Base is $205k, after taxes I end up with ~$129k. If I contribute full to my 401k ($19.5k) and put $70k into my savings/brokerage/HSA every year, that leaves me with $39.5k for annual spending on rent, food, travel, etc.

I feel like I’m struggling to make that work but I’m worried about decreasing my savings contributions. Any advice?

likeuplifting
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You are saving nearly 50% of your gross. That is way more than most do. You are fine and can ease up and spend more

likeuplifting

You’re saving a ton which is great. If you had more money, what would you do with it? I always think about quality of life because saving for retirement is great, but if it comes at cost of having to constantly penny pinch / aggressively budget / not being able to have enough “fun” budget set aside…it’s not really worth it

likehelpful

@Author - I'd recommend starting a budget with YNAB or something similar. I used the feel the same way you did where I'd have enough cash for my normal monthly expenses and then need to dip into "savings" for things like car repairs or vacations. I'd feel really stressed about dipping into savings for these totally normal and foreseeable but not regularly recurring expenses. YNAB helped me change my mindset. I wasn't just "saving," I was putting every dollar into a specific category. So I have a category for car repairs and one for vacations, etc. I also have categories for longer term goals like retirement. When car repairs come up, it's not stressful because I have money set aside for it. I can take spend my vacation money guilt-free because it's been earmarked for that purpose the whole time.

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Dude. I hate these posts and all of the, sacrificing now will pay off in 20 years. You're doing just fine. Better than fine compared to most. LIVE your f*cking life. ENJOY IT. Live on $45k or even $50k. You very well could be dead a year from now. No need to be irresponsible, but neither do you need to live like a pauper and feel deprived. You work hard, enjoy what you have.

likesmart

What do you or how do you manager finances?

You should always max out your 401(k)

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FYI, the max 401(k) contribution rate for 2022 is $20,500.

And if you’re contributing that on a before-tax basis, plus contributing the max to an HSA ($3,600 for single), and taking the standard deduction, [and if you lived in TENNESSEE], then your taxes would only be ~$48,000, leaving you with ~$157,000 after taxes. 😏

On the subject of real estate, you may be able to look into an IRA account that has the option of a Self-Directed Brokerage Window (or maybe your 401k has one, although that’s more rare). A SDBW can sometimes be used to invest in real estate with monies you set aside for retirement. The properties are owned by and profits go back into the SDBW, and are treated as retirement gains (and thus only taxed when distributed in retirement). If you really had your eyes on real estate, that may be an option to further diversify your portfolio in a tax-efficient way.

Don’t forget to contribute to an IRA. FWIW trying to live off $39k is tough but doable. You’ll thank yourself in 20yrs for sacrificing now

likesmartfunny

SSDC1 I did not suggest nor infer that, hence “sacrificing now”. However I do suggest OP maybe do it for 5 yrs..assuming OP is in their 20’s. ~$450k investment will compound quite nicely. ✌️

Bruh I make 170k and I’m saving like half of what you do you’re fine

likesmartfunny

You know he needed that encouragement M1 😆

It’s about balance. You do your best to save what you can but you have to live as well.
Best approach is to prioritize - make sure you get the 401k match, then max HSA, then back to 401k (or Roth depending on your marginal tax bracket). I would put brokerage as last priority.

likesmartfunny

I agree completely with this. Balance is the key. No point in saving so much and scrape by to be the richest person in the retirement home.

likefunnysmart

You save an exorbitant amount of money each year. Almost $100k. That's your tradeoff.

like

Just to add on to what everyone has said, you might also want to reevaluate your budget - specifically how much you allocate each month for "fun". It could be that you're not allocating enough to realistically cover events, activities and/or purchases that's fun and/or aimed at improving your overall quality of life.

Personally, I have a major budget category called 'Quality of Life'. Here's where I budget my fun money, vacations, day trips, camping, hiking, entertainment (concerts, Broadway shows, comedy shows, music festivals, etc), monthly spa treatments, etc. Obviously, these things mean a lot to me so I've identified and intentionally budget for them. In doing so, I'm more at ease spending, without feeling restricted. I also have tremendous peace of mind knowing that ultimately, I'm working towards a healthy balance between saving aggressively and enjoying the now. Good luck!

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I see you're in NYC. Can you move to a MCOL / LCOL area and keep your salary? If you can, you would free up some cash flow for 'free', i.e. without letting up on savings. At your savings rate, you're probably not making use of your location anyway, so you wouldn't miss much if at all.

Also, just my two cents, I can't tell you what's right for you, but consider why you're saving so much. Are you saving for specific goals or numbers or just out of fear / habits learned from growing up? I used to be more like you, not saving quite as much, but frugal about certain things. Lately though I've been thinking, I make decent money and have money saved, what's the point of money if not as a tool to enjoy and live the best quality of life that I can? Nobody knows the future, I could potentially not even make it to retirement, and then would all the saving and sacrificing experiences with friends and loved ones have been worth it?

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$70k savings per year outside of retirement is a lot. Why do you feel like you need to save this much? Live a little friend.

like

Personally I think you’re saving too much, how old are you? Think you should take some time to live your life while young.

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What city?

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NYC

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I agree with everyone’s comments. You are doing a great job depending on your age. You are saving a lot more than most others, so it’s ok if you need to cut back to enjoy life and not feel stressed about cash flow.

Just FYI (not like it matters based on what you’re saving already) - this year 401k contribution max is $20.5k for those under 50yrs of age.

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Five years ago I took 40% of my 401 and purchase a few investment properties, best decision I’ve ever made. Now I have some great passive income.

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Stuff like this is honestly pretty depressing to read. Like ya in most cities it’s hard to live on only $40k/yr, in nyc it’s virtually impossible and even if you can what’s the point in living in a place like nyc if all you do is lock yourself in your 400 sq foot apartment every night and cook ramen for yourself? I’ve found it’s more beneficial to focus on increasing income than saving pennies at a certain point. For reference, earning about $280k in Chicago, living on about $80k, saving the rest.

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We have the same base and with 401k I am only saving a total of $60k (single income household with a family with 2 young children) you are doing amazing.

Also best advice is to increase your income. Focus on career growth so you can maintain that savings and feel better about spending

How old are you?

No one talks about getting an IUL rather than maxing out 401k contributions. I believe a combination would be much better in the long run

IULs are not all it's cracked up to be. And illustrations in IUL scenarios rarely play out the way they are illustrated.

Lastly, in the last 15 years, the caps for many companies that have IUL policies have made changes to decrease their maximum cap.

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