Author Topic: Case Study - Just out of college. Where do I go from here?  (Read 1401 times)

Remnace

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Case Study - Just out of college. Where do I go from here?
« on: September 15, 2017, 01:45:39 PM »
Hi all,
I'm new to the whole FIRE scene so I'm a little uncertain how to proceed.

Info:
Graduated college in May and started a new job as a software engineer in the same month.
No dependents. S/O will be graduating and moving in next May. (I intend to propose in the next few months)
I spend a lot more on gas than I probably should due to driving back and fourth to see my S/O.

Salary:
   $60000 a year
   $1651.51 per paycheck on a biweekly basis.

Pre-tax deductions:
   Just set up a 401k. I'll be contributing 5% with company matching 4%.
   Social Security: $143
   Federal: $362
   State: $83
   Medicare: $34

Assets:
   2014 Scion Xb: $9500
   Savings account: $1200

Liabilities:
   Student Loan: $22503 @ 4.25% (Original balance: $23693)
   Car Loan: $12504.36 @ 5.24% (Original balance: $12840)

Monthly Expenses:
   Rent: $760
   Utilities: $55
   Internet: $40
   Phone: $34
   Student Loans: $147
   Car Payment: $256
   Car Insurance: $72
   Food: $280
   Gas: $130
   Misc: $75

   Food and gas tend to jump around a bit, but stay around those numbers.
   Also I'm paying more than the minimum on the student loans every month.
   
Specific Questions/Extra info:
   - Should I be focusing on my debt more or saving more?
   - I know I need to open an IRA, but I'm not sure whether to go traditional or roth.
   - Is there anywhere in my spending that seems too high?
   - I basically inherited my car when my father passed away in May. I know I could get
     something cheaper, but I'm hanging onto it for emotional reasons.



EDIT: Added in my miscellaneous spending category.




« Last Edit: September 16, 2017, 07:06:18 PM by Remnace »

solon

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #1 on: September 15, 2017, 01:59:55 PM »
It looks like your take-home pay is $3303.02 a month, and your expenses are $1774. That gives you an extra $1529 a month to play with. That is excellent money! We could nit-pick a little and find some more, but let's just start with this.

I don't see an emergency fund listed. Next month, take $1000, put it in a new bank account labeled "Emergency Fund", and then never touch it.

Next, we could tackle some of the debt. But first, do you anticipate any wedding/honeymoon expenses? It might make sense to save a little for that.

Novik

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #2 on: September 15, 2017, 02:29:25 PM »
So you have a quasi-emergency fund in your savings account. I'd increase that to 3 months bare-bones spending by December, and find somewhere high interest to park it (2-3%).

Next, this may seem drastic, but assuming your 401k has halfway decent investment options, have you considered maxing it out? You'll save on taxes, and putting 18k away per year is an amazing snowball to early retirement.

Then max out your IRA (I'm not in the US but my guess would be do the tax deductible kind because with a lower salary you might be allowed?). And I think this double as an extra emergency fund, so bonus. You probably have until partway into next year to do this.

Then start saving for a wedding if that's in the cards.


Expenses-wise, make sure you're actually tracking everything. See if you can bring food down (batch cooking! less meat/dairy). And I'd throw a significant amount of extra at your car loan (vs. the student loan) given the higher interest.


Maxing out your 401k etc may seem drastic, but your rent should drop in 1/2 when your SO moves in, so if you don't do it now, definitely re-consider next year.
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solon

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #3 on: September 15, 2017, 02:55:11 PM »
Jumping straight to maximum retirement saving is a little too soon, IMH(yet correct)O.

There is an excellent post on the optimal order to do these things in: https://forum.mrmoneymustache.com/investor-alley/investment-order/

But I think the most important thing to get your head around is the idea that you're not going to fritter away $1500 a month. Make sure you use it - all of it - for something that will make your life better. Saving, investing, paying off debt - it's all good. Take that $1500 and start doing something useful, and then we can tweak it for optimal impact.

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #4 on: September 15, 2017, 03:22:30 PM »
Keep living like a college student for as long as you can.
Don't go into debt for a wedding or honeymoon.

lhamo

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #5 on: September 15, 2017, 08:22:22 PM »
The interest rate on the car seems quite high -- if you really want to keep it cuz of your dad (sorry for your loss), can you look into refinancing at a local credit union? Also $450/month on transportation seems a bit steep given the debt.....

Your food costs seem high to me for an individual -- I feed a family of 4 (two teens, so basically four adults) on roughly 500-600/month for groceries/wine/toiletries/household supplies, plus we typically spend about 200/month on eating out.   

60k for a software engineer seems really low, though I guess your low COL helps.  Here in seattle you'd probably be making more like 100k but your rent would also double.
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Re: Case Study - Just out of college. Where do I go from here?
« Reply #6 on: September 16, 2017, 02:24:14 PM »

Specific Questions/Extra info:
   - Should I be focusing on my debt more or saving more?
   - I know I need to open an IRA, but I'm not sure whether to go traditional or roth.
   - Is there anywhere in my spending that seems too high?
   - I basically inherited my car when my father passed away in May. I know I could get
     something cheaper, but I'm hanging onto it for emotional reasons.

Should I be focusing on my debt more or saving more?
solon posted a link that provides this answer if you want to optimize things mathematically, and it's what I would recommend.  However, I think that a more important point than optimizing in the way that's posted in that link is to ensure you don't inflate your lifestyle.  Because you're getting started early, my opinion is that preventing lifestyle inflation is *by far* the best thing you can do.  If you are disciplined and can keep your spending close to what you posted, then I'd follow solon's advice.  If you're like most people and extra money will have a way of leaving your bank account, there is something to be said for locking in forced savings by maxing out your 401(k).  If you don't see it you can't spend it.  Similarly, if you are very goal focused then setting a goal of zero debt by a certain date might give you the motivation to stay on track.  Basically there's a mix of mathematical optimization and psychological optimization that is best, but you'll need to answer that.  As long as you select an option that minimizes lifestyle creep you'll be in good shape.  I know the Huntsville job market pretty well, and $60k to start is about right for that region.  However, your income should go up pretty quickly over the next few years.  If you can keep your rent where it is, add income from your S/O, and hold onto the car well after it's paid off then you'll be well on your way to FIRE.  Just don't succumb to lifestyle inflation!

I know I need to open an IRA, but I'm not sure whether to go traditional or roth
solon's link has the answer.

Is there anywhere in my spending that seems too high?
Based on what you posted, no.  However, I'm a little skeptical that this shows *all* of your expenses.  Do you really spend nothing on entertainment?  No movies, no travel, no car maintenance, no furnishings for the apartment, no gym membership, no new clothes, etc.?  Seeing a case study with absolutely zero discretionary spending seems fishy.  If you really are that frugal then I think the rest of your spending looks fine. 

I basically inherited my car when my father passed away in May. I know I could get
     something cheaper, but I'm hanging onto it for emotional reasons.

I'm sorry to hear about your father's passing.  If holding onto the car is important, that's understandable.  Just commit to making it the last car payment you'll ever have.

Goldielocks

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #7 on: September 16, 2017, 05:33:38 PM »
Your budget seems to be missing some very important categories.   Do you spend NOTHING other than the $280 for food in a month?  no subscriptions, games, gifts, socks, meals with GF, donations, new garbage can or sunscreen, no haircuts, no scissors or, well, ANYTHING?

Renter's insurance?  Other minor medical deductions or co-pays?  Parking tickets? Driver License Renewals? Engagement ring savings? You get the idea.

It could be, given that you just graduated,that you don't spend anything else, but it wont stay that way unless you put a budget line for these other items, even a small one, and track that you keep to it.

Next.   I highly recommend getting rid of the car loan ASAP.  A car loan is sometimes needed, but after your first one, you want to never have a car loan again.  Pay it off, within 12-18 months.   Pay the SL debt as a minimum payment that keeps you current for now.

Now, set some life / financial goals for yourself.  Take the time to think about what you want in the next 10 years.  Include savings, but also paint a mental picture of your everyday life.   Are you DINK?  Living in a rural location?  NY?   It is important to understand what you want, initially, and then share with your SO before you marry, and then adjust it to a mutal vision (give and take).   Otherwise you risk accepting the other person's vision for your life plan, besotted as you may be.

Finally,  you are making a lot of money for a single person in AL, don't fall down and start buying a lot of dinners out and fancy clothing or watches, etc.    Make a budget (even a loose or generous one), create a few goals, and you won't lifestyle creep by accident.   This was the best advice I received when I was a 22 yo new engineering graduate with full time work.   In hindsight, it was some of the best advice I have ever received.   .... I only wish someone had warned me about the horrors of being trapped in a large car loan at the same time!!...

Good Luck.


Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #8 on: September 16, 2017, 07:03:38 PM »
Your budget seems to be missing some very important categories.   Do you spend NOTHING other than the $280 for food in a month?  no subscriptions, games, gifts, socks, meals with GF, donations, new garbage can or sunscreen, no haircuts, no scissors or, well, ANYTHING?

Renter's insurance?  Other minor medical deductions or co-pays?  Parking tickets? Driver License Renewals? Engagement ring savings? You get the idea.

It could be, given that you just graduated,that you don't spend anything else, but it wont stay that way unless you put a budget line for these other items, even a small one, and track that you keep to it.

Next.   I highly recommend getting rid of the car loan ASAP.  A car loan is sometimes needed, but after your first one, you want to never have a car loan again.  Pay it off, within 12-18 months.   Pay the SL debt as a minimum payment that keeps you current for now.

Now, set some life / financial goals for yourself.  Take the time to think about what you want in the next 10 years.  Include savings, but also paint a mental picture of your everyday life.   Are you DINK?  Living in a rural location?  NY?   It is important to understand what you want, initially, and then share with your SO before you marry, and then adjust it to a mutal vision (give and take).   Otherwise you risk accepting the other person's vision for your life plan, besotted as you may be.

Finally,  you are making a lot of money for a single person in AL, don't fall down and start buying a lot of dinners out and fancy clothing or watches, etc.    Make a budget (even a loose or generous one), create a few goals, and you won't lifestyle creep by accident.   This was the best advice I received when I was a 22 yo new engineering graduate with full time work.   In hindsight, it was some of the best advice I have ever received.   .... I only wish someone had warned me about the horrors of being trapped in a large car loan at the same time!!...

Good Luck.

I do have occasional random expenditures that average out to about ~$75 in a misc category. I'll add that to the original post. I don't have a budget yet, but I'll sign up with mint in order to make tracking my spending more automatic and budgeting easier.

It looks like your take-home pay is $3303.02 a month, and your expenses are $1774. That gives you an extra $1529 a month to play with. That is excellent money! We could nit-pick a little and find some more, but let's just start with this.

I don't see an emergency fund listed. Next month, take $1000, put it in a new bank account labeled "Emergency Fund", and then never touch it.

Next, we could tackle some of the debt. But first, do you anticipate any wedding/honeymoon expenses? It might make sense to save a little for that.

Thanks for the advice! I assumed that an ER would be the next step, but I have that $1200 so I just assumed that was enough for anything small that pops up. I imagine there will be some wedding costs, but not sure how much I should be saving for that. We're planning on it being an incredibly small wedding. A honeymoon is something we're gonna put off until we can do something a little more grand.

Jumping straight to maximum retirement saving is a little too soon, IMH(yet correct)O.

There is an excellent post on the optimal order to do these things in: https://forum.mrmoneymustache.com/investor-alley/investment-order/

Thank you for this! That helps a lot seeing that there's a generally accepted flowchart to follow.

Is there anywhere in my spending that seems too high?
Based on what you posted, no.  However, I'm a little skeptical that this shows *all* of your expenses.  Do you really spend nothing on entertainment?  No movies, no travel, no car maintenance, no furnishings for the apartment, no gym membership, no new clothes, etc.?  Seeing a case study with absolutely zero discretionary spending seems fishy.  If you really are that frugal then I think the rest of your spending looks fine. 

I basically inherited my car when my father passed away in May. I know I could get
     something cheaper, but I'm hanging onto it for emotional reasons.

I'm sorry to hear about your father's passing.  If holding onto the car is important, that's understandable.  Just commit to making it the last car payment you'll ever have.

Going out to eat is also included in my food spending, I haven't had any car spending or a need for new furniture since I started tracking my spending. No memberships or subscriptions. I do have a renter's insurance policy, but my mother paid that for the year when she was helping me get set up in my new place. I do have a misc category in my spending which averaged out to ~$75 a month for random small things. I'll add that to the original post for clarity. Also it's nice to hear that I'm not being silly by holding onto a car for emotional reasons. Thanks!

So you have a quasi-emergency fund in your savings account. I'd increase that to 3 months bare-bones spending by December, and find somewhere high interest to park it (2-3%).

Next, this may seem drastic, but assuming your 401k has halfway decent investment options, have you considered maxing it out? You'll save on taxes, and putting 18k away per year is an amazing snowball to early retirement.

Then max out your IRA (I'm not in the US but my guess would be do the tax deductible kind because with a lower salary you might be allowed?). And I think this double as an extra emergency fund, so bonus. You probably have until partway into next year to do this.

Then start saving for a wedding if that's in the cards.


Expenses-wise, make sure you're actually tracking everything. See if you can bring food down (batch cooking! less meat/dairy). And I'd throw a significant amount of extra at your car loan (vs. the student loan) given the higher interest.


Maxing out your 401k etc may seem drastic, but your rent should drop in 1/2 when your SO moves in, so if you don't do it now, definitely re-consider next year.


I definitely need to start saving for the wedding (though I'm clueless as to how much weddings cost). As for food, I figured it was probably way to high. I do include eating out in that food category though so I could definitely trim it back. Thanks for the advice!



Thanks guys for taking the time to go over this! I really appreciate the feedback. So it seems my next step is to make a budget, add some money to that $1200 as an ER, more aggressively start paying off my car loan, avoid lifestyle creep like the plague, and start saving for the wedding! This advice is gold and I'll start applying it ASAP. Another question: I'm paid ahead on my student loans until May of next year. Since that's the case do I need to just let that go for now and focus on the car loan?

plainjane

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #9 on: September 16, 2017, 07:09:40 PM »
I definitely need to start saving for the wedding (though I'm clueless as to how much weddings cost).

Weddings cost what you decide they cost. You should discuss with your SO what is non negotiable, what is highly desirable, and what neither of you care about.  Then you can call around and ask vendors what it would cost to do those things (which is highly dependent on where you live).  Then you can revisit the list and decide if it those are still the things you want to do. And then save for it.
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Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #10 on: September 16, 2017, 08:04:37 PM »
Weddings cost what you decide they cost. You should discuss with your SO what is non negotiable, what is highly desirable, and what neither of you care about.  Then you can call around and ask vendors what it would cost to do those things (which is highly dependent on where you live).  Then you can revisit the list and decide if it those are still the things you want to do. And then save for it.

Thanks! I figure that'll probably wait until after the proposal. Since I've gotten out of college I've come to realize I'm clueless about a lot of things.

swashbucklinstache

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #11 on: September 17, 2017, 12:14:03 PM »
It could be, given that you just graduated,that you don't spend anything else, but it wont stay that way unless you put a budget line for these other items, even a small one, and track that you keep to it.

Next.   I highly recommend getting rid of the car loan ASAP.  A car loan is sometimes needed, but after your first one, you want to never have a car loan again.  Pay it off, within 12-18 months.   Pay the SL debt as a minimum payment that keeps you current for now.

Now, set some life / financial goals for yourself.  Take the time to think about what you want in the next 10 years.  Include savings, but also paint a mental picture of your everyday life.   Are you DINK?  Living in a rural location?  NY?   It is important to understand what you want, initially, and then share with your SO before you marry, and then adjust it to a mutal vision (give and take).   Otherwise you risk accepting the other person's vision for your life plan, besotted as you may be.

Finally,  you are making a lot of money for a single person in AL, don't fall down and start buying a lot of dinners out and fancy clothing or watches, etc.    Make a budget (even a loose or generous one), create a few goals, and you won't lifestyle creep by accident.   This was the best advice I received when I was a 22 yo new engineering graduate with full time work.   In hindsight, it was some of the best advice I have ever received.   .... I only wish someone had warned me about the horrors of being trapped in a large car loan at the same time!!...

Good Luck.

This is very solid life advice. I may quibble with the car loan, but only for advanced mustachians who might use a car loan as low interest non-callable leverage. In your shoes I would think of these as the people with $x00,000+ invested, with net worth increases per year larger than your current gross salary yet driving $x,000 cars. Not buying a car you need a loan to get should be advice everyone should follow in almost all circumstances.

Also it's nice to hear that I'm not being silly by holding onto a car for emotional reasons. Thanks!
Not to be drastic, but there's a lesson here. We talk a lot on here about the freedom to retire early and the desire to not ruin our planet, but there's a lot of downside protection to financial independence too. Specifically: you saving money and not having high expenses will put you in position to make decisions for emotional reasons when you want to throughout your life. Other people in your shoes may not have the luxury of doing so, e.g. they may have had to sell the car or even more personal things to make rent this month, even people making six figures, which is a shame because in the end life really is all about the emotional things. Recognizing that this may be a sub-optimal financial decision (it isn't perfect but isn't excessive by any means, by the way) but you are okay with making it for emotional reasons after evaluating how it affects you financially and emotionally, and what consequences that decision has for your life, is building the right thought process now on a small thing. a $12k are will seem small ten years from now if you save right!

Going through that thought process now will serve you well if (when) you find yourself on a bigger stage, e.g. inheriting a $300,000 house you don't want practically but have  emotional attachments to.

Good luck!
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plainjane

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #12 on: September 17, 2017, 02:42:33 PM »
Weddings cost what you decide they cost. You should discuss with your SO what is non negotiable, what is highly desirable, and what neither of you care about.  Then you can call around and ask vendors what it would cost to do those things (which is highly dependent on where you live).  Then you can revisit the list and decide if it those are still the things you want to do. And then save for it.
Thanks! I figure that'll probably wait until after the proposal. Since I've gotten out of college I've come to realize I'm clueless about a lot of things.

Some of it will wait, but it's still the type of discussion that is good to have before a proposal. If you aren't sufficiently aligned on things like that, it's a good thing to know before hand.  It doesn't have to be a formal discussion, just if you hear about someone getting married, or you go to a wedding, you can discuss afterwards.
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Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #13 on: September 18, 2017, 11:39:54 AM »
Not to be drastic, but there's a lesson here. We talk a lot on here about the freedom to retire early and the desire to not ruin our planet, but there's a lot of downside protection to financial independence too. Specifically: you saving money and not having high expenses will put you in position to make decisions for emotional reasons when you want to throughout your life. Other people in your shoes may not have the luxury of doing so, e.g. they may have had to sell the car or even more personal things to make rent this month, even people making six figures, which is a shame because in the end life really is all about the emotional things. Recognizing that this may be a sub-optimal financial decision (it isn't perfect but isn't excessive by any means, by the way) but you are okay with making it for emotional reasons after evaluating how it affects you financially and emotionally, and what consequences that decision has for your life, is building the right thought process now on a small thing. a $12k are will seem small ten years from now if you save right!

Going through that thought process now will serve you well if (when) you find yourself on a bigger stage, e.g. inheriting a $300,000 house you don't want practically but have  emotional attachments to.

Good luck!

I never even thought about it that way. I guess, in a lot of ways, I am quite a bit luckier than a lot of people already. Thank you for the insight!

Lady SA

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #14 on: September 18, 2017, 12:32:25 PM »
I have a couple thoughts:

1. Open a traditional IRA. The rule is if you expect your retirement expenses/income (because you will be drawing a retirement income equal to your expenses) to be lower than your current income, do traditional (because your tax rates will be lower in retirement, so shield your money from taxation now for a lower tax rate later). Mustashians generally have yearly expenses in the $30-40k range. So related to that, get your 401k company match, then save as much as possible in an HSA (see below), then your traditional IRA, then 401k. See https://forum.mrmoneymustache.com/investor-alley/investment-order/

2. Get on your employers high deductible health plan and open an HSA and max it out before anything else. It is not taxed ever so it's even better than a 401k or IRA. You are young and healthy so now is the best time to start that, unless you have a chronic illness.

3. Work hard to keep living like a college student. Your 20's will be the simplest, cheapest decade of your life, so really take advantage of the fact that you don't have kids, you're flexible location-wise, you're not tied down or limited. My DH and I graduated in 2014, and our one indulgence is a slightly nicer apartment in a not crappy part of town, and slightly healthier food from the grocery store -- because combined, we make almost $180k and we prioritized those things, so paying slightly higher rent than we need to be isn't really impacting our savings rate. We are a single car family and drive an absolute beater. We aren't buying a house. We DIY almost everything. We eat out once per month for a date night but strictly limit it to under $50. We shop exclusively at goodwill. We are delaying fun international trips because at this point, saving is higher priority, and we are delaying having children because getting ourselves in good financial shape and then being able to maximize our time with them is very important to us. And sacrificing all that means by the time we are 30, we will be well over halfway to total financial independence, and our plan is to downgrade to a part-time schedule to cover bills while we start our family and let our investments compound to our FIRE number in under a decade. This is something that our peers can't even fathom.

4. Wedding stuff: really try hard to keep things in perspective. It's a wonderful celebration, but in the end, it's just a party. No need to make it outrageously extravagant. And your BIGGEST expense will be paying to host people -- meals for each person, invitations for each person, chairs/tables/other rentals for each person, and a venue to accommodate each person. You biggest savings will come simply from cutting your guest list. If I had to go back, I would absolutely elope, or have a destination wedding with the 20 most important people in my life. Our wedding was fun, but it was so stressful for not that much payoff. I really would have enjoyed myself more if I had not dropped over $15k on a stupid party and been able to have an intimate celebration with people I was actually close with.

5. I agree on having those important discussions with your SO before the proposal. Getting aligned on finances/spending behaviors, plans for kids and family, and visions for a wedding are all good conversations to have before entering into a formal commitment.
« Last Edit: September 18, 2017, 12:48:46 PM by Lady SA »
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Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #15 on: September 18, 2017, 12:58:17 PM »
I have a couple thoughts:

1. Open a traditional IRA. The rule is if you expect your retirement expenses/income (because you will be drawing a retirement income equal to your expenses) to be lower than your current income, do traditional (because your tax rates will be lower in retirement, so shield your money from taxation now for a lower tax rate later). Mustashians generally have yearly expenses in the $30-40k range. So related to that, get your 401k company match, then save as much as possible in an HSA (see below), then your 401k, then a traditional IRA. See https://forum.mrmoneymustache.com/investor-alley/investment-order/

2. Get on your employers high deductible health plan and open an HSA and max it out before anything else. It is not taxed ever so it's even better than a 401k or IRA. You are young and healthy so now is the best time to start that, unless you have a chronic illness.

3. Work hard to keep living like a college student. Your 20's will be the simplest, cheapest decade of your life, so really take advantage of the fact that you don't have kids, you're flexible location-wise, you're not tied down or limited. Looks like you already upgraded your car, which is unfortunate, but keep lifestyle inflation to a minimum. My DH and I graduated in 2014, and our one indulgence is a slightly nicer apartment in a not crappy part of town, and slightly healthier food from the grocery store -- because combined, we make almost $200k and we prioritized those things, so paying slightly higher rent than we need to be isn't really impacting our savings rate. We are a single car family and drive an absolute beater. We aren't buying a house. We DIY almost everything. We eat out once per month for a date night but strictly limit it to under $50. We shop exclusively at goodwill. We are delaying fun international trips because at this point, saving is higher priority, and we are delaying having children because getting ourselves in good financial shape and then being able to maximize our time with them is very important to us. And sacrificing all that means by the time we are 30, we will be well over halfway to total financial independence, and our plan is to downgrade to a part-time schedule to cover bills while we start our family and let our investments compound to our FIRE number. This is something that our peers can't even fathom.

4. Wedding stuff: really try hard to keep things in perspective. It's a wonderful celebration, but in the end, it's just a party. No need to make it outrageously extravagant. And your BIGGEST expense will be paying to host people -- meals for each person, invitations for each person, chairs/tables/other rentals for each person, and a venue to accommodate each person. You biggest savings will come simply from cutting your guest list. If I had to go back, I would absolutely elope, or have a destination wedding with the 20 most important people in my life. Our wedding was fun, but it was so stressful for not that much payoff. I really would have enjoyed myself more if I had not dropped over $15k on a stupid party and been able to have an intimate celebration with people I was actually close with.

5. I agree on having those important discussions with your SO before the proposal. Getting aligned on finances/behaviors, plans for kids and family, and visions for a wedding are all good conversations to have before entering into a formal commitment.

Thank you for the input! I'm definitely going with a traditional IRA, but I don't know if I should even contribute to one before I've paid off my car loan. The car is definitely not ideal, but I cannot bring myself to part with it. With regards to my SO we are pretty much in sync with our vision of the future in terms of children, lifestyle, and the wedding itself. I think the only thing we have yet to discuss in depth is how we want to handle our finances. I will definitely make it a point to attack this topic with her before the proposal.

Shanksy

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #16 on: September 18, 2017, 01:14:02 PM »
Weddings don't have to be expensive, see my journal link below where I detail what I spent on ours back in March. But at the same time, your soon to be fiance may have opinions about what she wants, so it's definitely important to find out those things in advance. I would advise figuring out what is the most important aspect of the wedding for the two of you(when you get to that point) and then highlight those parts and save on the other things. We spent the most on food and booze! Best wishes! You're going to do so awesome at this game called Life.

Laura33

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #17 on: September 18, 2017, 01:45:55 PM »
Thank you for the input! I'm definitely going with a traditional IRA, but I don't know if I should even contribute to one before I've paid off my car loan.

You will get different opinions on this, given the @5% rate.  My view is do the IRA.  You only get $5500/yr in your IRA, and that gets to grow tax-deferred until retirement; if you miss 2017, you can't contribute extra in 2018 to make up for it -- it's use it or lose it.  So with your debt being in the 4-5% range (which is fairly low by historical standards), I suspect that being able to use that tax-protected space, and getting the deduction off of this year's taxes, will end up better for you in the long-term.  But, again, YMMV; reasonable minds can differ on this.
Laugh while you can, monkey-boy

Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #18 on: September 18, 2017, 03:13:18 PM »
Weddings don't have to be expensive, see my journal link below where I detail what I spent on ours back in March. But at the same time, your soon to be fiance may have opinions about what she wants, so it's definitely important to find out those things in advance. I would advise figuring out what is the most important aspect of the wedding for the two of you(when you get to that point) and then highlight those parts and save on the other things. We spent the most on food and booze! Best wishes! You're going to do so awesome at this game called Life.

Thanks Shanksy! It definitely helps to see examples. Also congrats on the wedding!

You will get different opinions on this, given the @5% rate.  My view is do the IRA.  You only get $5500/yr in your IRA, and that gets to grow tax-deferred until retirement; if you miss 2017, you can't contribute extra in 2018 to make up for it -- it's use it or lose it.  So with your debt being in the 4-5% range (which is fairly low by historical standards), I suspect that being able to use that tax-protected space, and getting the deduction off of this year's taxes, will end up better for you in the long-term.  But, again, YMMV; reasonable minds can differ on this.

I think that sounds reasonable to me. I guess I'd be missing an opportunity if I didn't contribute to the IRA now. Thank you for the advice!

BigHaus89

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #19 on: September 19, 2017, 11:40:32 AM »
Thank you for the input! I'm definitely going with a traditional IRA, but I don't know if I should even contribute to one before I've paid off my car loan.

You will get different opinions on this, given the @5% rate.  My view is do the IRA.  You only get $5500/yr in your IRA, and that gets to grow tax-deferred until retirement; if you miss 2017, you can't contribute extra in 2018 to make up for it -- it's use it or lose it.  So with your debt being in the 4-5% range (which is fairly low by historical standards), I suspect that being able to use that tax-protected space, and getting the deduction off of this year's taxes, will end up better for you in the long-term.  But, again, YMMV; reasonable minds can differ on this.

I agree with this.

Focusing on maxing an HSA, IRA and 401k should put you far ahead vs paying off the loans. Minimizing how much you pay in taxes will save you much more than the interest paid on those loans.

If you're unsure/want to learn more about investing and such, open a high interest savings account like Ally and park money there until you decide on what you want to do with it.

Bracken_Joy

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #20 on: September 19, 2017, 01:15:08 PM »
People have other stuff pretty well covered I think, so I'll focus on big upcoming expenses: wedding! It can be massive if you let it, or virtually nothing. Most people's comfort zone is somewhere in the middle. Depends on you and your finace's values, priorities, etc.

Useful links:
https://apracticalwedding.com/your-wedding-is-not-show/
https://apracticalwedding.com/where-to-start-planning-a-wedding/
A practical wedding is incredibly helpful at keeping things in perspective and finding solid, actionable advice.
https://forum.mrmoneymustache.com/welcome-to-the-forum/how-much-should-a-wedding-cost/
https://forum.mrmoneymustache.com/ask-a-mustachian/how-did-you-save-money-at-your-wedding/
And I send this book to all my friends/relatives as they get engaged, just as it was given to me: https://www.amazon.com/Hard-Questions-100-Ask-Before/dp/1585426210
My journal: Hiding in the Ferns
Like babies? Have kids? Want to chat about Babies and Pregnancy/Infertility? Group Journal Here.

GizmoTX

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #21 on: September 19, 2017, 03:45:49 PM »
Also, the cost of being in the wedding party varies widely.

DS gladly agreed to be a groomsman a year ago for his college roommate of 4 years. The bride & groom to be decided to dramatically reduce the scope -- their vows were private & the bridesmaids & groomsmen only attended a small reception dinner at a restaurant. The groomsmen wore their own dark slacks & shoes, a white dress shirt, & a supplied bowtie. Total cost: his wedding gift to the couple.

DS also agreed to be a groomsman for one of his best HS friends getting married last summer. This time, he had to fly & drive a rental car to the wedding in the next state, pay for a motel & food for the weekend, & rent his outfit ($275). Total cost: $800, including wedding gift. DS was completely shocked, expecting something more like the first wedding but feeling too obligated to back out.

Check2400

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #22 on: September 19, 2017, 04:45:35 PM »

Should I be focusing on my debt more or saving more?
Because you're getting started early, my opinion is that preventing lifestyle inflation is *by far* the best thing you can do.  If you're like most people and extra money will have a way of leaving your bank account, there is something to be said for locking in forced savings by maxing out your 401(k).

Other people have great advice, and also maths.  I will simply give you my personal anecdote on the above.  If you max your 401k, you will lose around $600 a paycheck to future you (since you are biweekly instead of twice a month, and you don't get taxed on it).  This is not tax optimized for your income level like a Roth may be. 

BUT, for me this approach worked for two reasons. 
First: It meant that every raise that I obtained subsequent to that went straight to me, and since you are at the start of your career, there will be many raises. 
Second:  It meant that if I wanted a raise sooner, I needed to pay off my student loans and debts.  Meaning, the sooner you kill that car loan, the sooner you get a post tax 'raise' of $250/mo.  The sooner you then kill off the Student Loan, another $150/mo. 

You have upcoming expenses, ring and wedding and etc.  Don't let financial optimization talk you out of the things that you want to do, but listen to the people here to make sure that the things you are doing are what you want.  No one gives a shit about perception regarding your wedding, and if they do, a good band and a cheap keg will blur that negative perception into a positive one.

Congrats on finding this place now, 99% of the people here would love to have your foresight and humility to ask for help at age 23. 

Remnace

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Re: Case Study - Just out of college. Where do I go from here?
« Reply #23 on: September 20, 2017, 07:14:26 AM »
Useful links:
https://apracticalwedding.com/your-wedding-is-not-show/
https://apracticalwedding.com/where-to-start-planning-a-wedding/
A practical wedding is incredibly helpful at keeping things in perspective and finding solid, actionable advice.
https://forum.mrmoneymustache.com/welcome-to-the-forum/how-much-should-a-wedding-cost/
https://forum.mrmoneymustache.com/ask-a-mustachian/how-did-you-save-money-at-your-wedding/
And I send this book to all my friends/relatives as they get engaged, just as it was given to me: https://www.amazon.com/Hard-Questions-100-Ask-Before/dp/1585426210

These are great resources. I've shared them with my SO. Thank you so much!

DS gladly agreed to be a groomsman a year ago for his college roommate of 4 years. The bride & groom to be decided to dramatically reduce the scope -- their vows were private & the bridesmaids & groomsmen only attended a small reception dinner at a restaurant. The groomsmen wore their own dark slacks & shoes, a white dress shirt, & a supplied bowtie. Total cost: his wedding gift to the couple.

I like that a lot. We want a very small and simple wedding. Thanks for sharing!


Should I be focusing on my debt more or saving more?
Because you're getting started early, my opinion is that preventing lifestyle inflation is *by far* the best thing you can do.  If you're like most people and extra money will have a way of leaving your bank account, there is something to be said for locking in forced savings by maxing out your 401(k).

Other people have great advice, and also maths.  I will simply give you my personal anecdote on the above.  If you max your 401k, you will lose around $600 a paycheck to future you (since you are biweekly instead of twice a month, and you don't get taxed on it).  This is not tax optimized for your income level like a Roth may be. 

BUT, for me this approach worked for two reasons. 
First: It meant that every raise that I obtained subsequent to that went straight to me, and since you are at the start of your career, there will be many raises. 
Second:  It meant that if I wanted a raise sooner, I needed to pay off my student loans and debts.  Meaning, the sooner you kill that car loan, the sooner you get a post tax 'raise' of $250/mo.  The sooner you then kill off the Student Loan, another $150/mo.   

Those are great points. I think this is something I would start doing if I noticed my lifestyle starting to inflate. Which, as of yet, hasn't happened to any great degree (barring food).