‘I want to feel like I am being smart with my money but I also want to enjoy myself’: 21 years old and seeking input/advice on balancing financial responsibility with personal enjoyment. How can I achieve this?

Hi Money Minder,

I’m new to the whole money game, just started working two weeks ago. I make around 105k, including the signing bonus. I live in NC, so it’s not crazy expensive. Had some debt, 7.3k in student loans, and 5k owed to family and friends for moving. Paid off the 5k already, so now I’ve got 7.3k student loans left. Two of them have 3.5% APR, around 2.6k each, and the other one is 2.1k with 5% APR. My parents are terrible with money, so I want to do things differently. Here’s what I’m thinking – let me know if I’m on the right track or need to switch it up.

Started contributing 5% of each paycheck to a pretax 401k, company matches 3% for the first year. Not sure if I should go Roth 401k instead since they haven’t taken money out yet – any advice?

Planning on putting in 2k in HSA this year, maxing it out next year. Got the lowest health insurance since I’m young and healthy. Paying less than 100 bucks per month for both car and health insurance. Car’s paid off, so no worries there. It’s old, but I’m not picky with cars.

Thinking of starting a HYSA for emergencies, but not sure how much to put in each paycheck. Considering $200, but it’ll take forever to reach 3 months of expenses. Got around $2750 per paycheck after deductions, so could probably bump up the savings.

Also considering maxing out my Roth IRA. Still unsure whether to pay off the higher interest student loan or max out Roth IRA. The 5% doesn’t seem too bad compared to potential investment returns.

Might open a brokerage account eventually. Not sure if it’s just for long-term investing or if I could do more with it. Thoughts on that?

Struggling to find a balance between saving and having fun. Spending 40% on necessities, 25% on savings, and feeling weird about spending 35% on fun stuff. Should I save more and cut back on fun or is my plan solid enough?

Thanks for reading this long post. Only been diving into this for a week, just wanna make sure I’m doing it right!

Thanks,
Savvy Saver”

Response from THE MONEY MINDER:
Hello There,

Congratulations on starting your new job and taking the initiative to be financially responsible! It’s great that you are already thinking about your finances and planning for the future. It’s important to start off on the right foot, and it seems like you are well on your way to achieving financial stability.

In terms of your 401k, it’s understandable that you are contemplating between a pre-tax 401k and a Roth 401k. Since you are just starting out and making 105k, it might be beneficial for you to contribute to a pre-tax 401k to take advantage of the tax benefits now. As your income grows in the future, you can always revisit this decision and consider switching to a Roth 401k.

Your plan to contribute to an HSA is a wise decision, especially since you are young and healthy. Maxing it out next year is a good goal to aim for. Additionally, setting aside money for a high-yield savings account for emergencies is also a smart move. Aim to save at least 3 months of expenses, and then gradually increase this amount as you progress in your career.

When it comes to paying off debt versus investing in a Roth IRA, it’s a good idea to prioritize paying off high-interest debt like the 5% student loan first. While investing in the Roth IRA can provide long-term growth, eliminating high-interest debt will save you money in the long run.

As for opening a brokerage account, it can be a good idea for long-term investing. You can consider mirroring your Roth IRA investments or diversifying your portfolio further. Keep in mind that day trading can be risky, so focusing on a long-term investment strategy is recommended.

Balancing saving, spending, and investing can be challenging, but it’s important to find a balance that works for you. You may want to revisit your budget and see if there are areas where you can cut back on expenses to save more. Remember that it’s okay to treat yourself occasionally, as long as you are still prioritizing your financial goals.

Overall, it seems like you have a solid financial plan in place. Keep up the good work, and don’t hesitate to make adjustments as needed. All the best from THE MONEY MINDER on your financial journey!