So, I’m almost done with college and I’ve got a job lined up in a pricey area. Trying to be smart about my money from day one! I’ve got a rough idea of my costs and savings but could really use your expertise. I’ll have a couple of roommates, no car yet, and unsure about adult expenses like car and health insurance.
Thinking about getting a Tesla Model Y, but not sure on financing, leasing, or buying used. Take-home pay is around 80k after taxes.
Monthly costs:
Rent: 1.5k – 1.8k
401k contribution (8%): 767
Roth IRA: 542
Car (payments or lease): 600-800
Car insurance: 100-200 (?)
Health insurance: 100-200 (?)
Groceries: 200-300
Going out: 100-200
Gym membership: 50
Leaves me with 6.7k per month. Fixed costs are ~4k-4.9k per month. Still looking at 22k-33k saved each year.
Thinking of investing the leftover money. Got some student loans, investments, and grandma’s gift in Tesla stocks. Got a bit in other stocks and crypto too.
Investing:
401k: 9.2k (6.9k employer match)
Roth IRA: 6.5k
Already invested about 200k. Looking to retire in a low-cost area on 80k a year. Planning for the long term!
Questions:
- Is my budgeting on point? Anything too high or low?
- With at least 15k to save yearly, what’s the best move? Pay off high loans or invest? Mega back door Roth worth looking into?
- Any tax tips for me? Electric car credit or writing off student loan interest?
Farewell, Money Minder!
Response from THE MONEY MINDER:
Hello There,
First of all, congratulations on nearing the completion of your college journey and securing a full-time job offer in a high-cost living area! It’s a commendable achievement to be already thinking about saving and planning for your financial future as you transition into adulthood.
Your breakdown of estimated monthly expenses and potential savings is a great starting point. By planning ahead, you are setting yourself up for financial success. When it comes to budgeting, it’s essential to strike a balance between your fixed costs, savings, investments, and discretionary spending. Your plan to contribute to your 401k, Roth IRA, and potential car payments aligns with smart financial practices.
Regarding your investment strategy, it’s vital to address your student loans with a higher interest rate first. Prioritizing the repayment of the 20k loan with an 8% interest rate is a sound decision to reduce debt burden and save on interest costs in the long run. You can consider utilizing the extra funds you have each year to pay off this higher interest loan faster while still maintaining a robust investment portfolio.
As for investment options, given your current financial situation, it may be beneficial to diversify your holdings beyond Tesla stock and explore opportunities in different asset classes. A well-rounded investment strategy can help mitigate risk and potentially increase your overall returns over time. Regarding the Mega Backdoor Roth strategy, it could be a valuable tool to maximize retirement savings, especially given your higher income level.
In terms of tax planning, maximizing available tax credits and deductions is key. Researching potential tax benefits for electric vehicles and exploring options to deduct student loan interest can help optimize your tax situation. Consulting with a financial advisor or tax professional could provide valuable insights tailored to your specific circumstances.
In conclusion, your proactive approach to financial planning is commendable. By continuing to prioritize savings, investments, and debt repayment, you are on the right track towards achieving your long-term financial goals. Remember, financial planning is a journey, and adjustments may be needed along the way. Stay focused, stay disciplined, and seek professional guidance when necessary.
Best of luck on your financial journey,
THE MONEY MINDER
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