Dear Dave

Dear Dave,

I have $100,000 in student loan debt. Since the amount is so large, is there a special place in your Baby Steps plan for it?

Jules

Dear Jules,

I hope you have a nice, large income with which to fight that big pile of student loan debt. I’ve seen even worse situations, though. I’ve talked to people who went $200,000 into debt for a four-year degree in a field where they’ll make $45,000. Yes, that kind of thinking and behavior is out there, and it’s ridiculous.

The fact that it’s a large amount of student loan debt doesn’t change anything. Baby Step 2 is where you pay off all debt except for your home. So, don’t let this student loan debt hang around for years and years. You’ve got to get focused and intense about getting control of your money. That means living on a strict, basics-only monthly budget. After that, start throwing every nickel and dime you can scrape together, and save toward paying off those student loans as fast as possible.

Your income is your largest wealth-building tool, Jules. You can’t save, and plan for the future, when all your money is flying out the door to pay off debt.

— Dave

Dear Dave,

My wife and I are completely debt-free, and we’re saving up for our first house. We currently have about $140,000 in savings, and we’d like to buy a home with cash when the time is right. Where should we put our money, so it will work for us while we save more?

Andy

Dear Andy,

If I were in your shoes, and maybe looking at a window of three or four years, I’d just park the cash in a good money market account. You won’t make a lot off it, but your money will be safe. I mean, all you’re looking for is a smart place to stash it for a little while.

When it comes to long-term investing, I’m a big fan of growth stock mutual funds. The problem with that in your situation would be the volatility of the market. By the time you’ve saved up more money, and spent time deciding on a house, the market may be down.

You two are in a great place financially right now. With the path you’re on, just imagine how incredible it will be in a few years to have a new home and be debt-free!

— Dave