College Student Budget Priorities

Colton wants to know how to prioritize his budget. He's returning to school and getting engaged, so he has a lot of big changes coming. He has some student loans. Should he pay those off before he gets engaged?

QUESTION: Colton in Des Moines wants to know how to prioritize his budget. He’s returning to school and getting engaged, so he has a lot of big changes coming. He has some student loans. Should he pay those off before he gets engaged? Dave gives Colton his priority list.

ANSWER: Here are your priorities if I were in your shoes.

Priority number one is food. In other words, necessities. I want you to pay cash for your lights, your water, your car’s gasoline, your food, your rent . . . that kind of stuff. Obviously, you have to live. That’s your first priority. This is all while adding no new debt.

The next priority would be to pay for your college. Pay cash for your tuition from this point forward.

The next item on the list is the ring. And the last item is paying off student loan debt. So if you wait until you’re married to work on the student loan debt because living and paying cash for existing school—new school—and buying the ring uses up your money and you don’t get to pay hardly any on the debt until you get married, and that’s okay. My first goal with the debt is to do no more damage. That means we’re not borrowing student loan money to live on. We’re not borrowing student loan money to go to school. You’re covering those two things. You’re going to buy probably a modest ring. By the way, that’s okay.

My wife’s first ring—the engagement ring—is a 0.29 carat pear-shaped piece of gravel. I’m serious. It’s the lowest quality possible diamond on the planet. I had no idea what I was doing. And I paid too much for it, too, by the way. But that was 32 years ago, and it seemed to work. By the way, it’s in the safe as a keepsake, and there’s a major freaking headlight on her hand now. You can upgrade later if you need to. You can upgrade later when you have the money if you need to is my point. There’s no correlation between the length of marriage, success of the marriage, and size of the diamond. As a matter of fact, there might be a negative correlation, but I’ve never been able to find a study to prove it.

I would pay minimum payments on all debt until I had my living taken care of, my school taken care of, and a modest ring taken care of. Minimum payments on everything and then beyond that, if you want to start attacking your debt, you would use the debt snowball. After you’re married and you get the real jobs and that kind of stuff, then we’re certainly going to attack the debt and get rid of it. But our first goal is to eat. Our second goal is to go no further into debt. And our third goal is to make that purchase—to make this plan execute—because this lady’s worth it, I bet.

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