How To Make A Financial Game Plan
Though I moved home last month (you can read all about it in my post : Why I Moved Back Home) there was a reason behind it. I wanted to be financially stable and if I can get there, financially independent.
I started moved back, started work, made some mistakes within the first month (you can read all about them in here) and didn't really know what goals I wanted to achieve. That being said I'm trying to layout my goals and expectations as best as I can.
My ultimate goal is to save 60% of my paycheck.
I just put down a car payment of $8,000 to knock down some of the interest on my car payments. This took down my savings from $17,704.23 to $9,704.23. Literally that transaction killed me inside. I received an inheritance of $15,000 which I used to keep myself afloat while taking time off to go back for my masters. I used about half of it and then built it back up while struggling to pay for everything when I was in Boston. So until I have that and then some (I'm planning for $50,000 in cash for a down payment) then my savings rate will be 40% for cash.
Since now I have been at home for a solid month, here are my financial stats:
Monthly Income (Fixed)
Biweekly paycheck of $2,210.12
Monthly Income of $4,420.24 (after taxes)
Monthly Expenses (Fixed)
Car payment of $367.90 per month for 4 years
Phone bill of around $100 per month
Apple cloud storage $0.99 per month
Apple phone loan $34.50 per month for 24 months
Car insurance $167.90 per month for 6 months
Monthly Fixed Expenses of $671.29
With some quick math that means that roughly 16% of my income is going towards fixed expenses.
A few notes:
I do want to pay off my car in half the time since the interest will tack on about $1000 plus on the principal so I will be paying closer to $800 per month for the first payment and see how I feel afterwards. That would bring my fixed expenses closer to 24% of my income. My car insurance is higher due to not having car insurance (because I didn't need a car while living in Boston). These payments will be reduced in about 6 months. I did pay my stepdad extra (since it's high policy) since I hate writing checks but I think I should to get an exact amount of save a few bucks.
I am also thinking of searching around for different phone service. AT&T has always worked well for me but I think it's very over priced. I am looking into Google's Project FI and doing more in-depth research.
A few notes:
I am currently contributing 22% of my paycheck to a Roth 401K. My employer contributes 6% of anything I put in there, there is no vesting period which I am stoked about. I chose a Roth 401K since I am just starting off my career, 25 years old and I anticipate that I will be in a higher tax bracket when I am older. Roth accounts take the taxes out before the money is invested rather than taking out the taxes after your investment has had time to grow (thus leading to more taxes). You can read about the difference in traditional and Roth 401ks here.
I also decided to max out my HSA for the remainder of the year. I never had a HSA account and I'm still reading up on them but I will be contributing roughly $390 per paycheck until 2019. I'm currently panicking over how much of my money will be tied up in investment/retirement accounts.
I am also very new to the personal investment world. Even though I did work in the Hedge Fund and Banking industries, when it comes to my own finances I am a little more lost. I am choosing to use Acorns and Robinhood for my investing for now.
Acorns allows increments of $5 to be invested on your behalf. These can be made up of either the spare change you "round up" or direct deposits you list in your account. Robinhood though allows you to purchase stocks commission free.
What I suggest:
List out all your expenses and then see how they align to your goals. Rethink the services and companies you are using and find ones that will help you reach your goals faster.
It's better to underestimate than over estimate on what you personally think you can do with your savings. Have SMART goals.
I am leaving this post with some questions that I am still seeking the answer to:
Should I go another way into personal investing other than Acorns and Robinhood?
Should I save more cash rather than investments?
What kind of investments should I be looking for?
Is my cash savings rate unreasonable? I know some people do a savings rate of only 15% and the rest they invest.