- February 8, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Financial Situation and Goals at the Age of 25
I am a 25-year-old with a stable income and ambitious plans for the future. My current salary stands at $95,000, and I have the potential to earn an additional $48,000 through bonuses if I meet my overtime goal. Moreover, I am pleased to report that I am still within the income limit for contributing to a Roth IRA.
In terms of my financial assets, I have a total of $32,000 saved in retirement accounts, consisting of a SIMPLE IRA and a Rollover IRA. On top of that, I have managed to save $25,000, which is earning a fairly decent interest rate of 4.5%. On the other hand, I am carrying a debt of -$43,000, which consists of private student loans with an interest rate of 2.7%. My monthly minimum payment for these loans is $835.
## Financial Plan and Goals for the Future
Looking ahead, my financial objectives include saving up a total of $85,000. This amount encompasses my emergency fund, a down payment for a home, and potential funds for a car down payment. Additionally, I have set a target of maxing out my Roth IRA contributions, amounting to $7,000. Furthermore, my employer offers a 3% contribution to a 401k, which requires no additional contributions from my end. Lastly, I aim to clear off my student loan debt entirely.
In terms of strategy, my plan revolves around hitting my savings target first, before focusing on paying off the low-interest student loan. Although this approach means prioritizing saving for a home over maximizing retirement contributions, I believe it is a reasonable trade-off given my circumstances.
## Seeking Advice and Opinions for my Financial Plan
As I work towards achieving my financial goals, I am open to feedback and advice from individuals who have experience in personal finance. I am particularly keen to hear whether my plan seems logical and achievable, or if there are any glaring mistakes or oversights. Based on my calculations, I am confident that with disciplined spending and the opportunity for overtime work, I can realistically meet my financial targets within the next two years.
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The math is easy. Choosing to defer your max retirement contributions will be a loss of a massive amount of gains at your age. I can’t find a situation that I’d ever advise someone your age, who is able to max their retirement contributions, not to. The time the money has to sit and grow from age 25 is just unreal and you’re staring down the barrel of throwing that away for the pleasure of replacing your own HVAC unit when it dies. (Swear to God, homeownership is not all its cracked up to be).┬á
But it’s your money. If you’d rather own a home, nothing anyone says here is going to change your mind.┬á
Do you really want to be tied down? In general you need to own a place for 5 years to come out ahead after closing costs, realestate agent fees, etc. If I were you I be maxing out tax advantaged account contributions. Hit that hard now, and you stop contributing later on and have it not matter. Whatever you have above those things, you could save into a index fund for an eventual down payment.
I don’t think saving to buy a house when you’re ready is a bad idea and that money inevitably has to come from somewhere but I would not forego much of your retirement savings to save for it. If you’re truly on track to make $143k this year I’d think even in a high cost of living city if you make good choices in how you spend your money you should be able to make a healthy retirement contribution and still save pretty aggressively outside of that. What do your current expenses look like and how much do you expect a place you’d be interested in buying to cost?
I think it comes down to the reason you want to buy a house. As others have pointed out, the route to having the highest net worth at retirement is by maximizing your retirement account contributions now, even after adding home equity due to buying a house young.
But homeownership also provides some intangible and unquantifiable benefits. You may want a stable place to raise a family, or a larger space to pursue particular hobbies. That could make it justifiable, but if youÔÇÖre just wanting to own a house because you feel pressure to reach that particular milestone or you think ÔÇ£renting is throwing money awayÔÇØ (itÔÇÖs not), then I donÔÇÖt see how sacrificing retirement savings makes sense in your situation.
Bad idea. You should prioritize saving for retirement instead of buying a house. You have it totally backwards.
IÔÇÖm in late 30s and have two kids. I donÔÇÖt own a house although IÔÇÖve owned houses before. My biggest financial regret for my 20s is not saving more in retirement. I donÔÇÖt regret not buying a house in my 20s though. I am years behind since I didnÔÇÖt save more for retirement in my 20s.
Your thinking is sound. 
Not sure what a down payment looks like in the market you’re looking to buy in. I’d account for extra in the emergency fund for home repairs.
Those are my thoughts. Good luck!
I would 1) Pay off debt, 2) Save for retirement, then look at a house/condo. Personally I would shy away from anything with an HOA, a real pain the butt to deal with. I would rather take more time renting and be prepared to buy a house then rush in. I spent my 20s and most of my 30s paying off debt, traveling, and putting into retirement. No regrets only young once and wonÔÇÖt ever get those years back. Also when you are 65 you wonÔÇÖt have energy to do half the shit I did in my 20s.