Advice for a youngster just starting out

[roguerower]

So, I graduated in the middle of May with a job. Moved to San Antonio and started working in the middle of June. Been here for 4 months. In that time I've done all the young single guy stuff, i.e. bought a ridiculous TV, stereo, motorcycle. I'm also paying stupid loans and all the usual bills (electric, water, cable, cell). I pay about 20% of my pay checks to taxes. My credit score is sitting around a 710-730.

About three months in, I started up my 401k. I put 10% of my annual base in and that's matched dollar for dollar up to 4% of my base. The money is in their (wells-fargo/companies) aggressive growth fund since I've got at least another 30ish years of working.

I've been paying down my motorcycle loan at an aggressive rate because i'd like it to become an asset rather than the banks collateral. So far out of the original $3700 loan (3mo old) I've paid off $1600 of it.

I've started putting money in my savings account as a "safety net" at a rate of about $250 a paycheck.

My spending has drastically reduced ever since I got all of my "stuff". I buy a blu-ray here and there but the majority of my spending is for lunch at work. I probably spend $30-50 a week for lunch.

What suggestions do the old guys have for me? Should I just keep dumping my money into my 401k and my safety net? Once (if) bonuses/tax returns start, i'll probably start another savings account and dump those in there.

 

[spidey07]

6-12 months in savings, max out 401k, put everything else in roth, when you hit max on that open individual brokerage account. With mortgage rates like this and the current housing market you really should think about buying within the next 6 months. You're never going to have an opportunity like this in your lifetime to acquire property.

-edit-
And stop giving the gubment interest free loan, you shouldn't be getting ANY refund from taxes.

 

[rcpratt]

Well, I'm not an old guy, actually in the same situation. Although I didn't go as crazy with the single-guy-with-a-good-job spending.

Yes, keep dumping into your 401k of course. That's probably a good contribution % to be at right now. Mine isn't maxed, but I am contributing the same % overall (14%) as you. I'm not going to be maxing the 401k out anytime soon because this rate will have me very secure in my retirement (for now) and I have more short-term interests (buying a house or something). Then next thing I would do is build up 6-months living expenses, your "safety net". For me that's about $10k. Personally, I have that money in a relatively safe money-market type account (1.55%).

I don't save a specific amount a month/paycheck, just whatever I have left over. But I'm pretty responsible financially. I recently finished up my $10k and now I'm doing some research on Roth IRAs or just investing in general.

 

[roguerower]

6-12 months in savings, max out 401k, put everything else in roth, when you hit max on that open individual brokerage account. With mortgage rates like this and the current housing market you really should think about buying within the next 6 months. You're never going to have an opportunity like this in your lifetime to acquire property.

-edit-
And stop giving the gubment interest free loan, you shouldn't be getting ANY refund from taxes.

Not an option. I work federal construction so next June I won't be here in SA anymore, may be in NC. Year or two after that, I'm in Seattle. Year after that, I'm in Florida. I just follow the government contracts.

As far as taxes go, they take out what they do, I'll get it all back eventually. Unlike you spidey, my concious is ok with government funded programs. I may not use them, but there are people out there who do. Now the extent of those programs is kinda fucked up, but the whole political atmosphere in this country just pisses me off so much that I just said fuck it.

 

[rcpratt]

They take out what they do? You should have the ability to increase your exemptions, I can just do it online. If you have to actually fill out a W-4 it's slightly more annoying. You should almost definitely have 2 exemptions.

 

[GuitarDaddy]

Sounds like your doing good! Like spidey said now is a great time to buy property if you have the resources, but be smart about it. DONT stretch your finances just to get into a house, but if you can make a reasonable down pmt and keep the interest and payments reasonable this is the time to find a nice starter home.

 

[olds]

Sounds like you are doing really well. Most kids have no concept of saving and just blow their money.

Always, always, always, max out anything your employer contributes to. It's free money.

Never skip on your savings. If times get tough, lower your standard of living and keep saving. It will pay off BIG TIME when you go to retire.

Don't date or marry one with bad credit or poor money management. They'll just bring you down with them and you'll start to resent them for not contributing as much as you are.

 

[esun]

BTW, you may want to consider an index fund rather than a mutual fund, if it's offered by your investment firm. Check to see if the mutual fund you have has actually beaten the overall market over the long haul. If not, save yourself the overhead and get an index.

 

[IceBergSLiM]

5% minimum towards hookers and blow.

 

[roguerower]

5% minimum towards hookers and blow.

That's a given. I'm insulted you have to remind me.

As far as property goes, I know it sound shitty, but for the next 8 years minimum I probably won't have any clue about where I am living on a year to year basis. I don't have a problem with it, but as far as buying property, it doesn't make any sense unless I find a place that I can see myself in 20 years down the road. And that hasn't happened yet.

 

[NoCreativity]

From my research, the recommendation on retirement accounts is:
- contribute as much to your 401K as it takes to get full employer match
- max out a Roth IRA
- if you want to contribute more to retiremnt, put it back in 401K

You also want to think about non-retirement investing once you have your safety net built up.

 

[thegimp03]

That seems pretty similar to what I did when I graduated 5 years ago, except I didn't have a motorcycle/loan. You'll thank yourself later when you build good habits early on. I just had a small addition to what other people have said. If your 401k has a roth option within it, I'd consider contributing 50% to the non-roth option and 50% to the roth option to help hedge against an inevitable rise in income taxes.