Question

Yvonne will be graduating in December with a degree in elementary education. Thanks to her hard work, she already has a third-grade teaching job lined up after she graduates. It will be the first time in her life that she will make more than minimum wage. Because she wasn’t able to make enough money while in college, she took out student loans to help pay for her education. She has $15,000 in student loan debt and $3,000 in credit card debt. Yvonne must start paying back the student loans once she is out of school, and she is already making payments to her credit card debt.

1. What is the first thing Yvonne should pay back after she graduates? Why?

2. Should Yvonne save up money for an emergency fund first or start paying off her debts first? Why?

3. Now that she will make more than minimum wage, create a game plan for Yvonne’s money.

Answer 1

1.

She should pay off her credit card debt first. This is because credit card debt usually carries a much higher interest rate than a student loan and paying it off first would help her avoid paying a higher interest amount over the long run.

2.

It is always good to save up for emergency first. We live in a highly uncertain world and what curve ball life might throw your way next, nobody knows! Not having enough funds when something bad happens might even lead Yvonne to take on more debt which will worsen her financial situation even further.

3.

Yvonne has just graduated and she is still very young. Her plan right now should be to manage her debt payments and other expenses in such a way that she is able to save up some money every month that she can invest in a medium risk investment such as index funds. A good starting point for her would be to jot down her life goals such as: buy a car at 30 or buy a house or go for a vacation. Then estimating how much would she require for these goals and how much should she save today would help her stay financially healthy and not miss out on life because of financial issues.