[USER]

Looking for advice. I am 35, single, no kids. Salary around 168k/yr. I rent, car is paid off. No credit card debt. Maxing out 401k and HSA yearly. I have about 45k in checking.

I have about 180k in student loans. Most are federal but 23k is private with a variable interest rate that is now 7.35% (was 3%). Highest interest rate on my federal loans is 7.5%.

I plan to start my own practice in a few years. I can pay off the private loan now and a chunk of the federal. I am very blessed to have my parents as my “emergency” fund. I will need some money to start my own practice (although I will be 100% remote) in the next 1-2 years and expect salary to increase when I do.

What do I do with the 45k in checking?

[Samuel]

You are 35 years old and you are using your parents as an emergency fund?

[Tyler]

Pay off any loans that have over a 5% interest rate first a foremost. Then start investing further with a taxable brokerage or backdoor Roth IRA. Keep it simple

Would you also like to explore: I max my Roth IRA account and my home is paid off. What should my next step be?

[Jessica]

I would focus on paying off the student loans. Owing 180k while making 168k is crazy to me. as is “my parents are my emergency fund” when 35 yrs old making 168k and maxing out 401k and HSA with $45k in a checking acct.!?

[Charlotte]

I know your parents “can” be your emergency fund, but you have enough and make enough to just keep your own emergency fund.

[Agata]

Put it in a HYSA. sounds like you will need to use it soon.

[Leigh]

You’re crushing it! I’d keep the cash. I’d also work backwards from what will be needed to open your own business. I’d make it a priority to pay off the debt. If you’re paying off monthly on student loans now, I recommend really getting aggressive. With your salary and limited expenses, you should be able to really make a dent in it the next couple of years.

[John]

Tough call here but I’m leaning towards putting the $45k in a HYSA or even a CD. I believe all your student loan interest payments are tax deductible so a 7.5% rate is almost equal to a 5% CD yield. Meaning, you’re almost breaking even by keeping the cash earning 5%, but having cash provides a wide safety net and start up funding when needed.

IMO having a sizable cash fund to start your own practice is the most important thing at this stage of your life. An investment into your own business always has the biggest ROI. Assuming your practice is successful sooner than later you’ll be able to squash the student loans down quickly.

Although I don’t like the idea, I believe there’s ways to use your 401K to basically loan yourself money and repay yourself with interest. I think a business and investing should remain and operate separately. You don’t want a business to fail and leave you with no way to repay a 401K loan. You’re better off with an SBA loan, etc.

However, look into a SEP, SoloK or SimpleK to supercharge your retirement savings once you’re self employed. You can sock away a LOT (like up to almost 3x more each year than a employer 401K).

You can check also: How many of you stopped contributing to 401k?

[Kim]

I wouldn’t take your parents help. It’ll bother you down the road that you didn’t do it on your own. Nice to have the safety net but don’t use it. You make a good salary and you’re 35.

[Josh]

Keep the cash. When you start your own practice you should try and get a building with an SBA loan.

You can do an SBA loan for a “duplex” practice. Your side need to be 51% of the size and can rent the other side.

You can do a 95% LTV loan on the practice.

I’m a real estate person but this is what I recomend. My father was a doctor and owned his own practice. It was a duplex as well but he didn’t own the other half.

[Zane]

I’d apply at least half of the 45k to the highest rate loans. That’s the equivalent of getting a guaranteed investment with a rate around 7%.

[Nauman]

Given your financial situation, here are a few suggestions for what you can do with the $45,000 in your checking account:

1. Pay off high-interest debt: Start by paying off the $23,000 private student loan with the variable interest rate of 7.35%. This will eliminate the higher interest rate and reduce your overall debt burden.

2. Create an emergency fund: While you mentioned having your parents as your “emergency” fund, it’s still beneficial to have your own dedicated emergency fund. Aim to set aside 3-6 months’ worth of living expenses in a separate savings account. This fund provides a safety net for unexpected expenses or income disruptions.

3. Save for future business expenses: If you plan to start your own practice in the next 1-2 years, allocate a portion of the funds toward saving for the initial costs and expenses associated with your business. Consider estimating how much you may need and set aside an appropriate amount to support your transition.

4. Pay down high-interest federal loans: After addressing the private loan and saving for your business, you can consider using some of the remaining funds to make a lump sum payment towards your federal student loans with the highest interest rates, such as the 7.5% loan. This can help reduce the overall interest you’ll pay over the life of the loan.

5. Invest for long-term goals: If you have additional funds after taking care of debt repayment and savings, you may consider investing for long-term goals, such as retirement or other financial objectives. Maxing out your 401(k) and HSA is a great start, but you could explore additional investment options, such as opening an individual brokerage account, to further grow your wealth.

Remember to evaluate your specific goals, risk tolerance, and time horizon when making investment decisions. It’s always wise to consult with a financial advisor who can provide personalized guidance based on your circumstances.

By strategically allocating your funds, you can work towards paying off debt, building financial security, and preparing for your future business endeavor.

[Alisa]

If it were me ..With that 45k open a brokerage account with fidelity online and try to get min 4% interest on it or some high yield savings account. Sitting in checking you aren’t making any money. You can still get min 4% without risk these days and have the money available to start your business. Great job starting the HSA but make sure you save every single receipt for health related costs. I’d also put money in a Roth while your income is low as you won’t be able to probably later once your income takes off.

[Author]

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