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Roux57
Da Boot
Member since Jul 2021
4 posts

Financial advice for a young recent graduate
Hey everyone, semi-recent lurker here, I am a class of 2020 La Tech graduate now working as a structural engineer in training and I am just looking for some pointers to keep myself on the right track to set myself up for a bright future. So I guess I will explain my current situation:

23 years old, Single, making about 67-68k this year, no kids, and no student loan debt but I did buy a house in august 2020 ($192k, 30yr 3.125% fixed) Currently my only retirement investments are 12% into 401k with 4% company match so that's roughly $800/mo into 401k in which I have accumulated about $15k so far (I was 100% vested as an intern so I got a small head start). My car ('14 accord 116k miles) is in good condition and paid off. So my monthly expenses are my mortgage, internet, utilities, phone bill, groceries, car insurance, and random weekly outing with friends. I do splurge a little bit by being in a nice hunting club that is $2300 a year but no cost can replace that time and those memories with my father. After buying everything I needed for my house my savings took quite a hit so I have $6.5k stored away there. My plan was to build savings to $10k and then forget about it and be my emergency fund and restart a separate savings for whatever else, vacations, etc.

Sometimes I feel like I am not saving or investing enough or not doing something quite right, I just cannot put a finger on it. Could you please offer any advice that you believe would be valuable to my future? I greatly appreciate any advice or constructive criticism.


GeneralLee
LSU Fan
Member since Aug 2004
11252 posts

re: Financial advice for a young recent graduate
quote:

Could you please offer any advice that you believe would be valuable to my future?


Max out your Roth's and HSA's as soon as possible... until it hurts.

Diversification is for protecting wealth, concentration is for creating it.


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102
jimbeam
US Army Fan
University of LSU
Member since Oct 2011
72379 posts

re: Financial advice for a young recent graduate
Live like you’re in college for a few more years. Save the rest


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190
thunderbird1100
LSU Fan
GSU Eagles fan
Member since Oct 2007
62260 posts

re: Financial advice for a young recent graduate
$800/mo for a 23 year old in a 401k is ahead of probably 98% of your peers, so you're doing good there.

I would definitely consider roth options in your 401k if you have that and a ROTH IRA especially if you're looking to invest more. Maybe just throw enough into your 401k to get the full 4% match (is it 5% like a safe harbor plan or is it more like 8% at 50% match?) then fund a ROTH IRA $500/mo to get the full $6k/yr there. In the IRA you will have endless investment options which is the positive there compared to a more limited 401k.

I would also look into an HSA and fully fund that (AND use investments in it, very important) if you have a qualified HDHP health plan. It's a fantastic investment vehicle and I regret not doing one in my 20s.

If you never added another dime to your investments and just did $800/mo continually you should have at least $1.8M by the time you are 63 in 40 years at a conservative 8% return. At 10% return you're looking more like almost $4M. So I'd say you're definitely doing well already.

It's hard to come up with retirement goals when you're 23, but you're going to give yourself a lot of awesome options by starting that early on investments.

Edit- 1 other thing I'd do sooner than later probably is build up a 3-6 month emergency fund of expenses. Seems like you're probably not far off 3 months right now. As a single income single household I would probably do closer to 6 months in that scenario but it's still up to you.
This post was edited on 7/13 at 10:31 am


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20
Displaced
LSU Fan
Member since Dec 2011
29732 posts

re: Financial advice for a young recent graduate
Honestly, live like you're 23 for a while.

You're making good money and already ahead on saving. With no student loan debt, you should be living like a king. Enjoy it now because this:
quote:

23 years old, Single, making about 67-68k this year, no kids,

Will all change eventually.


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151
jcaz
US Space Force Fan
Laffy
Member since Aug 2014
9037 posts

re: Financial advice for a young recent graduate
You are doing great. Far better than most your age. Build a decent cash savings and max out retirement contributions now. Eventually you’ll have a family and can manage it a little tighter.


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hiltacular
Georgia Tech Fan
Philadelphia
Member since Jan 2011
17741 posts

re: Financial advice for a young recent graduate
You are doing everything right. HSA/Roth IRA are the next steps. You will probably be due for a new car in the next couple years so keep that in mind.


natsoundup
Member since May 2013
292 posts

re: Financial advice for a young recent graduate
You are on an incredible path towards retirement. I would just try adding to your 401k in future years. Each dollar saved will net you a 20 to 24 percent decrease in taxes.

One of my biggest plays was to never have a car note…at least until I was 61 and took out a 15k loan for four years. I just don’t buy new cars

There’s the rub…avoiding want and taking care of needs. I admire people who lived it up and took risks. I am the tortoise, not the hare. Retired at 64 and will take s in two years. It will be a little tight until then…but the ss will be gravy

Good luck.


thunderbird1100
LSU Fan
GSU Eagles fan
Member since Oct 2007
62260 posts

re: Financial advice for a young recent graduate
quote:

I would just try adding to your 401k in future years


A good thing I like to say is when a lot of people get their yearly inflationary type raises (2-4%), just add a percent or two to 401k contribution and that's how you eventually get to maxing it out and you never really "feel it" hurting you doing that method as you still are bringing home more money but also increasing your 401k contribution. If you get a nice bigger raise, say like 10-20%, then try and throw like an additional 5-10% to 401k so you still feel the nice raise but also come that much closer to maxing 401k.


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edgebr
LSU Fan
Member since Oct 2018
58 posts

re: Financial advice for a young recent graduate
Being that you’re single with no kids, have you considered taking on a roommate or two? You could potentially have them pay your mortgage for you.


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FOHNewb
LSU Fan
Over here
Member since Jun 2021
9 posts

re: Financial advice for a young recent graduate
You're doing well but don't let that lull you into a sense of confidence that will result in "I can afford this nicer car", "I can afford a boat", "I can afford a motorcycle" and other hypotheticals that involve depreciating assets.

You want your money working for you. No brand new vehicles, and don't rationalize it as "Oh man, but I'm getting such a great price!" You aren't. They have to make money.

You've done a great job at limiting interest working against you, so after creating an emergency fund (that we only touch for REAL emergencies, right?), put the money to work for you in Roth IRAs and index funds. You're young, so I'd recommend you put a small portion in small cap growth indexes with low fees. And then leave it the heck alone other than to add to it.

What if the market goes down? If planes aren't falling from the sky, the market will recover. Leave it alone and don't realize losses. If the market is truly failing and will never recover, it's apocalypse time and your investments don't matter anymore anyway.


buffbraz
LSU Fan
Member since Nov 2005
5470 posts

re: Financial advice for a young recent graduate


Follow the Money Guy Show and their Financial Order of Operations. Their podcast is great and informative. Save early and often. Diversify your portfolio. Let time and compounding interest do its thing.


Dixie Normus
New Orleans Saints Fan
Earth
Member since Sep 2013
2083 posts

re: Financial advice for a young recent graduate
Not a financial planner, but this is my strategy and I’m doing better than most at 29yo assuming you have no higher interest debt.

1. Live below your means.
2. Emergency fund equal to 3-6mos expenses (closer to 3 if salaried, closer to 6 if on more volatile income).
3. Get maximum match from your employer.
4. Roth IRA
5. Anything left, try to get investments to ~15% of take home pay per month.
6. This is where you get to make decisions IMO.

After you’re doing 1-5, you’ve got options that depend on personal preferences that I consider head and heart decisions.

When I say head, the best financial move is to continue investing. Your investments will almost always earn you more than paying off your house early when looking at it in the long run.

On heart, sometimes people aren’t comfortable with debt. I’m one of those people. The opportunity cost of making more money in the market does not outweigh the security I feel if my shite is paid off.

The head/heart thing is purely a matter of personal preference and I am fully aware that investing is the “right” move, I just don’t like debt so I’ve opted to gear myself towards removing my house note instead of investing after that 15% threshold.

ETA: Someone also suggested roommates. If that’s an option, it’s an absolute no brainer considering you could get your mortgage paid by that alone easily.
This post was edited on 7/13 at 11:31 am


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jimbeam
US Army Fan
University of LSU
Member since Oct 2011
72379 posts

re: Financial advice for a young recent graduate
They’re such nerds. I love em


Cdawg
Houston Astros Fan
TigerFred's Living Room
Member since Sep 2003
55983 posts

re: Financial advice for a young recent graduate
quote:

I greatly appreciate any advice or constructive criticism.

single, stay the course and don't be afraid to act like a 23year old single guy. Don't go get yourself in massive debt, but it's ok to live a little. You're on the right path. Start reading up on investing and in time, you will be able to invest more and see more opportunities in the future to put money. It may not feel like you're saving enough but stick with it and in time you'll start seeing it really grow.
This post was edited on 7/13 at 11:59 am


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10
Costanza
Auburn Fan
Member since May 2011
2661 posts

re: Financial advice for a young recent graduate
Great start. I'd encourage funding a ROTH as soon as you can and would encourage you to avoid debt/car payments. You're going to be set.


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10
buffbraz
LSU Fan
Member since Nov 2005
5470 posts

re: Financial advice for a young recent graduate
quote:

They’re such nerds. I love em


Me too! Their show gets repetitive but it’s still good to hear some of the pearls when I’m driving to work and need some motivation to work and save.


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Turf Taint
LSU Fan
New Orleans
Member since Jun 2021
609 posts

re: Financial advice for a young recent graduate
You are smart for getting on top of this early! Time value of money is 8th wonder of world!

1. Live on 90% of earnings (or less...over time). Invest 10% (or more)

2. Control your expenses. Nothing wrong w/splurging here and there. You earned it and life is short. Necessities, wants, and luxuries...balance and see #1.

3. Make your money work for you (Get the company match on 401k but max those Roths and HSAs while your tax bracket is lower; this will shift over time). I am a fan of low cost index investing in broad indexes (VTI, VXUS, BND) in allocation fit for your age/risk tolerance. Be careful on bonds right now as interest rates are artificially low and inevitably will rise (incinerating bond prices). Error on side of high stock % (vs. bonds) at your age.

Get 3-6 months of expenses saved in emergency fund, along with 401k/Roth/HSA.

4. Own your stuff. Something about owning your own home, car, etc. Therefore, IMO, only good credit is low interest mortgages and try to minimize the rest (car if need to but credit cards are used for points only, pay off in-full each month or don't use them at all). Credit card interest is cancer to wealth building.

5. Read Richest Man In Babylon

6. Worry less about the max return on your investments and more about discipline of regular investing over long time. Don't try to beat the market. Most, including professionals, fail. See 3.

Good luck!



STLhog
Arkansas Fan
Nashville, TN
Member since Jan 2015
13465 posts

re: Financial advice for a young recent graduate
As others have said, I would probably take that additional 6% that the company doesn't match and put it into a Roth instead. Or at least a fraction of it. It can basically act as your emergency fund while gaining in the market (gains get taxed but contributions don't). 8% on your salary, assuming you get to around 6 figures by the time you're 30 will be close to maxing out annual contributions anyway. If you expect to get over the 140k max on Roth, best to fill it up now for when you become inegligble.

If your profession doesn't feel like you'll be getting that high that quickly, your strategy on 401k is pretty good.

Other than that, live a little as well. What's a few million dollars more when you're 75 years old and can hardly pee on the regular? The chances of your ex wife taking half or you just dying and handing it off to someone are likely higher than you running out of money with how you're doing so far.
This post was edited on 7/13 at 12:43 pm


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HC87
LSU Fan
Swansboro NC
Member since Dec 2014
2627 posts

re: Financial advice for a young recent graduate
MAXing your 401K is smart. Take adv of every cent the company will match. Roll it over into your 'next' employer's 401K if you move to another company. Someone your age will likely have 4-6 jobs over your working career.

Look into an aggressive mutual fund. Start investing 100, 200, etc p/month. Whatever you can afford and increase it as you obtain pay raises. Pay YOURSELF first. This is your investment that will grow, BUT you could access for a major requirement.

Put some money into savings, your rainy day fund so when you need it for car maint, house maint, etc., you have it. As this balance grows take some and roll it into CDs and/or stock purchases.

Retirement - mutual fund(s) - savings. Can't go wrong. As you accumulate more savings, obtain an annual bonus, etc. you could look at blue-chip stocks - Apple, Microsoft, etc. They are NOT going anywhere and you can't go wrong over the long haul. I kick myself for not investing in AAPL when it was 22-23 a share in 94-95. Bought in later and it has performed VERY well (splits/DRIP) over the last 15-20 years. Also look to start an additional ROTH IRA & max out your contributions when able. Check out the energy & utilities sector/funds.

Live within your means, enjoy the financial rewards of your hard work, and invest/save for the future.

Best of luck.
This post was edited on 7/13 at 1:08 pm


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