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Ask Dave

Older Dave's Advice to the Younger Dave

Jamin is graduating from college. He'll have about $40,000 in student loans, and he has $4,000 in savings. What advice would Dave give Jamin at this point?

QUESTION: Jamin in Raleigh is 24 and graduating from college in December with a degree in pre-law. He’ll have about $40,000 in student loans to pay off, and he has $4,000 in savings. He’s putting $100 a month into an IRA that has a $5,000 balance. What advice would Dave give Jamin at this point?

ANSWER: I would walk you right up the Baby Steps that we talk about. That is I’m going to put that $4,000 in savings as your emergency fund. I’m going to attack your debt. This is your only debt, I assume. As quickly as you get some income rolling in, I’m going to attack that debt with a vengeance and get rid of it first. That’s job one.

Job two is to go back to that account that has $4,000 in it, and let’s raise it up to three to six months of expenses, which is going to be more like $10,000 or more, depending on what you are making and what you’re spending and so forth. Then we’ll start our investing into good growth stock mutual funds in a retirement plan.

I’m going to send you a copy of The Total Money Makeover, and it’ll walk you through those Baby Steps that I was just outlining and show you not only what to do but why to do it. That answers the question you asked me most thoroughly. If the 53-year-old Dave could talk to the 24-year-old Dave, what would he tell him? I would hand him this book and say, “Do everything in this book.” That’s what I would do. It’s not because I’m trying to sell a book. It’s just that’s the best answer, and it’s a lot longer answer and more thorough answer than I can give you on the radio. That’s how I would get at that.