facebookI've been working for >1 year and have a student loan of 20,306.64 (down from 26k+) left to settle. My savings are 5.4k. Should I begin investing or finish clearing the loan first? - Seedly


I've been working for >1 year and have a student loan of 20,306.64 (down from 26k+) left to settle. My savings are 5.4k. Should I begin investing or finish clearing the loan first?

For context, I'm 27 years old this year. I understand the importance of compound interest, but let's face it: I'm getting on in years. As such, I've become increasingly antsy about not having started investments at my age.

I would like to get some advice on what to do moving forward. Thank you!

Discussion (8)

What are your thoughts?



12 Apr 2022

Level 6·Salaryman at Random Company

I had cleared my bank education loan of $30k one shot after graduation, before the interest rate kicks in, but achieveable mainly due to foresight that I'll need a bomb to cover that loan, and didn't get an ATM card in NS, plus selling weekends to do duties at $300 / Saturday and $150 / Sunday. Survived on <$400/year from angbaos for that 2 years.

However, that had left me with less than $400 left in bank after I cleared the loan, so I borrowed $10k from sibling to act as my emergency funds, and paid him bank loan's interest rate. I cleared it off in 12 months with hardcore saving (cheap dates, i.e. parks, youtube, etc), before I start to look into investment.

My logic was that, investment might bring me anywhere from -10% to +20% (very extreme, I know, but it is for example only), but paying off the debt (bank loan's interest to my sibling) is a secured 4.85% p.a. I always thought "one bird in the hand is always better than two or three birds in the bush". Guaranteed earnings / savings of ~4% is always significantly better than unguaranteed earnings, which might even cause loss.

I understand that you might feel that there's a lot on your plate right now, but just toughen it out for real for a year, and you will be able to see significant drop in the loan balance. Keep unnecessary spendings to the minimum, prep your own meals for lunch at work, pick up side hustle like teaching tuition, etc. They will make a difference.

Jiayou and free feel to ask any questions if you want.

My own experience:
Graduated at 28 with $30K CPF Edu Loan.
Elected to drag the repayment period to the max with the minimum payment.
Worked my ass off to progress in the workplace.
Started investing seriously two years after working and being foolish with my money in the early working years.
Invested into SG stocks monthly and adhoc investments in US markets.
Managed to get pay increments over the years to make adhoc Edu loan repayments while continuing to make regular investments.
Cleared the CPF Edu Loan after five years.
Investment portfolio managed to grow to five figures after five years. Not a lot but better than $0.

My mindset then was to keep the faith and plant a seed to watch it grow. That time invested in the market will never happen again. Time is the real opportunity cost here.

For example, my average cost for some of my APPL stock is $88 and for some of my AMD stock is $20. When will the prices of the those stocks go back to that level? Short of WW3 and the Second Great Depression or the company goes bust, maybe never again? Of course, I also got burnt a couple of times investing over the years. Ultimately the investments worked out as a portfolio over time.

Was I lucky?
Yes, I am fortunate to be able to make some right investments.

Was I smart?
No, I just buy and hold.

Can anyone tell the future then and now?
Not possible.

What does compound interest work on?
Time. And compound interest works both ways.

You must be invested in the market to enjoy the highs and lows of the journey.

Just need to take the first step.

With the options available nowadays, it doesn’t take a lot of money to start investing.

Wishing you all the best in your life journey.

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Hi Kelvin, I would strongly suggest to pay off any student loan first as this is considered a bad de...

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