Question

Sofia is a full-time student and works part time as a babysitter for three families in her college town. She consistently works five hours a week, but some weeks she is able to work more hours. She has a $7,500 student loan but doesn’t plan on making payments toward that until she graduates. Sofia has basic living expenses like rent, utilities, gas, car insurance, etc. She wants to start investing her money for the future. She also wants to purchase a new laptop for school. Unfortunately she never knows what her monthly income will be due to her irregular work schedule.

1. What advice can you give her to help her meet her goals?
2. Should Sofia purchase a new laptop? Why or why not?
3. Should she pay off her student loan first or start investing?

Answer 1

1. Sofia should invest a proportion of her income in fixed income securities such as a bank account. This will enable how to build an asset as well as on a fixed monthly income which will help to reduce the uncertainty of income.

2. She should not purchase the new laptop firstly because she already has a student loan as well as living expenses to manage. Secondly she has irregular income due to which payments on the loan taken for purchasing the new laptop will become difficult.

3. Sophia should start investing right away. Simultaneously she should start paying her student loan to reduce the amount of interest that she would be paying on the loan as a whole.