Should we invest in stocks or pay off student loans with money gifted to us from our wedding?

I am 37 years old and I recently married a 33-year-old woman with $90,000 in student debt. We both are pretty low earners, as we are school teachers. We were given $25,000 from family as a wedding present. What is the best way for us to move forward? Should we invest in stocks or mutual funds or pay off student loan debt? We know nothing about investing.

Co-Published on Investopedia

Co-Published on Investopedia

I encourage the two of you not to consider this as an either/or situation, but instead use the money to provide for multiple goals. Focus on multiple goals to help you achieve both financial stability and a happier life together.

I'm going to assume you don't have any high-interest credit card debt, so the next step would be to make sure you have a sufficient emergency fund. Start by placing money into a government-insured, high-interest credit union or bank savings account. As you both work and have stable jobs, a savings account of 3-months' income is likely large enough to handle any surprises.

With any money left over after the emergency fund, you might want to split it between the debt and investing for retirement. You should also contribute toward your retirement monthly, even if it is just $100 per month, so you can keep the momentum going and build a habit.

Regarding knowing nothing about investing, your two best options are (1) to find a fee-only and fiduciary financial adviser or (2) invest in your 403(b) at work in a target date fund. A 2050 Fund, for example, is designed to attempt to invest using a strategy appropriate for someone your ages who will retire near the year 2050. 

As educators, I think you will enjoy this article on the math of why focusing on multiple goals is better than rapidly paying off debt. You definitely want a plan to pay off student debt, but don't focus on the debt and ignore your other goals.

As teachers, you are fortunate that you likely have a pension which will provide at least part of your retirement income. You are correct, though, that you should also invest, as you don't want to rely completely on a pension system you have no control over.

Joshua Escalante Troesh is the President of Purposeful Strategic Partners and a tenured professor of Business at El Camino College. To explore working with him on your personal financial planning and investment advising needs, simply schedule a free Discover Meeting.

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