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Make meaningful improvements to your finances every week.

Now's your chance.

Make meaningful improvements to your finances every week.


This Financial Life: Jeff Wilson


 A  listener joins us for a financial check up in our This Financial Life episode.  Jeff Wilson finds out what he’s doing well and what he could do better.

Jeff lives in the Midwest where he works for the Department of Natural Resources, it’s an outside job where he helps care for wild life sites.  He burns down stuff for a living!

Jeff is 26, he has $24,000 in student loans.  He’s paid off about $12,000 so far.  His rent is $300 a month.  His loan payment is $400 a month.  He’s making about $1600 a month with some fluctuation.

He has avoided credit card debt, a big plus.  But he’s paying the minimum on the loans.  Even still, they could be paid off in about six years.  His cost of living is very, very low and Jeff hopes to retire early.

He has about $24,000 in cash saved, the same amount he has in loan debt.  It’s daunting though, to wipe out your savings in one fell swoop.  At the very least, Jeff has to get that money out of a crap interest savings account.

I see that large number and it's scary to wipe it down to zero.

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This is the ideal time for Jeff to pay off those loans.  He has a low cost of living, no credit card debt, a good line of credit if there were an emergency.  Kill the loans!

Jeff has an IRA with $10,000.  He also has a Betterment account.  The spanner in the works is that Jeff is laid off for three months of the year.  During that time he’s receiving unemployment but it’s not a lot.

Jeff is doing well and he knows what he needs to do.  He just needs a little convincing.  He could potentially be retired at 40.

All of our This Financial Life guests are savvy and doing pretty well and Jeff is no exception.  At just 26 years old, he’s already on the path to financial freedom.

Show Notes

Betterment:  Investing made better.

Mint:  The better way to budget.

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  • rockymtnrick

    I’m sorry you didn’t hear me yelling at you from my driver’s seat, so I guess I should comment. From what I heard, Jeff’s $25k student loan debt is divided among several loans, and “nearly half” are less than four percent, and others are in the high sixes. You advised Jeff to take his $24k savings to pay off ALL his student loans. I respectfully disagree. Yes, he should wipe out the debt that takes him backward in his financial goals, but he should retain the debt that takes him forward.

    We can debate the dividing point, but I’m choosing four percent. I believe Jeff can gain overall by moving half his savings into a Betterment (or other investment) account, and paying off the loans above four percent interest. He can then split future excess income between paying off his four-percent loan and funding his investment account. If my sons were in Jeff’s situation, that’s what I’d tell them.

    • Dude, I hear you but you need to consider that tomorrow may begin “the worst case scenario” and the position of being the one to doll out advice. Generally I’d agree with you but if this was in 2008, keeping debt at 4% and investing the rest wouldn’t have worked out.

      Plus, student loans are much worse than simple interest and like your mortgage, at the end of the term you’ll pay a much larger percentage than you’d estimate in normal interest calculations as interest is calculated daily.

      Perhaps the hardest part is setting the “cut off” at which interest rate is ok to hold. Technically none but in the fluffy realm it’s probably somewhere between 3% and 4%.

      • jb1907

        I would pay off all the loans and then start taking that money that was going to loans and put it into the market. The risk of the known is greater than the unknown. If 4% was guaranteed, I would split the difference. We are in a bull market and everything thinks they can’t lose money.

        • 100% agreed. Decent move but awesome quote – Safety not guaranteed.