Graduated Learning: Life after College

I got my degree, I got a job…now what?

What are you saving for? December 7, 2008

Filed under: Personal Finance — Stephanie @ 6:03 pm
Tags: , ,

I was updating my net worth calculations, and it got me thinking:  What am I saving for?

My current financial goals are not very specific.  Many pf bloggers have noted their short and long-term goals, often using nifty status bars.  They’re saving for an emergency fund, or a new puppy, or a down payment.  And I realized that I’m just saving to be saving.  At least for the short term.

My goals are stepwise.  First goal is to have a positive net worth.   Then I want to eliminate all debts (currently $60k+ student loans and $17k+ car loan).  After that, I guess I’d be saving for a down payment.

I think I’m sometimes just saving for the future, but I have no idea what I’m going to use that money for in the future.  Will I be buying a house?  I hope so, assuming it’s the right time and place for it.  And if marriage and kids are in my future, will I be paying for the wedding?  I’ll need money to raise kids, and maybe consider putting money away for their college education.  But really, I think I’m just hoarding money, with the intent of having it around in case I find myself in need.  It’s almost as if all of my savings is one big Emergency Fund.  The money’s there if I need it, but I don’t really have a plan of ever using it.

I realize that I could probably use some of my savings to pay down my debts.  But I just feel safer having a larger emergency fund than having a smaller debt, even though, mathematically, it’s not the best choice.

Should I start creating a “fund” for everything?  My long-term financial goals seem so far away.  I feel like I’m just saving and avoiding spending, and hoping that it will all fall into place.

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ING Lowers their rates…again! January 23, 2008

I can’t say that I wasn’t surprised. After the Fed lowered the interest rates 3/4 of a point, I knew my rates would shrink. Their checking account is down to 2.50% APY for up to for accounts with less than $5,000, and their savings account is down to 3.65% APY. This makes me all the more interested in paying off my student loans. I mentioned before that the interest rate for the bulk of my student loans had dropped, thanks to the Fed lowering rates last year. Sadly, I’ll be waiting a few more months before my loan rates are lowered (if the Fed rates don’t rise). In the meantime, paying off loans that are more than my yearly gross income (Darn you MIT!), most of which have an interest rate of 7.5% is going to net me more money than saving money at about half that rate. I already have a decent emergency fund, so I feel that I can draw some money from that and put a decent chunk towards the student loans. I do know that there are tax factors relating to the two options…I think that I’ll have to still pay taxes on the money I earn on interest through ING, but I also get some sort of tax benefit for the interest I pay on my student loans. I think for the whole “pay yourself first” idea, I’ll continue to put some money away every month, but I’ll draw some money from the “emergency fund” to pay a large amount towards my loans.

Though ING has lowered their rates, I’d still urge you to join up with them…for the referral bonus (that both you and I would get!). A guaranteed 10% return ($25 for $250) isn’t half bad, right? If you need a referral for either the electric orange checking account or the savings account, let me know (leave a comment; there’s a place to enter your email address, and only I can see it), or email me! Wow, this seems a bit forward and brazen to just tell you to do this (since I get a nice $10 referral bonus when you sign up and put at least $250 in). I’ve never really been a rate chaser when it comes to savings accounts…if you are, I don’t know if ING is right for you. The rates could change again!

Something I read about the Fed interest rate decrease is that they hope that by lowering the rates, consumers will be more willing to spend (rather than save). I guess that’s happening in a way for me…I’m spending the money on student loan payments instead of saving it in a savings account. But that made me wonder: are all these people you read about in personal finance blogs (me included, I suppose) partially to blame? Everyone is urged to have an emergency fund, be more frugal, spend less…but the economy “needs” us to spend to keep it going. I know that there’s also all the people NOT saving, because they’re part of the whole “subprime market meltdown” that is being blamed. Who knows…That was just something I was thinking about…

(some interesting articles that I’ve found on Slate.com (an online news magazine) relating to the Fed rate decreases…the one listed above: Bernanke’s Surprise, as well as How will the latests interest-rate cut affect me?, and How do you inject money into the economy?.)

 

 
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