Post # 1
If all goes well in my May interview, I will receive a teaching grant worth $10,000 by the end of the year. This fall, I am starting my year-long student teaching and will then get a job as a teacher in fall of 2015.
I am curious on the best way to spend this grant money. I considered putting half into a mutual stock (something with an average annual return of around 10%) or using some of the money as a down payment on a house. Getting a job after graduation does not worry me (I will be teaching middle school science) but I want to ensure that this money is getting the best use. During my student teaching, I will be tutoring and can expect to make at least $500 a month.
Should I plan to invest the money in order to see a larger return in a few years, should I use the money for a house (though I’m not certain if its most wise to do this during or after student teaching), or something else?
As a side note, I’m currently living with my boyfriend’s family since they are located closer to my school. We have been wanting to move out for years but don’t want to rent anywhere. What is most wise?
Post # 2
I’m not sure if buying a house right now would be the best bet when you don’t know where you are going to get a job. It might not be in the local area.
I would only put the money in the stock market if you won’t need it for at least 5-10 years. If you don’t know much about the stock market, you need to make sure you understand what type of investment you are buying that that just because an average annual return is 10% doesn’t mean that you will get that rate every year. It is also possible that it might go down temporarily, which is why the stock market isn’t meant for money that you will need within the immediate future.
Post # 3
Meglin: Do NOT invest money in the stock market that you cannot afford to lose or that you will need within the next 5-10 years. It is far too risky.
I would also advise against buying a home right now (and it may be difficult for you to qualify because you don’t have a steady, high enough income). Once you are working and have a secured job/steady income, that would be a better time to consider buying.
I would suggest putting it in a high yield savings account which will only get you around $100 a year, but it is garaunteed to be there when you need it.
It is clearly your money and your decision, but $10,000 is a decent amount of money and it would be a shame to either lose it in the stock market or buy a home that you might have to sell because your job is located somewhere else.
Post # 4
I would use this as a main income for the year. I get that you probably don’t have to pay much rent or utilities while living at your boyfriend’s house, but I would use that money to pay my share of living, and paying off any debt that I might have. If you have money left, then you can put it in a saving’s account somewhere… and probably an emergency fund because you don’t know when you’ll get a job. Right now all your possible income are uncertain, and so is your career a year from now. Until you’re settled, you should keep that money on hand, in case you might need it.
You shouldn’t depend on your in-laws to provide for you for the next year and a half. I really believe that if you think you can purchase a house, then you should also be able to provide for yourself prior to that.
Post # 5
Thank you for the input thus far; I will graduate with about $10,000 in student loan debt and about $8,000 for a car loan, so I also weighed my options with paying off debts. However, considering we want to move out as soon as possible, it will mean living with parents for a while longer (especially since my career as a teacher will never yield much income.)
Post # 6
Meglin: Given your new info, I would definitely not invest in the stock market. As I said before, way too risky. Are you only willing to buy and no rent? Renting is an affordable place is a great step toward independence.
While home ownership is great, it comes with a lot of financial responsibilities, not just the mortgage payment. If something breaks, you have to fix it. If you need a new water heater or roof, you have to pay for it. A lot of people don’t realize how expensive homes are until they are swimming in expenses. Also, if you both don’t have two years work experience, good-great credit scores and stable incomes, you may not qualify to buy a home.
ETA: I still think putting the money in a high interest savings account (like SallieMae or Ing Direct) would be the best option. Or using the money to rent a place.
Post # 7
$10,000 in school debt. $10,000 extra…. so…the $10,000 should completely pay off the debt. It is nice to not have that to deal with. It will be easier when the time comes to buy a house and have a monthly mortgage when you do not have a $200 loan debt for school. It is not a “fun” thing to “buy”…But that is what I would do…
Post # 8
I agree with PP. Never gamble with money in the stock market unless you can afford to lose it. I’m not sure what you mean by “mutual stock” though, do you mean mutual funds or stocks? There are safer funds that are less agreesive and have less risk, but naturally less return. Nothing advertising 10% a year yield is guarenteed, and that’s usually an average over a long time. I would not suggest picking individual stocks though, that is just much too risky unless you do a lot of research. If you do need that money in the near term, I’d just put it in a high (well, as high as you can get) yield savings or CDs or govt bonds. If it’s money you can afford to lose, go for the funds/stocks, it can definitely pay off.
Post # 9
bmo88: I’d prefer to buy from an investment standpoint; we both agree that we’d rather save up to purchase a home rather than rent. I’m certainly worried about those additional financial responsibilities you’re mentioning and I realize that I don’t have much in savings to cover major unforeseen circumstances, so thats definitely a major concern.
I have been technically self-employed as a tutor for a while, so its good you mention that. My Boyfriend or Best Friend has been working for the same company for 5 years, so he’s better off in that department than I am, though my credit is better (around 730). Those are very valid concerns to contemplate, however.
I want to make the best investment with this money because I want to be somewhat financially stable by the time I graduate. I’m also anxious to move out and am trying to maximize my potential to be in a place to do that within a year, ideally.
Post # 10
Meglin: I really, really, think you should use it to pay off your student debt. Just think how much faster you will be able to save your money ( and it will really be YOURS! not the BANKS!) if you don’t have the student loan payment. You can still move out and rent something cheap, pay off your car, and then use THAT extra money to start saving like crazy for your first home!
Another thing is – student loans are not bankruptible. If anything happens – you are not getting out of that! I think you should get that thing off your back 🙂
Post # 11
Giraffelover: It would definitely relieve my student loan debt, which would be wonderful, but I fear that losing all the money in one transaction will mean that I will need to work longer (and live at home longer) to save up enough money for a down payment. Currently, my savings are only about $1000, so I don’t have much money to begin with.
pinkshoes: The mutual fund is what I meant to say, one less aggressive and less risky. A CD might be a good idea, however; thank you for the recommendation!
Post # 12
Meglin: In many ways, homes can actually be a terrible investment. It really comes down to what home and where you buy it. We have had friends buy money pits (costing them thousands in simple and major repairs) and we have had friends buy homes that have increased significantly in value.
Really, buying a home is more of an emotional/stability investment than a finacial investment. As you are unlikely to make money on a home unless you keep it long term, make significant improvements that pay off or are in an usual market that appreciates a great deal. It’s great you have been self-employed, however, a lot of banks won’t recognize self-employment unless you have been working for a certain time frame (varies from bank to bank) and if you make a very stable, usually higher income.
Once you get a teaching job, you will become a much more desirable candidate to banks for a mortgage. Also, are you certain you want to live in your area for 7+years? Usually, buying/owning a home for less than that amount of time can cost you more money in the end.
As another PP mentioned, you may want to consider paying down some of your debt. Lenders will take your debt obligations into consideration when trying to get qualified. They will qualify you for less the more debt you owe.
Post # 13
I would put 5k towards my debt (whichever one has a higher interest rate) and save the other 5k in a CD if you’re concerned about having enough for a house. But you definitely should put at least some of it towards debt