Graduating college in a few weeks and about to start a new job

FastChef
FastChef

graduating college in a few weeks and about to start a new job. the company i'm going to work for is giving me 22k$ up front as a sign on bonus and to cover moving expenses.

i have 30k$ in student debt at 4.5% apr.

should i crush my loans or use that 20k to get a house while rates are still good?

King_Martha
King_Martha

bump

StrangeWizard
StrangeWizard

o-okay.

Illusionz
Illusionz

what do you think, op?.

Raving_Cute
Raving_Cute

that bonus is gonna get taxed hard. even in TX where there's not state income tax, I usually get hit for 35% or more on bonuses. Your student loan interest isn't that bad, is that weighted avg across all loans, or is it all 4.5%? Main question you want to ask yourself is can my return % on investments beat my interest rate? I Might be best to choose a few of the loans that have > 5% and crush those. I don't know how secure you feel in your job or if there's a probationary period, but I'd be reluctant to take on a shitload of debt (house) before determining how much you like working there, or how much your boss likes you working there.

Garbage Can Lid
Garbage Can Lid

i was leaning toward getting out from under my loans, but thats just because i don't like the feeling of being in debt.

farquit
farquit

continued.
i had a similar problem when I got hit with a big bonus, half of what yours is, but still. The house wasn't really an option, it happened a the start of the year, so what I did was opened up a roth and since it was before tax day I was able to max out contributions for the last year, and then I then clobbered a small but high interest student loan (6.55%). (I don't know about you but, out of school I had 25k in loan, but it was spread across multiple loans and shit). I spent the rest on a weekend bender.

5mileys
5mileys

or is it all 4.5%?
its all 4.5%

that bonus is gonna get taxed hard.
yeah, i'm going from turbo poor college student directly to middle class and uncle sam is raping my paycheck. i wanted to get a house for a variety of tax purposes.

TreeEater
TreeEater

What degree, what job, and what company?

JunkTop
JunkTop

mechanical engineering, reliability engineer, and its a semi-conductor manufacturer.

New_Cliche
New_Cliche

How did you wind up at that job? Did you go through the online application process?

Boy_vs_Girl
Boy_vs_Girl

middle class
For a young, single guy in the US, upper class starts at around $70k/yr

Spamalot
Spamalot

I applied online but only as a formality. One of the guys I did senior design with was the "rockstar" of my class and already had a job lined up there. the company kicks out referral bonuses, and my resume was one of the ones he kicked up the ladder.

So networking I guess. I think more dumb luck than anything.

takes2long
takes2long

Do you think you would have gotten a job right away if it weren't for that?

Carnalpleasure
Carnalpleasure

Old as fuck fag here - let my experience be your guide:

Bank the bonus for emergencies and then double or triple pay your loans on the monthly.

Try not t hit that bonus/nest egg at all but its there if you need to dive.

dont buy a house yet. it can really tie you down and you may hate your job, the city you are moving too, etc and want to move in the next couple of years.

If you do want to buy, get a duplex or some sort of multi unit house that you can rent out part of

you shoudl get about 75% of your PITI covered by the rent and your utilities will be lower too.

It'll be tempting to blow through some cash on nice shit, but try to refrain for a while. Pay the debt, live semi-frugally and when you want something, set aside a set amount weekly/monthly until you can afford it.

EG: I really wanted a vintage italian scooter so I set aside $100 month every month until I had enough. Some months I would get asked to go out drinking and I just put $50 in my scooter fund and bought a 12pack of beer and had friends over instead.

Good luck to you.

Emberburn
Emberburn

Get rid of debt first before making an investment and rent, don't buy.

VisualMaster
VisualMaster

Federal student loans? Make minimum payments on those. You can deduct the interest from your taxes, but only up to around $2000. If you deduct the loan interest, the government basically gave you an interest free loan and you can invest your money how you please. This is what I should have done when I graduated. I paid off my $15k loan in 2 years and missed out on a lot of money because of it.

PurpleCharger
PurpleCharger

i had another job lined up with the feds but these guys came in at the last minute and basically made me an offer i couldn't refuse. was a shock tbqh.

thanks for the advice.

don't buy
why? i loathe the idea of flushing (more) money down the toilet on rent.

GoogleCat
GoogleCat

Do NOT listen to this person, they have no idea what they are talking about.

Interest is tax deductable.
4.5% of $15000 = $675/yr in interest

at most, you will be in 35% tax bracket, but more likely 25%.

carrying the interest forward will save you ~$170/yr in taxes

Paying it off in 3 years will save you an average of $400/yr in interest over ten years.

deduct the 25% tax deduction from that = $300/yr x 10 yrs = $3000 in additional cost by not paying it off in 3 years.

Fried_Sushi
Fried_Sushi

renting while young helps keep your options open.
plus, in many parts of the country, real estate has had a big run-up and could be due for a small correction or at least a stabilization.

the first couple of years on a mortgage is almost all interest anyhow. Add to that the expense of repairs (which you dont have to pay on your rental) and transaction costs, if there is ANY chance you may want to move within 3 years, buying makes little sense.

girlDog
girlDog

follow up example:
these are rough figures but fairly accurate.

Buy a $200,000 house on 30 yr mortgage
Pay a total monthly payment around $1600
$100 of that for insurance
$200 of that for property taxes
$1000 of that for interest
$300 toward principal

$XXXXX for improvements/repairs

So you could rent a pretty decent place in most non LA/SF/NY/DC areas for $1600

A $200,000 house is OK, but nothing special in all but most depressed areas

You are only getting about $300 of equity every month by tying up your resources and limiting your options and taking on the risk of:
HVAC repairs
roofing repairs
plumbing issues
Washer/dryer/stove/refrigerator/dishwasher/etc replacement
$3600 tree removal
you get the idea.

Techpill
Techpill

what would be a price point for a house that you would think worth it?

Carnalpleasure
Carnalpleasure

Loans obviously.

Flameblow
Flameblow

A $200,000 house is OK, but nothing special in all but most depressed areas
God damn it feels good to live in Kansas. Thanks for reminding me why I live here.

tfw about to close on a $90k home (3 bed, 2.5 bath, brick) in a quiet neighborhood while making $80k fresh from college.

StonedTime
StonedTime

depends completely on the market.

But more importantly, it depends on how long you will own it.

Unless you are speculating on a solid run-up in appreciation, you should not buy a house unless you plan to own it at least 5 years.

Other general advice - only buy if you can afford it on a 15 year mortgage; you will save about 75% of the interest over the life of the loan and payments are not usually that much higher (~10-20% more).

Buy near a local university and near transit. Then, if you decide to move, you can rent it out easily and at a premium, offering you some added flexibility.

Look, the main thing is - if you are young, you neednt tie yourself down with a mortgage on a home.

Buying investment real estate is great tho. That's why i recommend the duplex option.

VisualMaster
VisualMaster

Hope you plan to stay awhile, cuz if you can get that for $90k, there must not be much market for housing.

Stark_Naked
Stark_Naked

informative. thanks again.

girlDog
girlDog

Don't be a retard. Get rid of your student loans. Buy a house when you decide to get married. Rates will still be decent and you can always refinance later.

Methnerd
Methnerd

You are expecting the price of your house to go up long term when taking on a mortgage. It is like speculating on the financial market but then with 100000+dollars and a single investment loan.

I am not going to waste time explaining this more but look at a mortgage as a part of your investing portfolio. If your mortgage is more than 30% of your portfolio/net worth, don't buy a house. (Being generous with the percentage)It is one of the biggest gambles you will ever make.
The term mortgage just looks nicer than "loan", even though it is the same.

Only buy houses if you are very well read on real estate. Don't be stupid, you can financially cripple yourself and limit your freedom and options in life if you make the wrong choice.

Snarelure
Snarelure

Older user as well. This guy knows his shit.

TalkBomber
TalkBomber

If you do want to buy, get a duplex or some sort of multi unit house that you can rent out part of

this is genius.

Lunatick
Lunatick

It's just the nature of living in a place like Kansas. There are houses in my town (small town, 3kish pop in WV) that are 4-5 bedroom, 3.5 bath with a big yard only going for 120-150k. It's really nice.

Tons of houses that are only 2 or 3 bedroom can go for as little has 40k here.

lostmypassword
lostmypassword

tfw just bought a 2 bed/1 bath 1500 sq ft house for 500k in Los Angeles

god damn boys

PurpleCharger
PurpleCharger

i'm gonna be in a similar situation soon and everyone i respect has told me to end the debt asap

once you pay your debt your life really gets started and you have enough for investing and experimentation

most people live like slaves because they never pay their loans off

Fuzzy_Logic
Fuzzy_Logic

i'd say it's more around 90k

Lord_Tryzalot
Lord_Tryzalot

I can add my perspective. Earned $80k out of college in a flyover state for the past three years. Lived very cushy and still managed to save $70k

PackManBrainlure
PackManBrainlure

grats, my niqqa! post some pics

w8t4u
w8t4u

living flyover in your youth is kind of a waste desu

idontknow
idontknow

i feel like this is horrific advice given that if he gets laid off or something he's suddenly liable for a debt burden that he could and should have gotten rid of when he was making money

i'm of the philosophy that you should always get rid of debt asap so that you can weather any financial storm

LuckyDusty
LuckyDusty

Naw. I live in a decently sized city and travel a lot (lotsa extra cash). It's not so bad

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