Broker Check

(301) 461-8492

What to consider when trying to balance multiple financial goals

| July 10, 2023

Balancing multiple financial goals can be challenging. Here are some considerations to help prioritize paying off student loans, saving for retirement, building an emergency fund, and saving for a home down payment:

  1. Interest Rates: Compare the interest rate on your student loans to the expected return on your investments. If the interest rate on your student loans is high, it might make sense to prioritize paying them off. However, if your student loan interest rate is low, you might achieve a higher return by investing in retirement accounts.

  2. Employer Retirement Match: If your employer offers a match on your retirement contributions, try to contribute at least enough to get the full match. This is essentially "free money" that can significantly boost your retirement savings.

  3. Emergency Fund: Before focusing heavily on long-term savings goals, it's generally recommended to build an emergency fund that can cover 3-6 months of living expenses. This offers a financial safety net in case of job loss, major health issues, or unexpected major expenses.

  4. Homeownership Goals: If homeownership is a priority, consider the timeline. If you plan to buy in the next few years, saving for a down payment could take precedence over extra student loan payments. If your timeline is longer, focusing on paying down debt or boosting retirement savings could make more sense.

  5. Tax Considerations: Remember that contributions to a traditional 401(k) or IRA can reduce your taxable income now, while contributions to a Roth 401(k) or IRA can provide tax-free income in retirement. Student loan interest may also be tax-deductible, which could decrease the effective interest rate of your loans.

  6. Loan Forgiveness Programs: If you're eligible for Public Service Loan Forgiveness or another loan forgiveness program, it might make sense to make the minimum student loan payments and focus on other financial goals.

Your individual circumstances, risk tolerance, and financial goals will influence how you prioritize these. Contact us to discuss how we can co-create a personalized strategy for you.