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About me:
- 25 year old recent grad
- 54k students loans
- 1st year out of college
- live in a downtown area with a roommate
- take public transportation to work everyday (paid by employer)
- Company offers pension (3% of gross income - 4% annual returns)
- Company matches 401k 50 cents on the dollar up to 10% of income (after one year of employment)
- Company offers annual bonus which will be spent on a vacation
I do not have any car payment (the car I'm driving is 15 years old...)
I want to pay off my student loans asap, but I'm concerned that I am not putting enough away into retirement? Would love to hear more thoughts on this. Also note that currently my employer is not matching any 401k contributions, although I am aware of the tax advantages.
Focus more on your student loan. It's best to get rid of your debt. Cut back on entertainment by $100. Use the extra $100 to pay down your student loans and have it applied to the principal. Use part of your annual bonus to pay down student loan (principal).
Your savings and retirement contributions are good.
What is your student loan interest rate? That affects if you should put more or less into it.
For example, I was able to consolidate all my Stafford loans into a single one w/ a 1.6% rate, so even though I have the cash on hand, I'm just making the required monthly payment and no more - I can get better returns on that money.
It's a completely different story if you have, say, 5%...
Location: Chapel Hill, NC, formerly NoVA and Phila
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What is your savings for? A house? New car? An emergency fund? I would maximize your 401(k) by shifting some of your savings into 401(k) until you are putting in the max allowed by your company. It reduces your tax burden for now anyway, so by shifting the money toward your 401(k), you will actually have more income to play with. But, it would help if you told us what the savings account is for. At a minimum, once you become eligible for the 401(k) match, then you should at least put 10% in, if nothing else.
For the most part, your budget looks sound. And the fact that you have a budget, are contributing to a 401(k) and to a savings account is a huge plus!
Congratulations on securing a job that pays a decent wage! Rare for most folks out of college.
Your budget looks solid, but I would definitely focus on getting those student loans paid off before worrying so much about accumulating funds in the 401k.
So you will have those loans paid off in about 5.5 years?
You're only putting $2400 a year into your 401k. My advice is to max it out while you are young. You get the advantage over the long-term (TVM) as well as the short-term. Your marginal rate is the highest when you're single.
Every dollar deferred returns a far higher rate than you can earn anywhere.
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