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The general rule is to have about six months of living expenses saved up. You seem like you're well on your way, so congrats.
That IS the general rule, but you will find truth be told, probably less than .05% have that on hand. While we have much more than that in "assets" actually savings is NOT near that....no interest, no reason to park our money there. Accessible, but not immediately. Should the need arise, we could "credit" what was needed and then payback from assets before the bill was do.
I think you are doing a remarkable job, keep up the GREAT work!
any suggestions on making money work for you? I have a 401K plan that I will be investing a very small amount in monthly but beyond that I am very interested in learning to make money work for me.
I am single with 0 obligations besides the standard middle class cost of living (rent, food, car lease/insurance). It is not for the purpose of supporting myself but rather for me to use to make a large purchase on the fly for example a car down payment or maybe I want to spend 2K to travel around the world or whatever.
I wonder what is "a lot" for me I think anything above 30K... but with spending/bills I don't think I could get there any time soon.
If you want to buy a house, 20% down is typical. I don't know your housing market, but assuming you can pick up a nice starter home for $200k, it will take about $40k plus closing, moving and setup costs, call it $45k to buy a house. You need to not let that clean you out, because a new home always has unexpected repairs and expenses, so your emergency savings (six months income) should be separate from your house savings.
BTW, I don't know how you got stuck with a car lease, but they normally only make economic sense for a business that can write off the whole lease amount as a business expense. For the next several years you should be driving a reliable used car that you paid cash for. That "new car smell" will cost you about 10 grand, and you will still end up driving a used car.
It's a good start given your age. Keep in mind there are people 50-60+ years of age living paycheck to paycheck with zero retirement savings.
The key to financial success is to study a field that has a high return on investment. You can then work a job with an above average income and live far below what your income level can buy and you can likely retire a millionaire.
I will take a different path than others. If by saving $12,000 you gave up the opportunity to at least get an employer's match on your 401K and perhaps also get $6,000 in a supplemental Roth IRA then you may have too much saved. You can build up emergency funds at a slower rate because you can not retroactively put money into a retirement account. After tax day you lose that opportunity forever.
In most 401K plans you can invest in the cash equivalent and later transfer into other assets after you have gained more financial education and confidence
I agree with this. It's best to save aggressively in retirement plans and a Roth IRA. Roth IRAs are particularly good for the young.
And by the way, OP, investing is as easy or difficult as you want it to be. I recommend investing in one of those "target retirement" funds from Vanguard or T. Rowe Price, or investing it in a balanced fund, which invests in a mix of stocks and bonds. Here are some balanced funds that have been around for a long time with great returns and below average expenses. Pick one (or maybe two) and stick with it (them) for decades:
Vanguard Wellington
Oakmark Equity & Income
Dodge & Cox Balanced
Mairs & Power Balanced
It's an admirable starting point for someone new to the adult world. So kudos to you for it. Here's what I'd recommend setting as a starting point, and it's not much off the path that some others have recommended.
Calculate up your monthly expenses, and multiply that by at least 30%. Multiply that number by 6 months (12 months would be even better) and set that as your goal for an emergency fund. Just keep in mind, any time you take on new debt you will need to readjust that savings number. It wouldn't hurt to invest those funds to let them make some money for you as well.
I would leave this for emergencies only, and then set up a separate savings to stick money into for downpayments, etc... That way no matter what happens (job loss, sickness, unexpected bills) you will not have to be concerned with running out of money to support yourself.
It all depends on your spending. If this covers your core expenses for 6-9 months, then it is a good emergency fund, but I would never call it a lot of money, but many would love to have that amount saved. Just keep going.
The general rule is to have about six months of living expenses saved up. You seem like you're well on your way, so congrats.
That's the MINIMUM you should have. The real rule of thumb is to save as much as you possibly can.
Remember, you have to live off of your savings for 30 years, so think of how much it takes for you to live on today, and then take inflation into account and you'll see that you'll need at least 1 million saved by the time you retire to survive...especially if Social Security dries up.
If you lived off of just $25,000 today, that $25,000 would actually have to be over $80,000 when you retired and nearly $200,000 by the end of your retirement. To survive retirement without going broke, you'd need to have a little more than $1,200,000 in the bank at retirement. So with $12,000 in the bank, the OP is about 1% done saving for retirement.
I bought a house with $0 down when I was 21 and sold it for a $30k profit when I was 23. I was just starting my first real job and I had $30k cash in the bank as a head start. The first thing I did was open a Roth IRA and deposit $4k (the maximum at the time). Then I maxed out my 401k that first year while slowly dipping into the profit I made from selling the home (because I spent more than I took home after contributing 1/3 of my income to my 401k). 1 year after selling the house I had around $20k in retirement funds, $10k in savings and a steady job. I lowered my 401k contributions back down to 10% and built up my savings slowly from there. Your numbers will look a little different, but you get the idea. You should open a Roth IRA and max it out. Also open a 401k and contribute around 10% to start off and adjust it from there.
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