I (23) am just getting ahold of my finances. 4 years ago I moved out of my family home to go to college and in the first year blew most of my savings and built up credit card debt while taking out student loans to pay for college. About a year and a half ago I started actively working towards decreasing my credit debt, proper budgeting, and saving. This year my tax return was higher than expected and I have a couple ideas I’ve been floating around what to do with it. I am open to tips and suggestions but these are my top thoughts:
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Put into a high yield saving account ( this is the option I know the least amount about so any insight on this would be very helpful and much appreciated)
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Use to pay off remaining credit debit. I would still be left with around 1-2K in debt but it would help clear out a lot. I currently comfortably make payments double the minimum and then some when I can spare some money.
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Use it to pay for my current semester at college and not take out another loan.
or
- Use it to pay off a loan I used to pay for a previous college semester.
Any shared expertise is appreciated, thank you!
Where do I put my money?
byu/Training-Dot-8157 inpersonalfinance
Posted by Training-Dot-8157
4 Comments
Pay down your credit card debt as much as possible. You are probably paying 20% interest on that debt. A high savings account will only pay 3% that is a negative 17% spread you are losing money on.
What is the interest rate on the credit cards? Whatever has the highest rate is what you should prioritize. Probably keep some amount ($500-$1000) in a savings account for emergencies
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Pay off your credit card debt first, no question, since the interest is usually the highest and drains your money fastest. After that, use what’s left to reduce future debt by paying for your current semester instead of taking new loans. A high-yield savings account is great, but it comes after high-interest debt is handled. Focus on eliminating expensive debt first, then build savings.
Your number one priority should be paying off your credit card debt because the interest rate is far higher than what you’ll gain from putting the money in a HYSA (most are returning 3.3-3.8% rn where as your credit card is likely costing you at least 15% and likely more). Do whatever you can to get out of credit card debt, then slowly start building your savings. Worry about your student loans after you’ve become cash flow positive on a monthly basis.