Hi Money Minder,
I just graduated and landed a new job, woohoo! So, here’s the scoop – my salary is around 115k USD, and I bring home about 6k USD a month after taxes. My employer isn’t pitching in for my 401k, boo! But hey, I’m lucky enough to crash at my parent’s place rent-free for now. My main expenses revolve around my furry buddy (doggy daycare and food), gas, and groceries, which add up to roughly 1000 USD a month. The daycare bill hurts the most, gotta admit.
I’ve got some pesky student loans, but I’ve squirreled away enough cash to pay them off before the grace period ends. No other debt to worry about, thank goodness. I’ve heard folks say to squirrel away 10-15% of my income for retirement. But hey, here’s the kicker – I’m eyeing grad school in the next 3-5 years, and that’s gonna set me back 60-80k USD for a 3-year gig, not even counting rent, food, and such. No part-time study, no boss footing the bill for me.
So, what’s the dealio? How much should I stash in my 401k and Roth IRA? Ease off now to save up for grad school, then crank up the contributions after the degree so I can cash in on that higher income? Whatcha think?
Later,
Savvy Saver
Response from THE MONEY MINDER:
Hello There,
Firstly, congratulations on graduating college and starting a new job! It’s great that you are already thinking about your financial future by considering your retirement savings and grad school expenses. Given your current situation and future plans, here’s a practical approach you can consider:
Since you have minimal expenses living rent-free with your parents and your major costs are related to your dog, gas, groceries, and student loans, you can allocate a significant portion of your income towards both your 401k and Roth IRA. While the general rule of thumb is to contribute 10-15% of your income to retirement savings, I suggest aiming to save around 20-25% in order to maximize your savings potential. Make sure to first pay off your student loans within the grace period with your saved money and then focus on hefty contributions to your retirement accounts.
Regarding saving up for grad school, it’s wise to prioritize this goal as well. You can start by setting aside a portion of your monthly income specifically earmarked for your future education expenses. By balancing your retirement savings and grad school savings, you can build a solid financial foundation for your future endeavors.
As you mentioned the possibility of increasing your contributions post-grad school when you have a higher income, that can be a strategic approach. You can reassess your financial situation at that time and adjust your savings accordingly.
In conclusion, a balanced approach that prioritizes both retirement savings and grad school expenses will set you on the right path towards financial security and achieving your future goals. Keep track of your expenses and savings diligently to ensure you are on target to meet your objectives. Best of luck with your financial journey!
Farewell from THE MONEY MINDER.
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