Hi all,

some pay information:

$2538.xx gross pay

$159.31 pre tax deducions

$538.21 employee tax deductions

$253.86 post tax deductions.

Net pay: $1587.xx

Currently have roughly $21k in savings, and $4k in stocks.

I'm a recent graduate (22) and am around 5-6 weeks into my job which pays $66k gross. No debt, low bills (pretty much only phone bill and groceries. Still live with parents so I don't pay rent yet). My employer provides dental insurance and health insurance (I pay around $32 per paycheck for this, bi-weekly pay). My employer also offers 5% match on 401k before tax, 401k after tax, and roth IRA.

Questions: Should I be investing in all 3 of these? and what's the difference between these 3? My ultimate goal is to be able to purchase a car (used) and move out within the next 1-1.5 years. Would this be possible while still investing? Can I expect a tax return or should I expect to pay more during tax season?

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the_los t1_iuk2dkq wrote on October 31, 2022 at 10:42 PM

At your age and income, you should be trying to max out your Roth 401K. What the 401Ks mea :

Traditional 401K - you and your employer put in $ before any taxes are taken out. When you’re ready to retire, you will pay taxes on the amount you take out.
Roth 401K - your paycheck is deducted of all taxes and deductions and you contribute on money that you’re paying taxes on today. All gains and principal, are tax free when you go withdraw. Only your portion of the contribution is post tax. The match your employer gives you, will be put in a traditional 401K.
A third option that you didn’t mention (if your company offers it): HSA (Health savings account) - you and maybe your employer put pre-tax money to go towards future medical expenses. This is a great option as you can put away $3850 each year and let it grow until and if you need it.

Considering how young you are and how bad the market is right now, I’d be trying to put away at least 20% of your income into one of these retirement vehicles. You have post tax income of 3485 a month, so maybe try to contribute $1700 a month for now and the rest can be savings and your normal daily expenses.

greyAbbot t1_iuk4bso wrote on October 31, 2022 at 10:58 PM

The Prime Directive for this sub

https://www.reddit.com/r/personalfinance/wiki/

covers all the basic questions you're asking. Start by working your way through that and come back here if you have specific questions.

Leon_Winters2023 t1_iuk4qim wrote on October 31, 2022 at 11:01 PM

You're doing awesome for your age, well ahead of your peers.

You should invest the amount into your 401k to get the company match. I'd personally only do that and nothing more.
Alongside this, invest the full $6,000 into a Roth IRA. Do something simple like VTI or VOO.
Dont move out until you can get a 10% down-payment on a home. I know it sucks living at home because you think it might impact dating, but if you have a house at 25-26 your dating life will be amazing compared to renting from 24 and beyond

For a car, take your post tax income/2, and that should be the maximum budget. It can be a new civic, new Mazda 3, Corolla. Or a used luxury car. Just don't buy anything crazy over the limit.

PM_MEYOURB00Bs OP t1_iuk6jrr wrote on October 31, 2022 at 11:16 PM

Any car you recommend purchasing? Personally do not feel comfortable buying a brand new car for various reasons.

Leon_Winters2023 t1_iuk85x3 wrote on October 31, 2022 at 11:28 PM

Don't be afraid to buy new if it's a reliable car like Toyota, Honda, or Mazda.

Mazda 3, Corolla, Camry, civic, accord. Personally I'd go for a Mazda 3 for the style haha and the fun of it. But Camry is best bet for just no nonsense.