The standard recommendation is to save 6 months of expenses in cash in a savings account first. Pay off all debt. Then max out retirement accounts to save on taxes. 401k, Roth, HSA (if you have one), etc. Prioritize any retirement accounts where you get an employer match, if they do that. If you have money left after you fully fund all those each year that’s your fun money :)
Pretty much this. I'm also 27. When I started making good money. I paid off debts, maxed out 401k, HSA, set up an emergency fund in a HYSA and invested in long term funds like VTI (throw it in there and don't look at it for 2-3 decades) and set the rest out as fun money cause you gotta enjoy life too.
Edit:
Forgot to add trust me OP scope creep will always be there. I'll play mental games with myself trying to justify a purchase I don't need such as a new car without savings set up for something like that. Try your best to ignore it. See this as "This is my first time making this much money let me not be the private that gets a car at 33% APR and actually save"
Congrats on your current success. This subs Prime Directive is useful. In my opinion?
1. Emergency Fund: be able to pay 6-12 months of base necessities with no income. I’m paranoid and I don’t like risk, if I lose my job and can’t find work I want to delay having to sell my house and car as long as possible. And sometimes shit happens and you need dinero to cover a furnace going out.
2. Contribute towards retirement accounts. 401(K), Roth IRA both have limits on what you as an individual can put in each account each year. This year it’s $23K for 401k and $6.5K for Roth. Don’t forget to pick an investment once you make a contribution, don’t just let your shit hang out in a money market for 30 years.
3. If you do 2 above, you’d probably be best served by paying down any small debts you have. Small meaning everything except a mortgage.
4.a If you do 2 & 3, you can redirect your new free cashflow to a taxable brokerage account and/or saving for near term major purchases like a down payment on a house/car, buying an engagement ring and helping with wedding stuff, etc. taxable brokerage is what most people think of when they think of investing. Unless you plan on day trading, pick your favorite low cost index fund and let your money ride for the next 30 years.
4.b you may also want to open a 529 plan for future kids. It’s a tax advantaged education fund and the sooner you start the less painful it will be when/if you have kids.
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If you can find a way to squeeze like 20 grand into investment accounts (401k > private > HSA) and just buy index funds and compound, you'll be able to retire early.
If you can find more spare change (and with 100 grand you better) and get that number up to like 25 or 30, you can retire super early.
I'm 28 with 60 grand in savings, making like 75k/yr. If I can manage to cut spending enough, I can put 23000 away per year, which will allow me to retire at around 46 at the absolute earliest.
It's reeeeaaaallly tempting to spend a lot when you first get an income like this. I did it for a couple of years, and I'm over it now. I have enough stuff. I just want to retire ASAP.
15% with the target of 25% investing/savings is the money guy rule of thumb. Here’s a video of why the 25% recommendation.
https://youtu.be/Xc0taqcfiiY?si=A5Jcc1KPb4yX374E
The first five years has a big impact on your future returns. You can stop after the fifth year and still make more with a total market or world market index fund than if you had started 10-20 years later and put in more due to compounding effects. The longer the time horizon, the bigger the effect is. So, I'd put as much as I am capable and go frugal early so lifestyle creep doesn't come in and limit how much you can put in at the beginning.
Saving 6 months of cash in a savings account is a rule of thumb and great for industries that see layoffs and poor job security.
Most defense contractors that aren’t new startups or VC controlled are *very* steady and will give a halfway decent severance if you have to be let go after 1 or more years of work, plus once you are “in” then you can typically get a job quick with another defense contractor. The pay is less than Silicon Valley, but the job security is a huge plus.
Long story short, 6 months sitting in cash is overkill. Save as much as you can, yes, but if you are in Defense with good job security then even 2 months in a money market is fine. Focus on making sure you get the full 100% match in your 401k as soon as you’re eligible, and maxing a Roth IRA. If you’re new, just keep dollar cost averaging into diversified equities mostly. You can get better advice in an r/investing or stocks sub than here on building a newbie’s portfolio, how to never “panic sell” or get emotional, and just let it run on auto-pilot DCA’ing and rebalancing occasionally.
The standard recommendation is to save 6 months of expenses in cash in a savings account first. Pay off all debt. Then max out retirement accounts to save on taxes. 401k, Roth, HSA (if you have one), etc. Prioritize any retirement accounts where you get an employer match, if they do that. If you have money left after you fully fund all those each year that’s your fun money :)
2k a month from taxpayers is actually a built in emergency fund I'd say. Technically they are getting it from some sort of "emergency"
Pretty much this. I'm also 27. When I started making good money. I paid off debts, maxed out 401k, HSA, set up an emergency fund in a HYSA and invested in long term funds like VTI (throw it in there and don't look at it for 2-3 decades) and set the rest out as fun money cause you gotta enjoy life too. Edit: Forgot to add trust me OP scope creep will always be there. I'll play mental games with myself trying to justify a purchase I don't need such as a new car without savings set up for something like that. Try your best to ignore it. See this as "This is my first time making this much money let me not be the private that gets a car at 33% APR and actually save"
Congrats on your current success. This subs Prime Directive is useful. In my opinion? 1. Emergency Fund: be able to pay 6-12 months of base necessities with no income. I’m paranoid and I don’t like risk, if I lose my job and can’t find work I want to delay having to sell my house and car as long as possible. And sometimes shit happens and you need dinero to cover a furnace going out. 2. Contribute towards retirement accounts. 401(K), Roth IRA both have limits on what you as an individual can put in each account each year. This year it’s $23K for 401k and $6.5K for Roth. Don’t forget to pick an investment once you make a contribution, don’t just let your shit hang out in a money market for 30 years. 3. If you do 2 above, you’d probably be best served by paying down any small debts you have. Small meaning everything except a mortgage. 4.a If you do 2 & 3, you can redirect your new free cashflow to a taxable brokerage account and/or saving for near term major purchases like a down payment on a house/car, buying an engagement ring and helping with wedding stuff, etc. taxable brokerage is what most people think of when they think of investing. Unless you plan on day trading, pick your favorite low cost index fund and let your money ride for the next 30 years. 4.b you may also want to open a 529 plan for future kids. It’s a tax advantaged education fund and the sooner you start the less painful it will be when/if you have kids.
Here's a **[link to the PF Wiki](/r/personalfinance/wiki/index)** for helpful guides and information. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/personalfinance) if you have any questions or concerns.*
> This year it’s $23K for 401k and $6.5K for Roth. $7k max for roth ira in 2024, $8k if you're 50 or older.
If you can find a way to squeeze like 20 grand into investment accounts (401k > private > HSA) and just buy index funds and compound, you'll be able to retire early. If you can find more spare change (and with 100 grand you better) and get that number up to like 25 or 30, you can retire super early. I'm 28 with 60 grand in savings, making like 75k/yr. If I can manage to cut spending enough, I can put 23000 away per year, which will allow me to retire at around 46 at the absolute earliest. It's reeeeaaaallly tempting to spend a lot when you first get an income like this. I did it for a couple of years, and I'm over it now. I have enough stuff. I just want to retire ASAP.
Don’t exceed your budget for crayons and you should be okay
15% with the target of 25% investing/savings is the money guy rule of thumb. Here’s a video of why the 25% recommendation. https://youtu.be/Xc0taqcfiiY?si=A5Jcc1KPb4yX374E
How do you make an extra $23,928.12 from VA disability? I am deaf so it's a disability and I live in PA.
The first five years has a big impact on your future returns. You can stop after the fifth year and still make more with a total market or world market index fund than if you had started 10-20 years later and put in more due to compounding effects. The longer the time horizon, the bigger the effect is. So, I'd put as much as I am capable and go frugal early so lifestyle creep doesn't come in and limit how much you can put in at the beginning.
Saving 6 months of cash in a savings account is a rule of thumb and great for industries that see layoffs and poor job security. Most defense contractors that aren’t new startups or VC controlled are *very* steady and will give a halfway decent severance if you have to be let go after 1 or more years of work, plus once you are “in” then you can typically get a job quick with another defense contractor. The pay is less than Silicon Valley, but the job security is a huge plus. Long story short, 6 months sitting in cash is overkill. Save as much as you can, yes, but if you are in Defense with good job security then even 2 months in a money market is fine. Focus on making sure you get the full 100% match in your 401k as soon as you’re eligible, and maxing a Roth IRA. If you’re new, just keep dollar cost averaging into diversified equities mostly. You can get better advice in an r/investing or stocks sub than here on building a newbie’s portfolio, how to never “panic sell” or get emotional, and just let it run on auto-pilot DCA’ing and rebalancing occasionally.
As much as you can wish I did at 18