out of your parents place.

If your parents are truely that underwater on their property they should stop paying their mortgage today and declare bankruptcy and get away from the massive liability. Can they sell the property?

If your parents are thousands of dollars short on their payments they need to max out all credit lines and then hide what little money they can then declare bankruptcy. It sounds like they are sitting on a TOXIC liability.

 

[TerryTerry]

Yeah. You can say that. It`s in pretty bad situation. They owe bank almost half a million dollars and HoA is no more. On top of that.. my parents speak no English and I have to handle all matters regarding their immigration, house and business issues. I will really have to decide what I have to do with these problems. I wasn`t involved in these things initially but now I am only to find out how terrible situation they are in financially. Their monthly cost for business and house mortgage alone is over $4500 each month. They just think it`s ok as long as they manage each month, but they are not. They have absolutely 0 saving on top of huge credit card debt... and I had to use some of my student loan to pay their late mortgage fees while I go to pharmacy school.

It`s a situation only I try to fix.. but my father is a stubborn man who is very hard to work with most of the time. If he is against the idea of moving out.. I probably will just pay off my student debt and see where I go from there. My dog is now 17 yo... once I am done taking care of him I will move on full speed ahead.

 

[TerryTerry]

They can`t sell this property. It has no HoA.. and the market value of the place is down to 50% compared to the price my parents purchased the place with. Yes. They got ripped bad. No point crying about it now. They weren`t being simple folks but just plain stupid. Nothing I can do about what happened in the past.

 

[npage148]

Since you got a bunch of good advice

Wait a couple more years saving and

 

[TerryTerry]

Hahaha. I know I need to do something with this money soon.
I will try to so they don`t rot for too long. The advice have been really helpful. I know there is no easy answer for this.

 

[Amicable Angora]

Throw 100% of that at student loans

This is where the money is (pun intended). Unless you think you can make more a year (unlikely) than the student loan interest rate, which is what 7-10% I would advise IMMEDIATELY paying off your loans.

 

[Old Timer]

What is your monthly student loan payment?

 

[TerryTerry]

Right now I pay around $600. I only worked full time for 20 months or so.
I`m leaning toward paying off debt ASAP. It kinda feels like right thing to do vs buying my own place which is what I want to do.

 

[WVUPharm2007]

Index that ish. Come back in 20 years.

 

[SouthernRetailRPH]

Personally I would pay off 50-60k now in loans, invest 30k and save 30-40k for now and going forward split extra income between the 3, that way you have some emergency savings, some of which could be used for a down payment. I would tell my parents to walk away from that mortgage, file bankruptcy and help them pay for a much cheaper place to live

 

[TerryTerry]

Thanks. Yeah. I think I will go ahead and pay off 2 of my biggest unsubsidized loans first. That will be around $80k ish. I will figure out what to do with rest of my money and future after that. Thanks

 

[Humble Sloth]

They can`t sell this property. It has no HoA.. and the market value of the place is down to 50% compared to the price my parents purchased the place with. Yes. They got ripped bad. No point crying about it now. They weren`t being simple folks but just plain stupid. Nothing I can do about what happened in the past.

If they are that under water they need to walk away from the liability and declare bankruptcy. Every dollar they sink into that dead house is throwing away money. Refuse to pay and let them default on it if you have to. You parents need to live within their means.

 

[PharmtoCS]

Paying back those loans would be essentially investing for a guaranteed 6%+ return.

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[Sine Cura]

I'm almost at the 3-year mark. $170k in student loan payments ($16k in interest payments) and $50k in tax-advantaged savings accounts.

I don't need $170k in cash for an emergency fund. That is like 5-6 years of an emergency fund.

 

[sosoo]

They owe bank almost half a million dollars and HoA is no more.

u should research on the mortgage crisis of 2008 /2009. ppl went under water with their mortgage the same way, n lost half the value of the house. many ppl stopped paying mortgage n let it foreclose... it is pointless to pay so much for something that worth so little. your parents must come to admit they've been scammed! dump the house n move on.

 

[Sine Cura]

We should aspire to be like our President (for those in the U.S.)


"I walked away from my underwater mortgage even though I had no business taking one out nor the means to take one out. That makes me smart."
"I abuse PAYE/REPAYE/IBR to subsidize my overpriced education and poor life choices, even though I make six figures as a [insert well-compensated occupation in health care], to minimize my student loan burden. That makes me smart."

Don't hate the player

 

[sakigt]

Dave Ramsey can be an dingus but I love this advice:

Would you get a student loan for $100,000 to have it sit in the bank?

 

[Humble Sloth]

We should aspire to be like our President (for those in the U.S.)


"I walked away from my underwater mortgage even though I had no business taking one out nor the means to take one out. That makes me smart."
"I abuse PAYE/REPAYE/IBR to subsidize my overpriced education and poor life choices, even though I make six figures as a [insert well-compensated occupation in health care], to minimize my student loan burden. That makes me smart."

Don't hate the player

How exactly does what OP is doing qualify as abusing the IBR system? You know IBR is based directly off income right?

 

[Sine Cura]

And IBR payment calculations are completely decoupled from the original principal (which is the point).

I consider it abuse and easy student loans clearly incentivize moral hazard, but smart people take advantage of the tools available to them if it benefits them. "That makes them smart."

Things like the insolvency exception to tax bombs on forgiven balances are other tools to abuse.

 

[Momus]

Op cash hoard 130k at $6.8% student loan = $736/month wasted. You know what I can use with that extra cash flow? Fly back and forth to Europe every month with the right deal. Taking 2 extra days off a month picking my nose. Eating fancy dinners 5 days a week. Leasing a Tesla. 36 hooker outcalls/yr and plenty of coke. You get the point.

 

[TerryTerry]

I checked and considered few things and come to the conclusion that it's best pay off student loan ASAP.

Paying off student debt is not only most effecient but also safest thing I can do with my money for future.

Like I said, I'll start by paying 2 unsbsidized loan accounta in full.

The fact is that I can't let this debt continue to grow. Once it's paid off I know it will feel like my life is being refreshed.

Thank u for all ur inputs. Hopefully I pay it off fully by the end of year if everything goes smooth.

If I do, I'll be sure to let u know.

For my family, yeah.. I'll figure something out. lol. It's no laughing matter but It's not 100% my responsibility afterall.

 

[ldiot]

Keep like 6 month emergency fund and spend all the rest on your loan.

 

[NewRPh2006]

...

 

[NewRPh2006]

Yeah. You can say that. It`s in pretty bad situation. They owe bank almost half a million dollars and HoA is no more. On top of that.. my parents speak no English and I have to handle all matters regarding their immigration, house and business issues. I will really have to decide what I have to do with these problems. I wasn`t involved in these things initially but now I am only to find out how terrible situation they are in financially. Their monthly cost for business and house mortgage alone is over $4500 each month. They just think it`s ok as long as they manage each month, but they are not. They have absolutely 0 saving on top of huge credit card debt... and I had to use some of my student loan to pay their late mortgage fees while I go to pharmacy school.

It`s a situation only I try to fix.. but my father is a stubborn man who is very hard to work with most of the time. If he is against the idea of moving out.. I probably will just pay off my student debt and see where I go from there. My dog is now 17 yo... once I am done taking care of him I will move on full speed ahead.

I'm not understanding the parent situation. Why are they dependent on your income? They bought a $500,000 condo... they have huge credit card debt... they have zero in savings... and you're responsible for it? No. They are headed straight for bankruptcy. Your income will not be able to stop that train. Don't destroy your financial future trying to bail them out of the inevitable bankruptcy. They need to support themselves and learn to avoid debt like the plague. What a mess. Move out. Let them deal with the consequences of their financial misbehavior. You don't have to be mean about it, but separate yourself from that situation. It is bigger than you can handle. You can finish paying off your own debt while renting a decent apartment for yourself in a safe neighborhood.