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I want the opinion of you savvy investors and financiers. I am 25 years old (just turned) and make $73K per year. Below is my financial background.
Annual Salary: $73K but I just got a raise to $81K which takes effect next month.
401K Contribution: 5% currently or about $210/month. Balance is currently $5K
Savings: $1.5K
Total Monthly Expenses
Rent/Utilities: $600/month
Phone: $110 (I pay part of my moms bill, I know I could find cheaper on my own)
Student Loan: $135/month (paying extra) total loan debt is only $7,300.
Car: $457/month with 31 months left.
Since my new promotion I have realized I must blow through money like a college student with a credit card. The reason for a lack of savings is for multiple reasons. For one, I just got the job paying $73K in November so I haven't been making a large amount for a long time. Also, any extra money I obtain I have been throwing at my student loans because my cost of living is relatively low. My job security is very good as well.
A large portion of my discretionary spending goes into bars, travel, and/or obtaining my own personal goods since I am young and needed all new wardrobes, furniture, etc out of school.
Do you think I am irresponsible with my money? Or do I get a little bit of a pardon because of my age? If you were in my position what would you do different?
I am 25 years old (just turned) I just got the job paying $73K in November
just got a raise to $81K which takes effect next month.
A large portion of my discretionary spending goes into bars, travel, and/or obtaining
my own personal goods ... Do you think I am irresponsible with my money?
For where you are you are/have been? Don't sweat it.
Don't continue the patterns... but don't fret. Just change.
1) MAX out the matching 401K
2) MAX out the IRA
3) Pay off any/all unsecured debt
4) Establish a 6 months emergency fund.
Not too bad from what I see, especially for a 25 year old.
The one thing I don't like is that car payment--it seems really, really high.
the second concern is the spending on entertainment--doing it without budgeting for it can be dangerous.
You haven't saved a lot, but you are young, and you're trying to pay down debt, so $1500 is okay for an emergency fund for now.
I would probably throw every available dollar at that student loan and get rid of it, then work on saving and maybe then increase your 401(k) contribution.
I would get rid of the car, but that's just me. I tend to like living with no car payment, and I prefer a reliable late-model used car over something flashy and snazzy.
Just keep a close eye on how much you're spending on bars, travel, and clothes, and set yourself a clear monthly budget limit for those things.
I can understand stocking up on durable household goods, which will hopefully last years, so you'll be set up for the next several years (pots & pans, dishes, towels, furniture, lighting, kitchen appliances, etc). But again, make sure you set a budget for how much you're allowed to spend on those things. Buy stuff that's decent quality and not going to go out of style in 15 minutes. I actually use some of my savings to buy those types of goods now and store them in my attic or basement--I know I'm going to need them anyway, and buying them today, with today's dollars beats inflation. This is stuff like bath towels, iron/ironing board, light bulbs, cleaning products, sheets, stuff that lasts several years but will definitely have to be replaced at some point.
Not too bad from what I see, especially for a 25 year old.
The one thing I don't like is that car payment--it seems really, really high.
the second concern is the spending on entertainment--doing it without budgeting for it can be dangerous.
You haven't saved a lot, but you are young, and you're trying to pay down debt, so $1500 is okay for an emergency fund for now.
I would probably throw every available dollar at that student loan and get rid of it, then work on saving and maybe then increase your 401(k) contribution.
I would get rid of the car, but that's just me. I tend to like living with no car payment, and I prefer a reliable late-model used car over something flashy and snazzy.
Just keep a close eye on how much you're spending on bars, travel, and clothes, and set yourself a clear monthly budget limit for those things.
I can understand stocking up on durable household goods, which will hopefully last years, so you'll be set up for the next several years (pots & pans, dishes, towels, furniture, lighting, kitchen appliances, etc). But again, make sure you set a budget for how much you're allowed to spend on those things. Buy stuff that's decent quality and not going to go out of style in 15 minutes. I actually use some of my savings to buy those types of goods now and store them in my attic or basement--I know I'm going to need them anyway, and buying them today, with today's dollars beats inflation. This is stuff like bath towels, iron/ironing board, light bulbs, cleaning products, sheets, stuff that lasts several years but will definitely have to be replaced at some point.
I agree with everything here. Thank you! I wish I could get rid of the car but I would take a huge financial beating. At this point it probably is just smarter to go with it until its paid off. The reason it is so huge is because I had no down payment. I had close to $0 after graduation. A majority of my peers had hand me down cars from their parents and were able to live at home for a short period of time. I had none of that.
Anyway, I love your last bit of advice about buying stuff today instead of holding off until tomorrow. I will certainly keep that in mind but since I am in an apartment who knows where I will be living next, I will need to keep it to a minimum.
In a year or two you can sell the car for what it's worth and break even.
I disagree with this. In less than three years OP will own this car. If the car hasn't given the OP much trouble by then, it makes the most sense to keep it, and for a while. It is possible that this will help him(?) to get ahead, rather than just "break even".
OP, I think you are doing fine, and the high car payment is the only problem I see. But what's done is done - this is not the most expensive lesson you could get, but it is a very good one.
I think I willl start collecting these posts from CD, and showing them my 15 year old son, saying "just don't do this - don't buy expensive car right out of college".
I would also look into increasing your retirement contributions. It is critical to get those up early in life, if you can. With 71K income you certainly should be in the position. Congrats, BTW - this is a really good income for a 25 year old!
I disagree with this. In less than three years OP will own this car. If the car hasn't given the OP much trouble by then, it makes the most sense to keep it, and for a while. It is possible that this will help him(?) to get ahead, rather than just "break even".
OP, I think you are doing fine, and the high car payment is the only problem I see. But what's done is done - this is not the most expensive lesson you could get, but it is a very good one.
I think I willl start collecting these posts from CD, and showing them my 15 year old son, saying "just don't do this - don't buy expensive car right out of college".
I would also look into increasing your retirement contributions. It is critical to get those up early in life, if you can. With 71K income you certainly should be in the position. Congrats, BTW - this is a really good income for a 25 year old!
My mistake, I assumed he just recently bought the car.
I do know a loan company that can handle your debt problems.....pm me for more info.
what, he doesn't have any debt issues? OP, I think you are fine. Like someone else mentioned I would set a budget for your going out, just to keep track of your spending.Like others have already mentioned work on maxing your 401k to match and fully funding your roth IRA each year along with paying down the SLs as fast as possible and you are good.
Max your 401k. Get up to 30K emergency funds. Then pay off your debt. Don't buy a new car for 2 years.
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