1.) I would have worked part time in college and in summers. Enough to max my Roth IRA.
At 30...(assuming a 6% REAL) return...I would have 128k....which wouldn't change my life TOO much but at 45 I would have 470k. That basically makes your coast FI and give you EXTRA confidence to take career pivots, long sabbaticals, tell your boss off if they are out of line, quit and move to a lower paying position and SO SO SO many other options.
2.) This wasn't a thing when I was 20...but it was when I was 30. I wish I would have understood and HSA is MORE LUCRATIVE than a Roth IRA and maxed it as SOON as I had the chance....both for my wife and myself. With an HSA you get a tax break in the year the money goes in AND it comes out tax free. ALSO....if you max the account annually form PAYROLL DEDUCTIONS ONLY (not 1 time lump sum deposits and such)....you get a break in payroll tax (social security/medicare). This is one of the ONLY ways to get a break on payroll tax (you pay payroll tax even when you set money aside in a Roth IRA and IRA). ALSO...what if down the road you have TOO much HSA....can convert it to an IRA.
3.) IF travel calls to you....backpack a little. Take a summer or even a year or two....save and work like a crazy person before your trip...maybe do some remote work AS you backpack and see the world a little. Youd be shocked how affordable it can be when you get into the research of it. I am 40 now, amazing wife, home, 2 great kids......but logistically.....longer term travel wont be a simple options for many years....would require home schooling and 4x the air tickets and nicer accomodations for family basics (no youth hostels). The is somewhat counter to save everything you have....but you have VERY limited opportunities for THIS kind of experience. With your degree...come home and find a job after a year of adventure...OR get a remote position and see if you an get your work done in 20-30 hours a week WHILE aboard. I spent 3.5 months in SE Asia between my Junior and Senior year of college.....while I didnt pay for it responsibly (used student loans to fund it) it was THE MOST WORTH WHILE MONEY I HAVE EVEN SPENT....more than any home, investment or anything. It changed me...filled me with memories and made me feel like I did something unique and worthwhile in life. That was ESPECIALLY valuable as I settled down....I had some big adventures....I had no regrets.....made it EASIER to stay on the straight and narrow with budgets and commit fully to my wife and kids. I look back on those times very fondly....youth hostels...meeting other travelers from Europe, learning from locals, getting off the beaten path, learning languages (I have forgotten all I learned but still), learning to ride motorcycles from a motorcycle cab drive I paid to teach me who had me whipping circles around buddest wats (temples essentially), seeing jungles, rock climbing "mountains", scuba diving in reefs, volunteering at a local orphanage, eat street food, take local buses to get places, live out of a small frame pack and realize how little you need to be happy....life changing.
4.) Live cheap. "Privacy is a luxury". My first apartment after college had 4 guys....was $188 a month for me and we split utilities. The very next year....I bought a 2 unit home and my unit had (5) bedrooms. I got rent from the lower apartment and from renting out the other 4 bedrooms for $300 a month including utilities. My mortgage back then....$782 all in...rent....$2000 and most of it was paid in cash (off the tax roll EXCEPT for the rent from my lower unit). I also got AMPLE tax write offs. I made a BOATLOAD of cashflow on that first place. I used some of the fund to help my now wife (girlfriend then) pay off her CC debt and buy a 2 unit. I moved in with her a year after I bought my home...rest is history. We had 2 multiunit but never made a ton at our primary jobs....those homes SET US UP. Between the cash flow....equity...tax write offs.....when the market heated up years later it was still RELATIVELY easy for us to buy and GUT/Renovate a home for our family. We moved when we were 35...lived in "her" multi unit for 10 years and our daughter was 1....knew we wanted a bigger place to have kid #2 and a home office. In 2018....bought a home with funds from a Heloc (paid off her rental and sold mine).....have a modern and updated 4 bed with an inground pool and furnished garage (pool house that we park in, in winters only)...with a 128k mortage....our mortgage is MINIMAL. Wouldn't be possible if we didn't set ourselves up earlier in life.
5.) Not much of a Dave Ramsey guy but he has 1 thing right....if you cant afford a home with a 15 year mortgage....you cant afford it period. Our rental HAD I learned that earlier in life....lifestyle creep would have been slower, maybe would have worked a LITTLE harder in my 20s.....few more side gigs here and there and would have NO mortgage today. Granted....at my loan amount that would only save me $7500 a year....but that would reduce life risk...maybe would have allowed my wife to quit a stressful job sooner...or at very least....stack more cash now to retire earlier. I know many people say "put as little down and put the difference into your investments".....MUCH easier said than done. When you have a mortgage, already have 15% automatically come out of your check for a 401k, have $500-600 automatically come out to max a Roth...its easy to THEN "coast". Keep it simple...say the bases are covered. Could I have afforded a 15 year mortgage and felt a little more pinch and worked more for a little more lifestyle...I could have. Could have I invested the "difference" in what I saved monthly from a 30 year and 15 years mortgage...yes you CAN....BUT in practice....it can FEEL almost illogical. Make it harder on yourself....with raises and inflation....those payments feel FAR more manageable after 5 years TRUST ME.
6.) DO NOT PLAN FOR LINEAR PATHS. This is hard to internalize without lots of life experience BUT sock A LOT away when you can. Why...because you WILL have set backs. We ALL use retirement calculators when we calculate how much money well have one day when we put aside X dollars every year for X years at X return.
What those calculators are BAD at helping you internalize...the ups and downs. No one get a consistent market return....its +20% one year and -15% another year. Also....few us of are blessed to contribute the same amount EVERY year....you have layoffs, company does bad and misses bonuses for a couple years, you enter a 2-4 year recessions, new babies / homes or other large expenses, you or your spouse or kids need a large medical expense, parents passing or needing extra help (time or financial) AND you have unexpected gains.....promotions, inheritances, work bonuses, once in a lifetime deals (home or car) and so on.
DONT LIVE BIG when things are on the up and up. It is NOT uncommon to have a 3-10 year "hot streak" of good things but EVERYTHING REVERTS TO THE MEAN....meaning there WILL CERTAINLY be down times. I got lucky...I graduated college RIGHT into a huge recessions....it set my expectations EARLY. You my friend.....are living in the sequel "roaring 20s" (google it) .... things are too good to be true almost. Sock away what you can, live small (still travel though) and expect some BIG DOWNSIDES.
6.) Get a modest emergency fund AFTER you max roth IRA and HSA and 401k match. You are young....2 months of ALL EXPENSES is for someone who lives on their own...even if you still live at home...so rent, utilities, car insurance, health insurance and all that) and invest it conservatively....HYSA or CDs or bonds with short maturities...or 3-4 months BUT invested in stocks (I double it incase markets crash out AND THEN you need to tap it). If it grows....let it be....as you get older emergencies are more likely...you have spouses and kids and homes to consider risks for. Id even consider leaving 1 month in a HYSA just for ease
7.) The pecking order
a) 1 month emergency fun in EASY to tap investments like HYSA or CD (pay a small fee to withdrawal early) .
b) 401k to get the FULL matching IF AND ONLY IF there is matching.
c) max HSA if applicable
d) max Roth IRA as long as youll finish the year in one of the 2 bottom tax brackets for federal taxes.
e) brokerage "emergency" for a 2nd month of expenses. THEN every 2 years....build up an additional month UNTIL you have 12-18 months in that brokerage account (always keeping 1 month in HYSA). Why SO MUCH....because layoffs tend to happen more WHEN the economy tanks. So say you have 12 months of expenses in a total market etf in your brokerage.....12 months drop 40% now you have 7.2 months. BAM you get laid off....AND need all 7.2 month BUT also owe taxes...now your have 6 months AFTER tax. See how quickly you went from 12 to 6.
So why bother with a brokerage for your emergency fund (its controversial advice)....well...young people are resilient and can easily take a lower paying job to cover LOW living expense....second...less likely for a health emergency....third if you have an HSA you have some OTHER funds for a health emergency that are tax free....fourth...if you get 6% returns and NO emergency in 5 years.....you grew your emergency fund 44%. If you can go 10 year with no emergency....79% growth. Lets say your expenses are 4k a month...and EVERY YEAR from year you set aside 4k for emergency. the FRIST year....money goes to a HYSA....years 2-10....invested at 6% real return. After 10 years your invested emergency grew to $46k...PLUS 4k in a HYS (lets say that treaded water and made no gains).....10 years out you have 50k....which is 12.5 months emergency. If you go 13 years (from 22 *post college* to 35) you have almost 72k which is 18 months emergency fund and you never need to save for emergencies again....unless you have one...then just replenish. At some point...emergency fund becomes a "retire a year or two early" fund and you hit the 1-2M mark.
f) max 401k / solo 401k / sep / federal sponsored program
g) IF you have an interest rate on your mortgage 6% or over...pay down mortgage. If rate is under 6%....backdoor Roth.
h) do the OTHER option from option "g"
i) at this point...you are insanely financially secure.....make sure you are LIVING and utilizing TIME. Stop worrying about finances. You are good.
8.) I wish I understood the FINANCIAL ramifications of health and time used. Every beer/shot I bought in my 20's...made me less wealthy and less healthy. If I could go back in time.....id take back 2/3 of those beers and 100% of the shots lol. Restaurant meals are the same...id take back 50% of them. I would take back money I spent when I was bored...."walking around a mall or store ... spending for something to do"...or a concert or movie I wasnt 100% pumped about because it was something to do. Would have watched less TV and played less video games and worked a bit more. Still see friends and do exciting things....but skip "c and b" tier level activities...especially if they are medium or high price tags. Also realized "free" activities....still have costs. BE ACTIVE....join sports or physical activities you LIKE. What you pay to do those activities will be 100% recouped in health issues and treating them later. Not only do you lose money traeating medical conditions.....you lose TONS OF TIME later in life 9during your highest eaning years).
9.) If you have friends to rent to...or make friends easily.....buy a home early and house hack (rent out the extra rooms). Id go as far to build a room in the basement to live in....rent out all bedrooms and pay that sucker down ASAP OR buildup emergency fund FAST. It is a GREAT side hustle.....bonus points if you buy a multiunit AND rent extra rooms in your unit.
10.) embraces "low lifestyle" it is never EASIER and MORE ACCEPTALE to be broke than when your young. If ways easier to say "sorry I cant make that nice dinner or b level movie" than tell our kids later you cant afford them to be in XYZ sport or tell your wife you guys cant afford to celebrate your 20 year anniversary with a dream trip.
