Happy New Year!
If you read my 2021 Financial Review, then you know 2021 was a pretty good year for me financially. Given this upswing, you might think I’d be headed into 2022 fairly optimistic and confident about my financial future. And you would be correct…kinda. More like half correct.
While I am perhaps more optimistic about my financial future than I have been at any other point in my adult life, I am also the most conflicted. When I said that my progress in 2021 changed how I felt about myself, my student loan debt, and my finances, I wasn’t being hyperbolic. For the past two-and-a-half years, I felt trapped by my debt and, given all the opportunities I have been afforded in life, I felt a great deal of shame about being trapped. However, making it under $90K in student loan debt, a new job, and the greater financial security that comes with that progress, means that my financial horizon now seems…bigger? That I have some obligation to future AfroPenny to do something more than just pay off my student loan debt…?
As I mentioned in my student loan refinance post, one of the things I am most excited about that resulted from choices in 2021, is the increased simplicity of my financial picture. I want that simplicity to extend to my 2022 Financial Goals, so there will only be three…
1) Earn the 20% match from Organization C (my new employer). – I don’t think it is possible for me to do anything other than contribute enough to earn the full 20% match from Organization C. This would result in $15,000.00 of my gross salary going to my 403b this year.
2) Save $1,000.00 as a non-emergency fund sinking fund. – Just because I didn’t plan for it doesn’t make it an emergency. This pot of money would be used to cover things that I should plan for in my budget…that I generally don’t. This includes things like my annual Costco or Prime memberships, car registration, car inspections, oil changes, Microsoft Office, insurance, etc. I would like to hope that if I didn’t have my student loan debt that I could devote the mental energy to better budget for these things…but I know that won’t be the case. I’ve often said one of the great things about being in your 30s is no longer pretending that you are going to change and, instead, learning to plan for who you are. I think one of the reasons that I have been successful at debt repayment thus far is that I have been mostly singularly focused. I am hoping that establishing a sinking fund prevents me from wrecking my budget when these expenses pop up but doesn’t take any time or attention away from my other goals.
So far, so good. Here is where I need help…
As I shared above, my new financial horizon seems bigger than just paying off my student loan debt. And this has been affirmed by other folks who have been both proud of the progress I have made but who also want me to start thinking about “other things.” My parents are split: my father thinks I should tough it out a bit longer and pay off my student loan debt while my mother thinks I should buy a house. The Wizard (my best friend) thinks that now that I have a fixed, low-interest rate on my student loans, that I should be in no rush to pay them back and should instead invest in property or ETFs. Gentleman Avery thinks I should pay off my student loan and get rid of the mental burden that accompanies it. (Note: I had talked to him about how my student loan debt made me feel at one of my lowest points. He wasn’t particularly considerate so I haven’t really told him about all of my progress but he does know about the new job.) To be fair to all of them, none of them know exactly how much student loan debt I have remaining. But you all do…which is why I am soliciting your advice. I think I really have three options for my third goal and would really like your input as to what I should do…
3a) Allocate all additional money to student loan debt repayment. Repayment goal for 2022: Make it below $60,000.00 in student loan debt. – I know! So this would pretty much be a continuation of the status quo with a massive goal for this year. This would be a lot easier if I were benefiting from the continued interest rate and payment forbearance on federal student loans that was just announced by the Biden Administration despite the fact that they said there would be no additional forbearances…but water, bridge, and all that jazz.
While I am drawn to this goal, there is also part of me that wonders if the additional hustle is worth it… Using the How soon could I pay off all my debts? calculator, I figured out that I could be student loan debt-free by 40 if I made payments of $2,000.00 per month (shoutout to Paula who also mentioned a similar number in her comment about my new job). Even with goal 1, this would just be a tiny bit of a stretch each month. This amount would become my budgeted monthly payment and wouldn’t vary as my interest rate is fixed. Any additional income I made beyond that amount, including any raises in the future, would be mine to do with as I liked. So…
3b) Make $2,000.00/month student loan payments. Allocate any additional money, including bonuses and raises, to other investment opportunities and increased quality of life. – I recognize that this is still a large amount that is still very dependent on me living a relatively frugal life. However, at the moment, it seems like I could still make this payment with little to no “hustle” as long as I stuck to my rather lean budget. Alternatively, the other good thing about 3a) is that making the cuts now, while we are still in a pandemic, I am unpartnered, and without children, is an easier choice to make now than it might be a couple of years down the road… That being said, I would also expect that my earnings would also have increased a couple of years down the road.
3c) Make minimum student loan payments. Allocate any additional money, including bonuses and raises, to other investment opportunities and increased quality of life. – This is the Wizard’s suggestion and my least favorite option. However, it would be an unfair thought experiment (and question for you all) if I didn’t at least consider it. I think my fear is that all that would really happen is that my quality of life would get upgraded. Maybe move out from the city and purchase a house? I have no investment acumen and no real interest in learning about the market (I have tried podcasts, books, and YouTube), and so if this money didn’t go to a house or savings, I worry I wouldn’t invest it or not invest it wisely.
So, what do you think?
I have decided last year’s quote from C in 2021 is going to be my mantra for 2022 as well as it is where I think I am in terms of mindset at this moment:
I think it’s important to not totally abandon the idea of getting out of debt, but also not sacrifice the rest of your life to “serving” it. – C
I hope this 2022 finds you, your loved ones, and your communities in a better place than we have been for the past few years. Happy New Year!