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Professional student saving up for car

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  • Professional student saving up for car

    24, 3rd year professional student, no residency required, debt free + stipend (HPSP military scholarship), 70k income post-grad during active duty. Plan on buying a $5-10k car at graduation in 2 years (happy to hear on what end of that range you all recommend I should pay for a car/what car you would recommend for longevity, dont care about any features). I think the general feeling is that saving up for a car and paying cash is more recommended over financing it. However, maybe it is different for me, since 1. we're talking about less than 10k 2. i am debt free, which puts me in a far better position than most professional students with loan burden.

    I have $6k right now and am contributing $200/month x 24 months to HYSA so will have a little over $10k by graduation. Would it be the worst thing in the world to invest the $6k in a taxable brokerage and put the other 4800 in a HYSA? In my eyes, worst case scenario, at graduation, the 6k will be negative net and will be "locked" from me to use without losing money- i can still use the $4800 and finance the other $0-5k. Or, I can wait a month or two post grad and use savings from that paycheck to just cover the 0-5k and pay it in full. Best case- I'm up a few hundred dollars, dont have to pay tax on it (since it's long term and I'm in a low tax bracket). I know all this is pinching over a few hundred dollars but since my salary will only be 70k, every dollar counts so I'd like to hear your thoughts.

    Thanks!

  • #2
    I don't have a problem with that plan. Recommend the $6k go into a Roth account.
    Financial planning, investment management and CPA services for medical and high-income professionals | 270-247-6087

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    • #3
      Originally posted by jfoxcpacfp View Post
      I don't have a problem with that plan. Recommend the $6k go into a Roth account.
      already have a separate monthly contribution to max out the roth IRA!

      glad to hear you approve, first time buying a car and obviously first time transitioning into real income so want to make sure Im not missing anything obvious

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      • #4
        Kind of a tangent, but make sure you have accounted for insurance/maintenance costs. People always seem to be surprised at this when buying their first car.

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        • #5
          Honestly, chasing a few hundred dollars in yield is something I used to do when I was at your stage in life but it's a drop in the bucket long-term. I'd keep it simple. Your bigger risk is buying too much car because of financing - that'll eat up the extra few hundred dollars very quickly.

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          • #6
            Do you have unique costs that will change at graduation in the next two years (parking, high registration/taxes where you live now but not where you intend to practice, etc.)? If not, I would consider searching over the preceding 6 months prior to graduation. You’re much more likely to get a better deal as well as find a car you actually want to drive if you can expand your time frame over several months compared to several weeks pre/post graduation.

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            • #7
              Originally posted by wa2106 View Post
              Honestly, chasing a few hundred dollars in yield is something I used to do when I was at your stage in life but it's a drop in the bucket long-term. I'd keep it simple. Your bigger risk is buying too much car because of financing - that'll eat up the extra few hundred dollars very quickly.
              wouldn't the sum of all the interest i pay if i have to finance $0-5k over like 24-36 months be extremely small (maybe a few hundred)? You are right that this is flirting with trying to make a quick buck with relatively short term investing though...

              "I would consider searching over the preceding 6 months prior to graduation. You’re much more likely to get a better deal as well as find a car you actually want to drive if you can expand your time frame over several months compared to several weeks pre/post graduation."

              This is a very good point, I will start my car search over a more extended time frame

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