Erasing “debt.”
You’ve likely heard about the student loan forgiveness announcement from President Biden.
Key Takeaways
This news has been spreading, and many folks are wondering if they qualify or not. Those who qualify are excited about the potential of an extra $10,000 available to them now that they don’t have to worry about paying off as debt.
It’s well known that the financial burden of student loans prevents many folks from purchasing real estate and building wealth. This is why taking advantage of this student loan forgiveness program is so essential.
Let’s buckle down and look at how you can invest $10,000 after confirming student loan forgiveness in order to build your wealth and focus on establishing your financial health.
Nearly 8 million Americans immediately qualify for student loan forgiveness without any application. If your annual income is below $125,000 (or $250,000 as a married couple), you will qualify for $10,000 in student loan forgiveness.
The Federal Student Aid website has stated that relief can be expected within 4-6 weeks of applying. The website recommends completing your application before November 15, 2022 if you want to see the relief before 2023.
If you do qualify, you’ll have freed up $10,000 that you can now invest. This money should be used to build financial momentum for millions of Americans.
Here are the best way to invest the money you no longer need to allocate towards your student debt.
The first way that you should invest this money is to create a cash reserve so that you have cash available to you if anything bad happens. Some experts recommend that you save three months’ worth of expenses as a cash reserve to help you handle a possible job loss or another kind of disaster.
Your parents or grandparents have likely advised you of the significance of saving money for a rainy day. Think: your car breaks down, a broken bone, or any of life’s unexpected consequences.
If you already have a cash reserve fund, we suggest topping it off to ensure that you have enough money to be ready for whatever life throws at you.
The sooner that you start saving up for retirement, the more comfortable your life will be in your golden years. Saving for retirement isn’t something that you do later on in life. While getting old is the last thing on your mind when you’re young, you must plan for your older self so you don’t get stuck working longer than you want to because you didn’t prepare.
How can you start saving for retirement?
It’s important to start planning for retirement as soon as possible so that you don’t have to spend your golden years working when you could be relaxing with your family.
Have you been thinking about trying your hand at investing in the stock market? Since you’ll have more money to invest, you’ll want to put some of your money where it will grow.
It’s usually best to start investing in index funds that contain companies you believe in. You may want to take your chances investing in individual stocks, but it’s wise to wait until you have more experience and confidence as an investor. Sometimes, the best investments are the boring ones that provide consistent results. Targeting 6% to 8% over the long-term will provide big growth over time.
This $10,000 could be put towards your personal development or career growth. You may have heard that the best investment comes from investing in yourself. Increasing your skills and knowledge will result in more income, which will help you build more wealth over time.
How can you invest this money into yourself?
Take that course that you’ve been thinking about. Is there a course that could improve your standing at work or help you make more money on the side?
Learn a new skill. Could you use this money towards picking up a new skill, such as graphic design, coding, sales or copywriting?
Try a community college program. Since your debt has been forgiven, you can use this money to upgrade your education at a community college near you.
This $10,000 in relief could be the financial aid that you need to make a career change or advancement that’s been on your mind.
While this isn’t technically an investment, you can use this money to tackle other debts. Chances are that $10,000 isn’t enough to wipe out all of your student loans. While $10,000 is nothing to scoff at, you may not be completely debt free after your student loan forgiveness. You might also have additional federal and private student loans, depending on how much financial aid you took out for your studies. You may also have other debts ranging from credit card debt to a car loan. Use the money you allotted to your student loan payments to reduce your overall debt load.
Since we looked at the best ways to invest this student loan forgiveness money, it’s only fair that we look at what you shouldn’t invest in so you don’t squander this unique opportunity. It may be tempting to chase the promise of high returns that are “guaranteed” by some random person on social media. Remember—if it sounds too good to be true, it usually is.
Here are a few ways you should not invest this $10,000:
The purpose of this student loan relief is to help ease the pressure on your finances. Don’t make things worse by taking on unnecessary risks.
If you find out that you’re approved for student loan forgiveness, then you’ll have $10,000 of your balance wiped out, which should noticeably lighten up the financial burden of student debt. This could be the perfect opportunity to start investing, pay down other debts, or to build momentum in investments you’ve already been making.
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