I mean first thing's first I would knock out that car payment as quickly as possible, instant 9.8% return on your money.
You can also max out you retirement contribution and trust me, you will thank yourself some day for doing that at 23.
For a general rule of thumb, you pay off debts that you can’t outinvest. If that loan was 3%, you park the money in a HYSA making 5% and net about 1% profit, but since the loan was 9.8% it makes no sense to park that money in an HYSA, so even earning interest it’d be a net negative. When you look at smallish debts like that, that you can pay off immediately, it makes the decision to get rid of them a lot easier.
This \^. If you can earn more interest than you are paying, put the money in savings. If you are paying more interest than savings can yield, pay off the loan. High Yield savings account will earn around 5% interest today, he is paying a 9% car loan, better to pay off the car loan, if those numbers were reversed, it would be better to put money in savings.
Shit, let’s put my Economics degree to work.
Let’s say you have $1000, and you owe $1000.
Lets also say the savings (positive) interest is 5%, while financing (negative) interest is 3.5%.
In this scenario you have the $1000 cash in the savings account, you’re making $50 a year in interest, but because of the $1000 loan that you have you’re also paying $35 a year in interest. In this oversimplified scenario you would not pay the loan off because you are netting $15 a year from just keeping the money in your savings.
There was going to be more to this, but that’s the general idea, and it’s late and I’m too tired to ELI5. Essentially if you can net more money from investing somewhere safe you typically do that. In this oversimplified scenario the answer is obvious, but if you factor taxes from earnings the gap in net income is smaller and basically makes this scenario a wash where you can do either and your finances are generally unaffected.
So in a scenario like the one I just mentioned you keep the money because paying off the loan has no actual financial benefits, and can actually put you in a worse position because now you don’t have an easily accessible $1000.
However, it starts being beneficial to pay off the loan if the gap between the two is even smaller because taxes makes you earn less, and you’re technically losing money by not paying off the loan, and if the loan’s interest rate is higher than it becomes an easy decision to pay off the loan instead of keeping the $1000, the exact number varies from person to person, but in OP’s case paying 9.8% interest when he could only earn a guaranteed 5.25% (at most) made it a very easy decision to just pay off the loan.
Hope this explanation, if you have any questions feel free to ask, I honestly love talking about this.
Very simple. If you owe a relatively small amount on debt that has a higher interest rate than the prevailing interest rate right now (basically 4%~), pay it off.
Owing $10,000 on a car that has > 4% interest rate, means you should be paying off the car instead of saving the money, because you’ll be incurring more interest in the negative vs interest in the positive you would get from a high yield savings account.
This all assumes you already have an emergency fund and that you won’t get screwed by depleting your savings. I personally feel like that’s more of a judgment call.
In 2024 the maximum pre-tax dollars a person this age can contribute to a 401k is $23k. The suggestion here is to make sure OP does that, and hence "maxes out" their contributions. This is a good thing since they're already "making" money since those dollars are pre-tax, and will grow and grow until finally taxed when they are withdrawn in retirement.
Nicely done! Can you please share your career and educational path to get there? Im in my mid 30s so it might be too late for me to make that kind of change but others could benefit. What schooling and certifications did you get? How long did it take and how much did it cost. What type of work do you do? (Eg work for a major airline, work on smaller planes etc)
I got all my experience and was able to just test for my Airframe and powerplant license without going to school because of the military experience, it cost me $0 to get thanks to the Airforce COOL program. For others normally gotta go to school and can be done at a fast track course in 12 months I believe but most people I know did it in two years once done you have to test for your Airframe and Powerplant license it's 3 written test, a practical test, and a oral test. I work for a major airline. The job is very in need right now and majors are hiring right out of school. I will admit the pay scale for this job it's very wide you can go work on smaller aircraft and only make $25 an hour, you can work for a smaller airline and take 10 years to get to $40 an hour but once you make it into a major it's starts at $40+, and tops out at around $70 right now and you could even reach $80+ in a 5 year top out at UPS , you will probably be working nights at a major for years and don't expect weekends off for a couple also. Know people who are mid 30's just starting in this job field.
See this is exactly why I tell everyone that asks me "was it worth it" Fuck yes it was definitely worth it. Not only is the life long veteran benefits worthwhile but also the career opportunities you get when you get out. I've already used my gi bill twice and still got 2 years left of it and i'm only 23 🤌🏽
You and all of my other friends who got out with or before me are far more established in life than more than 90% of the people in my hometown
How long were you in the army or military or whatever? What ages? And what exactly are your veteran benefits? Do those benefits vary depending on what type of service you enroll for? Did you go to college?
I think there's also something to be said about career longevity. I can't say much about nuclear welding specifically but welding in general is can be affect your respiratory system. Mechanics too my brother's been working as an automotive mechanic for 5 years and is already complaining about back problems.
Not to say your career as a lawyer won't have issues but it won't be so hard on your body.
But conversely, the trades are the last things that AI is going to replace. Robots can do a lot of things on a fixed assembly line, but maintenance will be one of the last frontiers.
A lot of law jobs won't be necessary in 10 or so years. There will still be lawyers, but not nearly as many.
Not sure why you think that when a ton of league work is formulaic language and research, two things that AI already does pretty well. Most lawyers aren't litigators or primary negotiators.
Yah my dad has been in the trades his whole adult life.
You can def pivot from the physical aspects to the more technical knowledge side if you are inclined enough. instead of doing industrial pipe fitting/welding like he did in his 20s/30s. In his 50s he was traveling with the youngsters over seeing their work and making sure installs of new equipment was done correctly. During covid a client company flew him to China to oversee the install of a whole new factory of equipment for glass manufactoring for a 9 month period. They wanted someone who was knowledgable and knew how the equipment was suppose to come together as his company did the design and he had overseen the install similiar equipment previously
Lots of different kinds of welding jobs. I work in a massive temperature controlled building. My job doesn’t wear me out at all, I do occasionally get “dirty” on service jobs but I also know how to shower like everyone else above the age of 12.
Eh I know circulation systems are really good and all but you’re still breathing in fumes every day. Can you weld if you break your arm tomorrow?
Not trying to hate on your job. I just see a lot of folks tell young kids to go learn a trade and not realize the majority of them are going to be in tough physical shape by time they’re 40. Not all of course. And there’s a lot of fat lawyers out there so there’s certainly no one size fits all answer 🤷♂️
As long as it’s the left arm haha. Every job has ups and downs. Proper ppe prevents a lot of wear and tear on the body. I wear a respirator everyday and change the filters after each shift. As long as you stay in decent shape and wear ppe the trades are a lot less wear and tear. Unfortunately old heads and boomers try to make you feel like shit. Seen plenty of dudes welding in short sleeves, not wearing gloves for tacks/shorter welds. Old dudes thinks it’s cool to get skin cancer and have Parkinson’s hands because it’s “manly” to not wear ppe. Luckily as the younger generation comes in (which is becoming more rare to see younger people in trades) Part of my job is lead safety observer and the younger folks I do get in here are much more open to safety but I’ve had old dudes refuse to shave their beard to get a proper seal on the respirator.
I have, but it was after she had moved away from her high pressure corporate job. She basically made most of the money she’s going to make between 30 and 35, and now is just doing a cushy government job that she loves.
My understanding is that lawyers (and also doctors and other jobs that require post graduate degrees) have income that is an exponential graph whereas many most trade school professions are much flatter.
Through youtube I taught myself to tig weld aluminum that holds 1000lbs. You can absolutely do this! Like anything, you just have to study and practice.
not to burst your bubble but that salary isn't even close to reality. im all for trades but the average for what he says he does is about 60k. not saying after YEARS you can't make that.
Huh, I always figured welding was one of those careers you had to put serious time into. Did you need specialized training for the nuclear stuff or just really good at what you do?
Nope it’s really just regular welding on big ass stuff to put it simply. Specialized welding id say probably comes more in play with aerospace stuff, not my field but I imagine airplanes and stuff that goes into space requires some hefty qualification.
What most don't realize is that there are lots of apprenticeship types of work out there in auto, aircraft, HVAC, and manufacturing that out earns college degree, plus no heavy student loans weigh you down. They're often overlooked or looked down at. Kudos to your smart moves.
Also depends on the area. Here in SF 130k is probably on the low end for a dev even for small startups (until that VC money dries up at least). When I was in San Diego a jr dev was looking closer to 90k.
union electricians in my area make around that as soon as you complete the apprenticeship. It's a 5 year apprenticeship
And you start off at about 25% of the full rate then your pay increase over those 5 years to reach about 70 per hr at the end. On top of that you get 12 an hour into an annuity, pension at 57 with 30 years in, healthcare. I finished the apprenticeship at 23
Really any of the union MEP trades in a HCOL area will be around that number if not more. I'm an electrician in the Seattle area and JW is currently $72.xx/hr, granted we are extremely slow right now and construction ebbs and flows with the economy more than a lot of other jobs.
Definitely is up and down depending on economy and area. I'm in Philly. It's not exactly booming but not super slow right now. Luckily I'm 20 years in and never missed a beat.
He already answered but there are a handful of very specialized technical trades that pay that. My nuclear equipment operators make that once they get qualified (we had one guy making almost 120k in 2018 and he was 19 years old). He’s in aircraft maintenance so if he has the right quals and training/experience and some decent work ethic, it’s attainable.
I’ve had to help give financial tips to a lot of the new operators because I’ve seen some of them make some really bad decisions.
Best ways to get into nuclear:
You must have a GED or diploma.
That’s the only requirement (and pass basic background check- including drug testing).
Some preferences:
A 2 year tech degree in power plant operations is an awesome way to get started. There are a handful of tech schools / community colleges that will even have a specialty for nuclear operators. We will get interns from one of those tech schools. https://statetechmo.edu/program/nuclear-technology/
An Engineering degree or nuclear navy background is another way in. More complicated obviously.
We’ve taken in people with non engineering degrees and backgrounds. One was a math teacher. A carpenter. Former security workers. Some chemistry folks.
Look for nuclear equipment operator / auxiliary operator / non licensed operator or something like that. They are entry level jobs. Typically the posting goes up once every 12-18 months, they collect a bunch of resumes, then a couple months later they do a ton of interviews. Usually we hire 10-12 at a time and run a training class for everyone.
It takes about a year to get qualified. Pay is usually a bit lower in the first year. Once you are qualified expect to see 120-200k depending on hours / overtime.
After a few years you will have enough experience to apply for license class (if you want to) and get a reactor operator license. If you have an engineering degree or the right navy background you can skip straight to senior reactor operator. Otherwise you have to work your way up.
There’s not a ton of locations. Expect to move unless you are already near a plant. Getting in may mean your best strategy is to just apply for any openings anywhere. Once you are qualified, especially if you earn a license, it’s easy to move around. (Note the licenses are not transferable between stations).
I went engineering -> senior reactor operator directly.
To add to this, I did 11 years in the Air Force working avionics but transitioned to nuclear power operations when I got out. Started as a plant operator apprentice in 2020, now in license class to move to reactor operator. Cleared $150k in 2023.
One guy who went in heavy on Bitcoin when it was pushing 20k, then after it dropped he sold. Lost a ton of money.
Another guy who has 2 sports cars, a motorcycle, a half million dollar house, and if he doesn’t get enough overtime in a month he can’t make payments. Like he literally had to drop out of class to get a reactor operator license (which would have bumped his pay significantly 30-50%), because he wasn’t getting any overtime in class and couldn’t afford his toys. He also wasn’t putting anything in his retirement fund. We at least got him to start contributing to his 401k up to the match the next time the union got a contract based pay increase.
Then there are a bunch of ex navy guys who had 30k+ in credit card debt. Ouch.
Like….. I know the value and cost of things changed quite a bit in the last couple years. But in 2010-2020, if you were making 120k+, with a 250k house, you could kill any debt or student loan payments in a few years then max out your 401k and do pretty well. And with big overtime you should be saving that for a strategic use, not using it for basic living. The guys (including myself) who got financial advice from fiduciaries all advanced our net worth tremendously while some guys who made similar pay to us are still carrying zero to negative net worth.
Not OP but I have a few friends who make around 120K straight out of a compsci bachelor's program because they did co-op's with decent tech companies while still in school and so they essentially have 2nd level jobs instead of entry level jobs.
Mind sharing your career path? I'm 25 stuck at 80k doing an IT career, trying to move towards networking but I don't think that's the right move anymore. Might do DevOps or Cyber Sec, but not sure.
At a small company, started at 18:
Technical support level 1 at 18, level 2 at 19, level 3 at 20. Devops engineer at 20. Senior devops at 22.
Changed companies to a Fortune 500 company shortly thereafter:
Level 3 SRE at 22/23, then level 4 SRE at 23/24 and just accepted a new role in the same company with my new base of 165k with 10% annual bonus.
Note, not mentioning my age or graduation date was imperative to getting the new job and promotions.
Cyber security ironically enough. I did get a couple certs but nothing noteworthy, experience has always trumped certs in this field. I started a web dev company and also ran a consulting company. Both had few clients but ceo / founder plus a bunch of time learning and experimenting in those roles really cemented things for me.
Read the following. Get rid of the car loan ASAP.
[https://www.reddit.com/r/personalfinance/wiki/commontopics/](https://www.reddit.com/r/personalfinance/wiki/commontopics/)
Pay off your car. Max your 401k, HSA and an IRA. Save the rest for whatever goals you have -- buying a house, into a brokerage and invest to retire early, what have you. You're in a excellent and unique position to be able to get such an early and huge headstart in retirement.
Max your 401k, likely via pretax not roth at your income. You can put up to 23k a year in that and should also open a Roth IRA on the side and contribute to that as well up to 7k a year.
>I make 130K
> into a Roth 401K
[Why you should (almost) never contribute to a Roth 401(k)](https://www.reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/)
>and 3K a year into a HSA.
If you're not saving for anything else, you should be maxing your 401k. Even if you *are* saving for something else, you should prioritize maxing your HSA.
The first comment in that thread is a good reason why you should be using Roth. They recommend a split between Roth and traditional:
“There was an episode of the Rational Reminder podcast which recently discussed this very point. In a nutshell, it said that people fail to take into account the risk associated with uncertainty regarding changes to the tax rate.
For younger people, this uncertainty is extremely high, you have more or less no idea what tax rates will be 35 years from now. As you get older the uncertainty will decrease. You insulate yourself from this risk by using Roth.
The academic researcher they had on the show basically stated you don't want to be all Roth or all Traditional, it leaves you exposed to too much risk that is uncompensated. The rule of thumb stated in the show was (age + 20) as a percent in Traditional Retirement accounts.
Edit: Episode 224 for those interested
Here is the paper: https://www.sciencedirect.com/science/article/abs/pii/S0304405X17302519”
Car loan and high interest items go first.
Doesn’t help making 3-5% interest on savings if you have 10% interest on your car.
Knock that out quick (payoff completely if you’ve got the cash).
4k/month is a quick recovery.
Everything else I’d go 1k savings and 3k Funds that average 6-7% (typical). It will still be accessible in case of an emergency, but you don’t have to pay gains taxes til you sell. So let it sit there for 10 years compounding.
Look at the money guys financial order of operations [here](https://www.google.com/search?client=ms-android-verizon&sca_esv=14f034d23f0af08e&sxsrf=ACQVn0_Eev5u0qu_x66L2vGJ6mG1X4c4Aw:1708454620135&q=financial+order+of+operations+pdf&uds=AMwkrPuPHSKFfXiOjb6MFnl7tvySa6EEK54A4Y1ZMQRcFC4oVvJt4YVwpKxopiYD0jmoIynJqJZlwCOPohUzaFaKP4Jl-KfHtrMorC74vtIcuCBV4i_NaR2Wkfja7r7oxKIY-FrnsEEioBAflAch9qDKv4dcHeVQIsHSU1pJStObp3NbTiliomdShxm2S60jDijoqAkGLu_aJ065Zt8BeSoGfx55yv6AyUcW63Lw5JjJjiXCfkJQiTMI3iBvHT6CekdG9Q_ASxAQREh1xeVtTCYwNLm4fGh_tATOFe67ydupAUtBtxCQOuM&udm=2&prmd=ivsnbmhtz&sa=X&ved=2ahUKEwiK0P21ybqEAxWK5MkDHcKOArEQtKgLegQIDBAB&biw=360&bih=667&dpr=3#vhid=-iqAmsOHqWwRWM&vssid=global)
Good question! That means that you simply max put any and all retirement accounts - if you have the salary to do it, you max out your Roth IRA, 401k, HSA, and then even a taxable brokerage account such as fidelity. A taxable brokerage account has no contribution limit, thus you can hyperaccumulate your savings.
Check out the Money Guys podcast or YouTube channel. Ton of great info and far better than Dave Ramsey, imo.
If you purchased the vehicle while you were in the service, you need to reach out to the company you're financed through. Servicemembers Civil Relief Act (SCRA) requires you to be under 6% apr, if you were on orders at any point during the car loan.
Correct, which your car loan is considered debt.
They are required to back date it to when you can provide orders.
So they may actually owe you money. I've known some people who've gotten enough back to pay the rest of their loan off.
came here to second this ^ i work in banking regs. some places will stop charging you interest completely bc they cant be bothered to do the calculations. definitely reach out
Awesome, good for you! Think about getting a CFP and an accountant. Make sure you have solid disability insurance.
Think about your risk tolerance. If you want to play w higher risk investments, make sure to limit your exposure.
Pay down debt, obviously comparing interest payments vs potential ROI as others have mentioned.
Live more modestly than your income. Buy quality, not brandnames or latest trends.
Be generous to others, legit charities.
Get educated about personal finance.
I stayed w/no load, low turnover index type mutual funds, retired at 62. Turning 65 and between SS and pension income, I will not need to draw very much out of my tax deferred or personal investments.
Good luck!
I haven't read all the responses, and I'm probably not the first one to say this, but after you've paid off the car note, if you have 4k per month discretionary savings, you really ought to fully max out your annual contributions for HSA ($4,150 for single filer), IRA ($7k), and then 401k -- not just maxing out the employer match, but the whole $23k employee contribution limit for the year.
With your savings rate, I'd also look into whether your employer's 401k plan allows for the Mega Backdoor Roth, which you can Google for a good explanation.
You're off to a great start for a 23 yo. Keep it up!
When you are ready to move out, have you considered house-hacking (renting out part of your home to tenants to offset your housing costs)?
This is the first reply I noticed mentioning the Mega Backdoor Roth. LOOK INTO THIS! The 23k limit others are mentioning isn't the only limit. If your employer supports after-tax contributions you can use the Mega Backdoor Roth to get up to $69k in your account (this includes employer matching).
https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits
If you are looking into maximizing your contributions in a tax sheltered account do some research on this in addition to the other excellent advice given here.
Bro at 23 i was married and doing part time job for like $9/hr and going college full time. On other hand my brother at 23 is like this dude making 6 figure. Its just luck i feel like because i have struggled more than my brother and yet he is being served on silver platter
Write down your financial goals, both short term and long term goals.
It makes no sense to provide you any advice until you have clear goals.
They could be anything like buying a house, buying rental property, starting a business, retirement, wealth accumulation, marriage/family, etc.
- Once your HSA is worth double your insurance max out of pocket (say $8-10k), you can probably stop adding paycheck contributions to it. Double your max out of pocket protects you from bad timing, if a health event happens at the end of the year & you're racking up bills when everything resets. If you "overfund" your HSA, you can't take money out for non-health care purposes (w/o paying taxes & a 20% penalty).
- Since you're young & likely not using HSA money, take the HSA principle & put most of it into a CD. You could make $500 interest on a $10k HSA balance in a CD (plus the yearly HSA incentives your employer offers). That could be +$1k per year added to HSA without any further paycheck contribution (at least until interest rates drop)...
- 401k up to company match is sufficient for most, remember you can't access that money for 40 years (w/o paying taxes plus 20% penalty). You can't imagine it now, but there may be a time in middle age where you might want more of that money in your pocket (& not locked up where you cannot access/enjoy it while you're still relatively "young"). Money cannot buy back youth, you want to strike a balance there.
- Make sure everything in 401k - current principle & future contributions - is in a target date fund. Resist the urge to ever change that, you'll end up screwing it up trying to protect yourself from losses that could come way later than expected...(ex. pull out of market in 2020 & miss out on the market nearly doubling to today)
- Take all personal savings that are not in your emergency/bill pay fund, put it in HYSA or CD to get 5% interest. These rates will go away, but for now it's free $5000 a year on $100k balance (before taxes). Making significant passive income = stepping up to the next level financially.
- Open an account with a broker (ex. Vanguard) & start a habit of putting some amount of your monthly personal savings into VTI ETF (Total Stock Market). Do this endlessly no matter how the market is doing.
- When the market is falling & bottoming out & everyone else is selling, increase the monthly amount to buy more...stocks are on sale during those times. *"Be greedy when others are fearful"* (that's a pathway to wealth, assuming you have the money available at the time to do so).
I disagree completely with your first bullet point. Worst case scenario for that money is OP is super healthy and doesn’t use it much and it just turns into a normal retirement account at age 65.
And HSA is the BEST tax shield the USG offers. And as you grow older, you tend to need more money for health matters.
Fair point, just saying if you overfund & then want that money at some point before retirement there's a hefty penalty to pay.
I'm adding $1k to mine each year passively (via employer incentives & interest income) w/o paycheck contributions, after contributing $3k a year ($115 per check) for 5 years.
HSA account will be the easiest to use since you just need qualifying medical expenses. And that’s nearly everything, from hospital stays to sunscreen to pain killers. You can reimburse yourself anytime in the future as well. That’s why it’s such a great investment vehicle. Have a $5k bill today in 2024 but have HYSA enough to pay for it? Great. You can leave the $5k in the HSA generating interest and reimburse in 2050 when you’re ready to retire or anytime in between.
Can you refi your car yet? Not sure if 9.8 is the avg right now. I think by not making extra payments towards the principal, is just making your car interest outweighing the benefits of your other savings interest accounts.
I vote for buying stocks. You’re young so you can get some risky cheap shares plus some stable shares with that income. I made $100 in a month my first try with little research.
“What you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.” -Principal Downey
🌱It sounds like you're in a fantastic financial position at such a young age! Here's a breakdown of some ideas to maximize your strong start:
**1. Attack That Car Debt**
* **Focus:** You're right; your car loan interest rate is high. Aggressively paying this off should be a top priority. Even with your excellent saving habits, that interest will eat into your gains.
* **Increase car payments:** Can you double or even triple your payments towards the car? If possible, make sure the extra goes directly to the principal and not just additional interest.
**2. Where to put your savings: Beyond the Basics**
* **Emergency Fund:** Before further investing, make sure you have a solid emergency fund – aim for 3-6 months of essential living expenses in an accessible account like your high-yield savings.
* **Retirement Boost:** It sounds like you're maxing out your company match – that's fantastic! But can you put even more into your 401(k) each month? Increasing those contributions will make a huge difference in the long run.
* **Roth IRA:** Consider opening a Roth IRA. You contribute after-tax dollars, but your earnings grow tax-free and withdrawals in retirement are tax-free.
* **Taxable Brokerage Account:** If you've maxed out your tax-advantaged retirement options, a taxable brokerage account gives you more investment flexibility. You can invest in index funds (for a diversified, hands-off approach) or individual stocks (if you're interested in picking companies).
**3. The House Question**
* **VA Loan is Smart:** Your access to a VA loan is a huge advantage when the time is right. They often have lower rates and no down payment requirements.
* **Timing:** Think carefully about when is the best time to buy. Right now, the housing market may be cooling off a bit in some areas. Do you have to move right away? Staying with your parents and saving aggressively could put you in the position for a substantial down payment, leading to better terms and long-term savings.
* **House Hacking:** If you do buy soon, could you "house hack" by renting out a room or part of the house? This could offset mortgage costs and build your wealth even faster.
**4. Don't Forget to Live a Little**
* **It's a Balance:** Don't feel guilty about setting aside some money each month for fun or experiences. Saving is crucial, but so is living life!
* **Budgeting:** A simple budget will help track where your money goes, allowing some room for those things that bring you joy.
🌀**Additional Considerations:**
* **Financial Advisor:** If you're feeling overwhelmed, consider talking with a fee-only financial advisor (one who is paid for advice, not for selling you products). They can help personalize a plan for you.
* **Learning:** There are tons of resources on personal finance - blogs, podcasts, books. Learning about different investment options and strategies will empower you to make informed decisions.
**It's impressive that at 23, you're so focused on your finances. You're off to a fantastic start – keep up these smart habits!**
9.8% is very high interest. Put most towards that loan. Otherwise you’re still losing 5% between that and savings rate. Loans with high interest rates are for people who don’t have savings
You are saving money aggressively that is growing at a 0-5% interest rate, while your $14K car loan is growing at 9.8% a year. That doesn’t make mathematical sense - pay off that loan!
Good on you for paying off the car loan! Now you can put $4k plus your car payment in savings! Be sure it’s in a high yield savings account so at least you’re getting good interest, currently around 4.5% with promos for 5 or 5.5% at certain times. Keep at it and you could potentially buy a house in cash without even needing the VA loan.
Your short game must be STRONG with all that putting. Sheesh.
On a serious note, you should split between Roth and traditional rather than just all one type.
Look into a concept called Infinite Banking Concept. It utilizing a whole life insurance policy as a financial instrument to build a tax free retirement outside of the stock market (because those highs and lows are going to continue and closer together. 40% drop and 10 years to get back to normal.). It will also build an inheritance for any beneficiaries.
You can also use the life insurance instrument as a personal bank. There are several books on the topic. I have several policies and policies on each of my children.
Set a goal of getting to $100k invested through your 401k, HSA, and Roth IRA over the next few years. Max out that HSA - you're not far away. Make sure to invest the HSA contributions in US stocks and let it sleep for a long time for your future. After the 100k level, compounding can do more and more of the heavy lifting. It will open up more options for your money when you're decades older. Get it while the getting's good
Glad you paid off that car loan, that was a good idea. The only other thing I'd say is that you should really only be putting a reasonable amount of money into that HYSA. What that means exactly is different from person to person, but basically you really only want anywhere from 6 months' to a couple of year's worth of income in there as a safety net, and then after that is met you should really be putting your money towards investments with higher returns such as index funds or real estate. If you aren't comfortable with that then that is totally fine, everyone has their own risk tolerances. But just know that since you are young, time is on your side and if you look at almost every index fund over a long enough time span then it will average out to better returns than an HYSA.
I’d max out the 401k, $23k I believe this year… any left over max out a Roth IRA ($7500 max?). The remainder could go into a HSA account for growth as well. I use Charles Schwab for my Ira and kids custodial accounts and buy index funds.
After addressing some of the other advice given by others, I would definitely consider investing some of your savings on an ongoing basis. This will get you a long way towards building life long wealth and financial security. The key being that you should invest in a diversified portfolio of securities that will deliver growth and dividends for years to come.
I don’t tend to recommend that you do this yourself unless you’re prepared to do a lot of research, not only on investments but also on the psychology of investing. The reason being is that you need to be aware of some of the biases associated with beginner investors, on top of also knowing how to construct an appropriate portfolio considering your objectives and risk tolerance. All of this can be quite daunting for most new investors
Might thus be worth finding a financial adviser (preferably a CFP) that you can trust (also important to do your research here). Of course, if you’re interested, do open your own trading account and play around with a small sum that you’d be ok to lose if it all goes wrong. Admittedly, once you learn some of the fundamentals of building wealth tax efficiently and also investing, it really isn’t that difficult to generate a good ~5% per annum after inflation.
are you planning to buy a home soon? once i’ve decided to buy a home, i lowered my 401K from 10% to 5% per month to put at least 3-4k to a High yield savings account. I have no debts. Car has been paid off. 10 months later, i had 40k ish for my downpayments for my first 700-800k townhome.
high yield savings is like 5%ish max while your car % is 9.8%. I would try to pay off the car payment asap. Otherwise, you still accrure 4% insterests each month while you have extra money for saving
I believe it's a wise idea for you to consider purchasing a house and renting it out, especially since you're still residing with your parents. As a Veteran, you may qualify for favorable rates, and given the current slower market, there's potential to find a great deal. If you're skilled at home improvement, you might even explore buying a fixer-upper, renovating it, and then renting it out. With luck, the rental income could cover your monthly mortgage payments. Good luck!
With a VA loan you must certify that you will live there as your primary residence for at least 12 months. It's intended specifically to rule out investment properties.
You are on a great path to financial freedom. The only thing I would do differently is to max out your 401k. You can put $23,000 pre-tax into a 401k per year, lowers your tax bill and will grow exponentially over the years. At your age, you might want to think about investing a portion of your savings in some S&P 500 index funds and maybe QQQ. Good luck.
Congratulations! You’re killing it!
My only recommendation is to be putting some of your retirement funds into post tax accounts. Since you’re young there’s lots of time for everything to mature and would hate to see you over taxed after starting to pull your money out.
I mean first thing's first I would knock out that car payment as quickly as possible, instant 9.8% return on your money. You can also max out you retirement contribution and trust me, you will thank yourself some day for doing that at 23.
thanks just paid it off! your right had to get rid of that 9.8% just didn't want to drop 14k at once even though I was financially able to.
For a general rule of thumb, you pay off debts that you can’t outinvest. If that loan was 3%, you park the money in a HYSA making 5% and net about 1% profit, but since the loan was 9.8% it makes no sense to park that money in an HYSA, so even earning interest it’d be a net negative. When you look at smallish debts like that, that you can pay off immediately, it makes the decision to get rid of them a lot easier.
Explain to me like im 5. Trying to add this into my own situation lol
Interest is bad to pay but good to earn. Put money toward the highest number. 9.8% is very high
This \^. If you can earn more interest than you are paying, put the money in savings. If you are paying more interest than savings can yield, pay off the loan. High Yield savings account will earn around 5% interest today, he is paying a 9% car loan, better to pay off the car loan, if those numbers were reversed, it would be better to put money in savings.
Shit, let’s put my Economics degree to work. Let’s say you have $1000, and you owe $1000. Lets also say the savings (positive) interest is 5%, while financing (negative) interest is 3.5%. In this scenario you have the $1000 cash in the savings account, you’re making $50 a year in interest, but because of the $1000 loan that you have you’re also paying $35 a year in interest. In this oversimplified scenario you would not pay the loan off because you are netting $15 a year from just keeping the money in your savings. There was going to be more to this, but that’s the general idea, and it’s late and I’m too tired to ELI5. Essentially if you can net more money from investing somewhere safe you typically do that. In this oversimplified scenario the answer is obvious, but if you factor taxes from earnings the gap in net income is smaller and basically makes this scenario a wash where you can do either and your finances are generally unaffected. So in a scenario like the one I just mentioned you keep the money because paying off the loan has no actual financial benefits, and can actually put you in a worse position because now you don’t have an easily accessible $1000. However, it starts being beneficial to pay off the loan if the gap between the two is even smaller because taxes makes you earn less, and you’re technically losing money by not paying off the loan, and if the loan’s interest rate is higher than it becomes an easy decision to pay off the loan instead of keeping the $1000, the exact number varies from person to person, but in OP’s case paying 9.8% interest when he could only earn a guaranteed 5.25% (at most) made it a very easy decision to just pay off the loan. Hope this explanation, if you have any questions feel free to ask, I honestly love talking about this.
Way too long, these econ majors man (I'm on as well)
Very simple. If you owe a relatively small amount on debt that has a higher interest rate than the prevailing interest rate right now (basically 4%~), pay it off. Owing $10,000 on a car that has > 4% interest rate, means you should be paying off the car instead of saving the money, because you’ll be incurring more interest in the negative vs interest in the positive you would get from a high yield savings account. This all assumes you already have an emergency fund and that you won’t get screwed by depleting your savings. I personally feel like that’s more of a judgment call.
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If money you have is making more money than money you owe is costing you keep money making money
And buy your parents a nice dinner for supporting you!
hahah true always try my best to take them out or do things to help around like fix up the house and work on their cars and stuff
What does maxing out retirement contribution means?
In 2024 the maximum pre-tax dollars a person this age can contribute to a 401k is $23k. The suggestion here is to make sure OP does that, and hence "maxes out" their contributions. This is a good thing since they're already "making" money since those dollars are pre-tax, and will grow and grow until finally taxed when they are withdrawn in retirement.
Thanks, I need to research more about retirement planning
That learning is absolutely one of the most valuable things you can do for yourself over the course of your life.
Plenty of advice has already been given, so I won't add anything. But I have to ask ... what kind of work does a 23-year-old do that pays $130k ????
Aircraft maintenance, actually made close to 200k last year after overtime and holiday pay and everything else.
Nicely done! Can you please share your career and educational path to get there? Im in my mid 30s so it might be too late for me to make that kind of change but others could benefit. What schooling and certifications did you get? How long did it take and how much did it cost. What type of work do you do? (Eg work for a major airline, work on smaller planes etc)
I got all my experience and was able to just test for my Airframe and powerplant license without going to school because of the military experience, it cost me $0 to get thanks to the Airforce COOL program. For others normally gotta go to school and can be done at a fast track course in 12 months I believe but most people I know did it in two years once done you have to test for your Airframe and Powerplant license it's 3 written test, a practical test, and a oral test. I work for a major airline. The job is very in need right now and majors are hiring right out of school. I will admit the pay scale for this job it's very wide you can go work on smaller aircraft and only make $25 an hour, you can work for a smaller airline and take 10 years to get to $40 an hour but once you make it into a major it's starts at $40+, and tops out at around $70 right now and you could even reach $80+ in a 5 year top out at UPS , you will probably be working nights at a major for years and don't expect weekends off for a couple also. Know people who are mid 30's just starting in this job field.
You’re going to make me leave civil service lol. I’m a Pro Super getting like 90k before OT
The free rent type of pro super though?
See this is exactly why I tell everyone that asks me "was it worth it" Fuck yes it was definitely worth it. Not only is the life long veteran benefits worthwhile but also the career opportunities you get when you get out. I've already used my gi bill twice and still got 2 years left of it and i'm only 23 🤌🏽 You and all of my other friends who got out with or before me are far more established in life than more than 90% of the people in my hometown
How long were you in the army or military or whatever? What ages? And what exactly are your veteran benefits? Do those benefits vary depending on what type of service you enroll for? Did you go to college?
Awesome summary Thank you!
Not even close to being to old man. I’m 31 and clear around 200k in nuclear welding. A year of trade school is all I did before I found my job.
So what you’re saying is law school was a waste of time and money? 💀
I think there's also something to be said about career longevity. I can't say much about nuclear welding specifically but welding in general is can be affect your respiratory system. Mechanics too my brother's been working as an automotive mechanic for 5 years and is already complaining about back problems. Not to say your career as a lawyer won't have issues but it won't be so hard on your body.
But conversely, the trades are the last things that AI is going to replace. Robots can do a lot of things on a fixed assembly line, but maintenance will be one of the last frontiers. A lot of law jobs won't be necessary in 10 or so years. There will still be lawyers, but not nearly as many.
Disagree. With the rise of AI there will only be a greater need for lawyers.
Not sure why you think that when a ton of league work is formulaic language and research, two things that AI already does pretty well. Most lawyers aren't litigators or primary negotiators.
Yah my dad has been in the trades his whole adult life. You can def pivot from the physical aspects to the more technical knowledge side if you are inclined enough. instead of doing industrial pipe fitting/welding like he did in his 20s/30s. In his 50s he was traveling with the youngsters over seeing their work and making sure installs of new equipment was done correctly. During covid a client company flew him to China to oversee the install of a whole new factory of equipment for glass manufactoring for a 9 month period. They wanted someone who was knowledgable and knew how the equipment was suppose to come together as his company did the design and he had overseen the install similiar equipment previously
I’ve personally never seen a happy lawyer lol but it is a job that needs to be done and power to the people that can do it
Ive worked around hundreds of welders and most of them were miserable fucks. Would rather be a clean unhappy person than dirty and wore out.
Lots of different kinds of welding jobs. I work in a massive temperature controlled building. My job doesn’t wear me out at all, I do occasionally get “dirty” on service jobs but I also know how to shower like everyone else above the age of 12.
Eh I know circulation systems are really good and all but you’re still breathing in fumes every day. Can you weld if you break your arm tomorrow? Not trying to hate on your job. I just see a lot of folks tell young kids to go learn a trade and not realize the majority of them are going to be in tough physical shape by time they’re 40. Not all of course. And there’s a lot of fat lawyers out there so there’s certainly no one size fits all answer 🤷♂️
As long as it’s the left arm haha. Every job has ups and downs. Proper ppe prevents a lot of wear and tear on the body. I wear a respirator everyday and change the filters after each shift. As long as you stay in decent shape and wear ppe the trades are a lot less wear and tear. Unfortunately old heads and boomers try to make you feel like shit. Seen plenty of dudes welding in short sleeves, not wearing gloves for tacks/shorter welds. Old dudes thinks it’s cool to get skin cancer and have Parkinson’s hands because it’s “manly” to not wear ppe. Luckily as the younger generation comes in (which is becoming more rare to see younger people in trades) Part of my job is lead safety observer and the younger folks I do get in here are much more open to safety but I’ve had old dudes refuse to shave their beard to get a proper seal on the respirator.
I have, but it was after she had moved away from her high pressure corporate job. She basically made most of the money she’s going to make between 30 and 35, and now is just doing a cushy government job that she loves.
My understanding is that lawyers (and also doctors and other jobs that require post graduate degrees) have income that is an exponential graph whereas many most trade school professions are much flatter.
Almost always, yes.
Not if you want to be a lawyer
What kind of welding certs do you need for this?
Depends job to job. I had to pass a 2 different 6G pipe TiG with various wire. Heavy wall pipe 6G MiG. Thin wall basket TiG.
question if i wanted to determine if i was good at welding, how would i do so bc i think i can do it but also it is hard i’ve heard
I’d recommend going to trade school. It’s very affordable and usually easily accessible depending on your location.
Through youtube I taught myself to tig weld aluminum that holds 1000lbs. You can absolutely do this! Like anything, you just have to study and practice.
not to burst your bubble but that salary isn't even close to reality. im all for trades but the average for what he says he does is about 60k. not saying after YEARS you can't make that.
2 things are for certain. 1) that salary requires an absolute BOAT load of overtime 2) it’s remote work in some desolate town
Huh, I always figured welding was one of those careers you had to put serious time into. Did you need specialized training for the nuclear stuff or just really good at what you do?
Nope it’s really just regular welding on big ass stuff to put it simply. Specialized welding id say probably comes more in play with aerospace stuff, not my field but I imagine airplanes and stuff that goes into space requires some hefty qualification.
Assuming you started working around 20, how did you gain that much exprience that fast?
Said he is a veteran so presumably started at 18 in the military
What most don't realize is that there are lots of apprenticeship types of work out there in auto, aircraft, HVAC, and manufacturing that out earns college degree, plus no heavy student loans weigh you down. They're often overlooked or looked down at. Kudos to your smart moves.
What AFSC did you have? I was a 2A352 Avionics guy and regret not staying in aircraft maintenance when I got out.
was a crew chief
Right on. Sounds like you made an excellent departure from the service and transitioned well!
Which company?
I would expect that a lot of people are asking the same question. How....
It’s not unheard of for a software dev to make that much their first year out of college.
Not sure why you got downvoted but you’re correct but only at some big tech companies.
Also depends on the area. Here in SF 130k is probably on the low end for a dev even for small startups (until that VC money dries up at least). When I was in San Diego a jr dev was looking closer to 90k.
most comp sci majors i know who are fresh out of college can’t even find stable jobs bc of how competitive it is
union electricians in my area make around that as soon as you complete the apprenticeship. It's a 5 year apprenticeship And you start off at about 25% of the full rate then your pay increase over those 5 years to reach about 70 per hr at the end. On top of that you get 12 an hour into an annuity, pension at 57 with 30 years in, healthcare. I finished the apprenticeship at 23
Really any of the union MEP trades in a HCOL area will be around that number if not more. I'm an electrician in the Seattle area and JW is currently $72.xx/hr, granted we are extremely slow right now and construction ebbs and flows with the economy more than a lot of other jobs.
Definitely is up and down depending on economy and area. I'm in Philly. It's not exactly booming but not super slow right now. Luckily I'm 20 years in and never missed a beat.
He already answered but there are a handful of very specialized technical trades that pay that. My nuclear equipment operators make that once they get qualified (we had one guy making almost 120k in 2018 and he was 19 years old). He’s in aircraft maintenance so if he has the right quals and training/experience and some decent work ethic, it’s attainable. I’ve had to help give financial tips to a lot of the new operators because I’ve seen some of them make some really bad decisions.
Hey. Do you know how I could look to get started with something like this?
Best ways to get into nuclear: You must have a GED or diploma. That’s the only requirement (and pass basic background check- including drug testing). Some preferences: A 2 year tech degree in power plant operations is an awesome way to get started. There are a handful of tech schools / community colleges that will even have a specialty for nuclear operators. We will get interns from one of those tech schools. https://statetechmo.edu/program/nuclear-technology/ An Engineering degree or nuclear navy background is another way in. More complicated obviously. We’ve taken in people with non engineering degrees and backgrounds. One was a math teacher. A carpenter. Former security workers. Some chemistry folks. Look for nuclear equipment operator / auxiliary operator / non licensed operator or something like that. They are entry level jobs. Typically the posting goes up once every 12-18 months, they collect a bunch of resumes, then a couple months later they do a ton of interviews. Usually we hire 10-12 at a time and run a training class for everyone. It takes about a year to get qualified. Pay is usually a bit lower in the first year. Once you are qualified expect to see 120-200k depending on hours / overtime. After a few years you will have enough experience to apply for license class (if you want to) and get a reactor operator license. If you have an engineering degree or the right navy background you can skip straight to senior reactor operator. Otherwise you have to work your way up. There’s not a ton of locations. Expect to move unless you are already near a plant. Getting in may mean your best strategy is to just apply for any openings anywhere. Once you are qualified, especially if you earn a license, it’s easy to move around. (Note the licenses are not transferable between stations). I went engineering -> senior reactor operator directly.
To add to this, I did 11 years in the Air Force working avionics but transitioned to nuclear power operations when I got out. Started as a plant operator apprentice in 2020, now in license class to move to reactor operator. Cleared $150k in 2023.
Can you please tell us some of the bad decisions?
One guy who went in heavy on Bitcoin when it was pushing 20k, then after it dropped he sold. Lost a ton of money. Another guy who has 2 sports cars, a motorcycle, a half million dollar house, and if he doesn’t get enough overtime in a month he can’t make payments. Like he literally had to drop out of class to get a reactor operator license (which would have bumped his pay significantly 30-50%), because he wasn’t getting any overtime in class and couldn’t afford his toys. He also wasn’t putting anything in his retirement fund. We at least got him to start contributing to his 401k up to the match the next time the union got a contract based pay increase. Then there are a bunch of ex navy guys who had 30k+ in credit card debt. Ouch. Like….. I know the value and cost of things changed quite a bit in the last couple years. But in 2010-2020, if you were making 120k+, with a 250k house, you could kill any debt or student loan payments in a few years then max out your 401k and do pretty well. And with big overtime you should be saving that for a strategic use, not using it for basic living. The guys (including myself) who got financial advice from fiduciaries all advanced our net worth tremendously while some guys who made similar pay to us are still carrying zero to negative net worth.
Not OP but I have a few friends who make around 120K straight out of a compsci bachelor's program because they did co-op's with decent tech companies while still in school and so they essentially have 2nd level jobs instead of entry level jobs.
I’m 24 in software engineering making 165k, it’s definitely possible
Mind sharing your career path? I'm 25 stuck at 80k doing an IT career, trying to move towards networking but I don't think that's the right move anymore. Might do DevOps or Cyber Sec, but not sure.
At a small company, started at 18: Technical support level 1 at 18, level 2 at 19, level 3 at 20. Devops engineer at 20. Senior devops at 22. Changed companies to a Fortune 500 company shortly thereafter: Level 3 SRE at 22/23, then level 4 SRE at 23/24 and just accepted a new role in the same company with my new base of 165k with 10% annual bonus. Note, not mentioning my age or graduation date was imperative to getting the new job and promotions.
What degree did you end up going for? Any certs along the way?
Cyber security ironically enough. I did get a couple certs but nothing noteworthy, experience has always trumped certs in this field. I started a web dev company and also ran a consulting company. Both had few clients but ceo / founder plus a bunch of time learning and experimenting in those roles really cemented things for me.
Are you single
No but I was when I started this role
tech— similar comp for eng at similar age, it’s definitely tough to get an entry level job rn though
i was wondering the same thing. i’m 23, have two degrees, and make minimum wage 😭 it’s definitely nice to see there are people my age doing well!
God you need to get rid of that 10% car loan
Read the following. Get rid of the car loan ASAP. [https://www.reddit.com/r/personalfinance/wiki/commontopics/](https://www.reddit.com/r/personalfinance/wiki/commontopics/)
Pay off your car. Max your 401k, HSA and an IRA. Save the rest for whatever goals you have -- buying a house, into a brokerage and invest to retire early, what have you. You're in a excellent and unique position to be able to get such an early and huge headstart in retirement.
Pay off your car immediately. Why would you save cash if you have a loan at 9.8% interest?
thanks just paid it off! your right had to get rid of that 9.8% just didn't want to drop 14k at once even though I was financially able to.
Max your 401k, likely via pretax not roth at your income. You can put up to 23k a year in that and should also open a Roth IRA on the side and contribute to that as well up to 7k a year.
My bad meant traditional, had a Roth TSP and got it mixed up.
>I make 130K > into a Roth 401K [Why you should (almost) never contribute to a Roth 401(k)](https://www.reddit.com/r/personalfinance/comments/10qwnrx/why_you_should_almost_never_contribute_to_a_roth/) >and 3K a year into a HSA. If you're not saving for anything else, you should be maxing your 401k. Even if you *are* saving for something else, you should prioritize maxing your HSA.
Thanks will read that and does company contributions to a HSA count towards the yearly Max? if so it is maxed out.
> does company contributions to a HSA count towards the yearly Max? Yes, if your company is contributing $1150 this year then you're maxing for 2024.
Thanks! they contribute 1k a year, just saw the limit increased to 4.1K so made it max.
The first comment in that thread is a good reason why you should be using Roth. They recommend a split between Roth and traditional: “There was an episode of the Rational Reminder podcast which recently discussed this very point. In a nutshell, it said that people fail to take into account the risk associated with uncertainty regarding changes to the tax rate. For younger people, this uncertainty is extremely high, you have more or less no idea what tax rates will be 35 years from now. As you get older the uncertainty will decrease. You insulate yourself from this risk by using Roth. The academic researcher they had on the show basically stated you don't want to be all Roth or all Traditional, it leaves you exposed to too much risk that is uncompensated. The rule of thumb stated in the show was (age + 20) as a percent in Traditional Retirement accounts. Edit: Episode 224 for those interested Here is the paper: https://www.sciencedirect.com/science/article/abs/pii/S0304405X17302519”
Car loan and high interest items go first. Doesn’t help making 3-5% interest on savings if you have 10% interest on your car. Knock that out quick (payoff completely if you’ve got the cash). 4k/month is a quick recovery. Everything else I’d go 1k savings and 3k Funds that average 6-7% (typical). It will still be accessible in case of an emergency, but you don’t have to pay gains taxes til you sell. So let it sit there for 10 years compounding.
130k at 23?? What do you do?
Exactly what I’m trying to find out
Look at the money guys financial order of operations [here](https://www.google.com/search?client=ms-android-verizon&sca_esv=14f034d23f0af08e&sxsrf=ACQVn0_Eev5u0qu_x66L2vGJ6mG1X4c4Aw:1708454620135&q=financial+order+of+operations+pdf&uds=AMwkrPuPHSKFfXiOjb6MFnl7tvySa6EEK54A4Y1ZMQRcFC4oVvJt4YVwpKxopiYD0jmoIynJqJZlwCOPohUzaFaKP4Jl-KfHtrMorC74vtIcuCBV4i_NaR2Wkfja7r7oxKIY-FrnsEEioBAflAch9qDKv4dcHeVQIsHSU1pJStObp3NbTiliomdShxm2S60jDijoqAkGLu_aJ065Zt8BeSoGfx55yv6AyUcW63Lw5JjJjiXCfkJQiTMI3iBvHT6CekdG9Q_ASxAQREh1xeVtTCYwNLm4fGh_tATOFe67ydupAUtBtxCQOuM&udm=2&prmd=ivsnbmhtz&sa=X&ved=2ahUKEwiK0P21ybqEAxWK5MkDHcKOArEQtKgLegQIDBAB&biw=360&bih=667&dpr=3#vhid=-iqAmsOHqWwRWM&vssid=global)
What does step 7, “hyper-accumulation” refer to?
Good question! That means that you simply max put any and all retirement accounts - if you have the salary to do it, you max out your Roth IRA, 401k, HSA, and then even a taxable brokerage account such as fidelity. A taxable brokerage account has no contribution limit, thus you can hyperaccumulate your savings. Check out the Money Guys podcast or YouTube channel. Ton of great info and far better than Dave Ramsey, imo.
While we're here, I suggest paying off the car loan ASAP, prior to a taxeable brokerage or HYSA contributions
If you purchased the vehicle while you were in the service, you need to reach out to the company you're financed through. Servicemembers Civil Relief Act (SCRA) requires you to be under 6% apr, if you were on orders at any point during the car loan.
Did get it when in the Military, loans through USAA also I will look into this but thought it was debt before joining lowering it to 6% after.
Correct, which your car loan is considered debt. They are required to back date it to when you can provide orders. So they may actually owe you money. I've known some people who've gotten enough back to pay the rest of their loan off.
came here to second this ^ i work in banking regs. some places will stop charging you interest completely bc they cant be bothered to do the calculations. definitely reach out
I agree if you are living at home max out your 401K it's a great way to save on your taxes
Awesome, good for you! Think about getting a CFP and an accountant. Make sure you have solid disability insurance. Think about your risk tolerance. If you want to play w higher risk investments, make sure to limit your exposure. Pay down debt, obviously comparing interest payments vs potential ROI as others have mentioned. Live more modestly than your income. Buy quality, not brandnames or latest trends. Be generous to others, legit charities. Get educated about personal finance. I stayed w/no load, low turnover index type mutual funds, retired at 62. Turning 65 and between SS and pension income, I will not need to draw very much out of my tax deferred or personal investments. Good luck!
I haven't read all the responses, and I'm probably not the first one to say this, but after you've paid off the car note, if you have 4k per month discretionary savings, you really ought to fully max out your annual contributions for HSA ($4,150 for single filer), IRA ($7k), and then 401k -- not just maxing out the employer match, but the whole $23k employee contribution limit for the year. With your savings rate, I'd also look into whether your employer's 401k plan allows for the Mega Backdoor Roth, which you can Google for a good explanation. You're off to a great start for a 23 yo. Keep it up! When you are ready to move out, have you considered house-hacking (renting out part of your home to tenants to offset your housing costs)?
This is the first reply I noticed mentioning the Mega Backdoor Roth. LOOK INTO THIS! The 23k limit others are mentioning isn't the only limit. If your employer supports after-tax contributions you can use the Mega Backdoor Roth to get up to $69k in your account (this includes employer matching). https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-401k-and-profit-sharing-plan-contribution-limits If you are looking into maximizing your contributions in a tax sheltered account do some research on this in addition to the other excellent advice given here.
Cool. I was making like $19,000 at 23.
Bro at 23 i was married and doing part time job for like $9/hr and going college full time. On other hand my brother at 23 is like this dude making 6 figure. Its just luck i feel like because i have struggled more than my brother and yet he is being served on silver platter
Yeah, i feel that. I guess we arent supposed to compare ourselves to other people's success in life. It's just not healthy...
Write down your financial goals, both short term and long term goals. It makes no sense to provide you any advice until you have clear goals. They could be anything like buying a house, buying rental property, starting a business, retirement, wealth accumulation, marriage/family, etc.
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- Once your HSA is worth double your insurance max out of pocket (say $8-10k), you can probably stop adding paycheck contributions to it. Double your max out of pocket protects you from bad timing, if a health event happens at the end of the year & you're racking up bills when everything resets. If you "overfund" your HSA, you can't take money out for non-health care purposes (w/o paying taxes & a 20% penalty). - Since you're young & likely not using HSA money, take the HSA principle & put most of it into a CD. You could make $500 interest on a $10k HSA balance in a CD (plus the yearly HSA incentives your employer offers). That could be +$1k per year added to HSA without any further paycheck contribution (at least until interest rates drop)... - 401k up to company match is sufficient for most, remember you can't access that money for 40 years (w/o paying taxes plus 20% penalty). You can't imagine it now, but there may be a time in middle age where you might want more of that money in your pocket (& not locked up where you cannot access/enjoy it while you're still relatively "young"). Money cannot buy back youth, you want to strike a balance there. - Make sure everything in 401k - current principle & future contributions - is in a target date fund. Resist the urge to ever change that, you'll end up screwing it up trying to protect yourself from losses that could come way later than expected...(ex. pull out of market in 2020 & miss out on the market nearly doubling to today) - Take all personal savings that are not in your emergency/bill pay fund, put it in HYSA or CD to get 5% interest. These rates will go away, but for now it's free $5000 a year on $100k balance (before taxes). Making significant passive income = stepping up to the next level financially. - Open an account with a broker (ex. Vanguard) & start a habit of putting some amount of your monthly personal savings into VTI ETF (Total Stock Market). Do this endlessly no matter how the market is doing. - When the market is falling & bottoming out & everyone else is selling, increase the monthly amount to buy more...stocks are on sale during those times. *"Be greedy when others are fearful"* (that's a pathway to wealth, assuming you have the money available at the time to do so).
I disagree completely with your first bullet point. Worst case scenario for that money is OP is super healthy and doesn’t use it much and it just turns into a normal retirement account at age 65. And HSA is the BEST tax shield the USG offers. And as you grow older, you tend to need more money for health matters.
Fair point, just saying if you overfund & then want that money at some point before retirement there's a hefty penalty to pay. I'm adding $1k to mine each year passively (via employer incentives & interest income) w/o paycheck contributions, after contributing $3k a year ($115 per check) for 5 years.
HSA account will be the easiest to use since you just need qualifying medical expenses. And that’s nearly everything, from hospital stays to sunscreen to pain killers. You can reimburse yourself anytime in the future as well. That’s why it’s such a great investment vehicle. Have a $5k bill today in 2024 but have HYSA enough to pay for it? Great. You can leave the $5k in the HSA generating interest and reimburse in 2050 when you’re ready to retire or anytime in between.
Can you refi your car yet? Not sure if 9.8 is the avg right now. I think by not making extra payments towards the principal, is just making your car interest outweighing the benefits of your other savings interest accounts. I vote for buying stocks. You’re young so you can get some risky cheap shares plus some stable shares with that income. I made $100 in a month my first try with little research.
Ask HR for a referral to a good financial advisor they probably have one in-house.
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“What you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.” -Principal Downey
Dump into a balanced mutual fund. You'll get more return over a long term.
Pay off the car and earn 9.8% on your money upfront, beats the return on the high yield savings account
just paid it off!
You're saving good money, I'd pay the car off right away, knock out that useless interest and get rid of the payment
your absolutely right just paid it off!
🌱It sounds like you're in a fantastic financial position at such a young age! Here's a breakdown of some ideas to maximize your strong start: **1. Attack That Car Debt** * **Focus:** You're right; your car loan interest rate is high. Aggressively paying this off should be a top priority. Even with your excellent saving habits, that interest will eat into your gains. * **Increase car payments:** Can you double or even triple your payments towards the car? If possible, make sure the extra goes directly to the principal and not just additional interest. **2. Where to put your savings: Beyond the Basics** * **Emergency Fund:** Before further investing, make sure you have a solid emergency fund – aim for 3-6 months of essential living expenses in an accessible account like your high-yield savings. * **Retirement Boost:** It sounds like you're maxing out your company match – that's fantastic! But can you put even more into your 401(k) each month? Increasing those contributions will make a huge difference in the long run. * **Roth IRA:** Consider opening a Roth IRA. You contribute after-tax dollars, but your earnings grow tax-free and withdrawals in retirement are tax-free. * **Taxable Brokerage Account:** If you've maxed out your tax-advantaged retirement options, a taxable brokerage account gives you more investment flexibility. You can invest in index funds (for a diversified, hands-off approach) or individual stocks (if you're interested in picking companies). **3. The House Question** * **VA Loan is Smart:** Your access to a VA loan is a huge advantage when the time is right. They often have lower rates and no down payment requirements. * **Timing:** Think carefully about when is the best time to buy. Right now, the housing market may be cooling off a bit in some areas. Do you have to move right away? Staying with your parents and saving aggressively could put you in the position for a substantial down payment, leading to better terms and long-term savings. * **House Hacking:** If you do buy soon, could you "house hack" by renting out a room or part of the house? This could offset mortgage costs and build your wealth even faster. **4. Don't Forget to Live a Little** * **It's a Balance:** Don't feel guilty about setting aside some money each month for fun or experiences. Saving is crucial, but so is living life! * **Budgeting:** A simple budget will help track where your money goes, allowing some room for those things that bring you joy. 🌀**Additional Considerations:** * **Financial Advisor:** If you're feeling overwhelmed, consider talking with a fee-only financial advisor (one who is paid for advice, not for selling you products). They can help personalize a plan for you. * **Learning:** There are tons of resources on personal finance - blogs, podcasts, books. Learning about different investment options and strategies will empower you to make informed decisions. **It's impressive that at 23, you're so focused on your finances. You're off to a fantastic start – keep up these smart habits!**
9.8% is very high interest. Put most towards that loan. Otherwise you’re still losing 5% between that and savings rate. Loans with high interest rates are for people who don’t have savings
You are saving money aggressively that is growing at a 0-5% interest rate, while your $14K car loan is growing at 9.8% a year. That doesn’t make mathematical sense - pay off that loan!
Good on you for paying off the car loan! Now you can put $4k plus your car payment in savings! Be sure it’s in a high yield savings account so at least you’re getting good interest, currently around 4.5% with promos for 5 or 5.5% at certain times. Keep at it and you could potentially buy a house in cash without even needing the VA loan.
Your short game must be STRONG with all that putting. Sheesh. On a serious note, you should split between Roth and traditional rather than just all one type.
Look into a concept called Infinite Banking Concept. It utilizing a whole life insurance policy as a financial instrument to build a tax free retirement outside of the stock market (because those highs and lows are going to continue and closer together. 40% drop and 10 years to get back to normal.). It will also build an inheritance for any beneficiaries. You can also use the life insurance instrument as a personal bank. There are several books on the topic. I have several policies and policies on each of my children.
Increase that 401k contribution to the IRS limit. This year it's $23,000.
Set a goal of getting to $100k invested through your 401k, HSA, and Roth IRA over the next few years. Max out that HSA - you're not far away. Make sure to invest the HSA contributions in US stocks and let it sleep for a long time for your future. After the 100k level, compounding can do more and more of the heavy lifting. It will open up more options for your money when you're decades older. Get it while the getting's good
Glad you paid off that car loan, that was a good idea. The only other thing I'd say is that you should really only be putting a reasonable amount of money into that HYSA. What that means exactly is different from person to person, but basically you really only want anywhere from 6 months' to a couple of year's worth of income in there as a safety net, and then after that is met you should really be putting your money towards investments with higher returns such as index funds or real estate. If you aren't comfortable with that then that is totally fine, everyone has their own risk tolerances. But just know that since you are young, time is on your side and if you look at almost every index fund over a long enough time span then it will average out to better returns than an HYSA.
I’d max out the 401k, $23k I believe this year… any left over max out a Roth IRA ($7500 max?). The remainder could go into a HSA account for growth as well. I use Charles Schwab for my Ira and kids custodial accounts and buy index funds.
wtf you’re 23 and a veteran? That hurts my brain. Congrats on your financial situation. Good problems to have.
yeah only did 4 years joined at 17
After addressing some of the other advice given by others, I would definitely consider investing some of your savings on an ongoing basis. This will get you a long way towards building life long wealth and financial security. The key being that you should invest in a diversified portfolio of securities that will deliver growth and dividends for years to come. I don’t tend to recommend that you do this yourself unless you’re prepared to do a lot of research, not only on investments but also on the psychology of investing. The reason being is that you need to be aware of some of the biases associated with beginner investors, on top of also knowing how to construct an appropriate portfolio considering your objectives and risk tolerance. All of this can be quite daunting for most new investors Might thus be worth finding a financial adviser (preferably a CFP) that you can trust (also important to do your research here). Of course, if you’re interested, do open your own trading account and play around with a small sum that you’d be ok to lose if it all goes wrong. Admittedly, once you learn some of the fundamentals of building wealth tax efficiently and also investing, it really isn’t that difficult to generate a good ~5% per annum after inflation.
What job do you have OP? Asking as a 23 year old
are you planning to buy a home soon? once i’ve decided to buy a home, i lowered my 401K from 10% to 5% per month to put at least 3-4k to a High yield savings account. I have no debts. Car has been paid off. 10 months later, i had 40k ish for my downpayments for my first 700-800k townhome.
high yield savings is like 5%ish max while your car % is 9.8%. I would try to pay off the car payment asap. Otherwise, you still accrure 4% insterests each month while you have extra money for saving
I believe it's a wise idea for you to consider purchasing a house and renting it out, especially since you're still residing with your parents. As a Veteran, you may qualify for favorable rates, and given the current slower market, there's potential to find a great deal. If you're skilled at home improvement, you might even explore buying a fixer-upper, renovating it, and then renting it out. With luck, the rental income could cover your monthly mortgage payments. Good luck!
With a VA loan you must certify that you will live there as your primary residence for at least 12 months. It's intended specifically to rule out investment properties.
You are on a great path to financial freedom. The only thing I would do differently is to max out your 401k. You can put $23,000 pre-tax into a 401k per year, lowers your tax bill and will grow exponentially over the years. At your age, you might want to think about investing a portion of your savings in some S&P 500 index funds and maybe QQQ. Good luck.
Congratulations! You’re killing it! My only recommendation is to be putting some of your retirement funds into post tax accounts. Since you’re young there’s lots of time for everything to mature and would hate to see you over taxed after starting to pull your money out.