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Great on you for saving up and having a good starting point for your financial security. There’s plenty of posts about each of these items so you can dive further into a specific discussion, but generally the suggestions are to:
Hold 3 months of all living expenses - emergency fund just in case you unexpectedly lose your job
Pay off debt - especially anything with interest higher than your rate of expected return (7% for me personally but depends from person to person
Bump up your company 401k - up to the match initially. Bumping this up reduces your cash flow, but essentially gives you higher total compensation if you can stomach the reduction. This can be anywhere from a 25% to 100% gain from the matching portion
Pay into an IRA or Roth - very generally speaking, IRAs may be favorable while you can still deduct the contribution, Roth’s may be favorable if you plan on having a higher income during retirement than you do now
Max out the rest of the 401k - limit is somewhere to the tune of 19,000 this year
Then after that there’s a variety of more advanced financial management items, but this should be a good starting point! Happy to give more personalized feedback if you DM me. I came from a similar situation, and was in your shoes not too long ago. After seeing a few of my friends mismanage their personal finances, I want to try to help anyone that is asking for input
What else would you advise around the more advanced financial tools after doing all of the above?
Gimme some! Put the month in high yield savings (not very high yield now but better than nothing). Max out 401k, HSA. Start investing - safe bet is index funds
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Max 401k, HSA, then max IRA (Roth or back door depending on your income level). For cash you have now keep what you need for 6 months of expenses in a savings account as cash, then start a brokerage account (like Wells Trade)
First I hope the money is in a High yielding savings account like Ally. The rates aren’t great right now but better than nothing.
Max 401K - especially if company match exists.
Set up a Roth IRA (if you make under a certain amount) - contribute to that (6K a year now). Can pick singles stocks or ETFs, index funds, etc.
Investment account - stock picks that you think are long term plays (same as Roth but typically more single stocks). Some people start to get into short term plays, options, etc. but up to you to do the research and if you have the time.
I’d build an emergency fund (whatever your needs are) in Ally and then all the extra money you make id put into the two stock portfolios.
Pro
VOO
^ I’m in a similar situation, especially wondering where to put money for short term savings like going to business school in a couple of years
Which institution?
I vest your money! Youth is your greatest asset. If you invest )10k in a investment now earning a 10% rate of return by the time you retire you’ll have $600k. Advice is diversify yourself- maybe add some time a savings account accruing interest, others to an ETF, invest in stocks/ bonds/ other securities in order to increase your rate of return.
A1 what are you talking about... I just plugged it into an investment calculator and 10% return on 10k over 100 years would be 137M lol. 40 years would be 452k though, so I guess you’re right about not being 600k?
Woow congrats! That's amazing, hope I can get there in next 5 years
Thanks everyone for the advice! I need to research all these terms. I currently am still on my parents health insurance since they have better coverage so no HSA for me, right? Unfortunately, I have the money in a basic saving account but I want to transfer it to Ally or Marcus and just keep like $5-10K in my regular savings. Thoughts? Also how did you all learn all these terms, pls feel
free to pass on resources 😊
You shouldn’t need a lot in your regular savings though moving Ally back to regular (if there is an emergency) would take 2-3 days so as long as you don’t think that will happen then I’d keep most in Ally/a high yielding account
Currently have 20K in Vanguard VTSAX, and 110K in Checking/savings account. Rest is in 401K and Roth IRA. How much more of the 110K should I put into an investment fund? I’m 22, 1YOE in consulting
Great job!! Set up a budget. From there figure out what your monthly expenses are. Then set aside 3-6 months of that 110k as an emergency fund in a HYSA. Typically this would range somewhere in the 15-30k area. If you have long term savings goals (house, car, something fancy you’ve been wanting to spend money on) I would use some of the remaining money on that goal. The rest I would invest.
Personally, I always donate some of any money I receive so if it were me, I would donate some portion of that in addition to the above. But obviously that is a personal choice.
From a 24 yr old w a similar background who just figured our this personal finance thing last year, here are my tips and some books and other resources:
If you have debt, pay it off asap.
If you’re planning on moving out of your family’s place, first figure out what your average rent in the area you wanna move to is. Secondly, set up a zero based budget and figure out what your monthly expenses are (including your future avg rent). Set aside 3-6 months of your expenses in a high yield savings account as an emergency fund. Don’t touch this except for emergencies. Then, If you want, set some money aside for the transition (ie deposit, new furniture, moving costs).
After those steps, I would begin setting long term goals and investing. For example if you wanna save for a car or a house, you can use some of the money for that and I’d also start setting money aside every month.
Then work on constantly investing at least 15% of your income in tax advantage accounts: 401ks, Roth IRA, HSA
My primary piece of advice is to do a zero based budget every. single.month. Think of a budget as telling your money where to go and how to work for you. It doesn’t have to be super strict or frugal, it just sets limits on your spending, tells your money where to go, and gives you permission to spend. When you don’t come from a background that valued financial literacy like us, I’ve found that the biggest mistakes are either a) spending all your money or b) not knowing how much you’re going to need for the month or for an emergency so hoarding all your money rather than putting it to better use - a budget helps you prevent both of those.
Useful resources: simple path to wealth (book), total money makeover (book), @ personalfinanceclub (ig account)
Good luck, you got this!!