Critique my first year associate budget Forum

[LawyerNever]

I just thought it's funny that you phrased it as you "believe" in compound interest like it's Tinkerbell

Came here to post this.

[hous]

Hello, I am C/O 2016, and with 3LOL have had enough time to start planning my financials. I will be working big law in SoCal making 160k. I will be 25 years old when I start.
Vision: Plan for both the best and worst case scenarios: 1. try to have enough liquidity after the two year mark, should I or firm decide big law is not for me 2. have a good start on retirement (I am a big believer in the power of compound interest i.e. 'snowball effect') 3. Be mindful with money. Mindful is different from frugal insofar that the former recognizes that I am willing to put up certain costs to improve my QOL (e.g. living close to work to not have to deal with horrible traffic).

Stats:
1. Projected Debt at first day of employment -- 56k stafford
2. No liquid assets, but I own my car.

Budget for first year:
1. Max out 401k. This will probably put my post-tax income at $7,200 a month
2. $3,500 towards loans: this is the part where I am curious as to what TLS'ers think. I could easily get away with putting only 2k a month given my low debt.
3. High deductible health insurance, with a couple grand shored up in an HSA: $250 a month
4. COL: $3,200.
5. Remaining cash --> rainy day fund. If I put $3,500 towards loans that only leaves me with $250 a month. I could overcome this by saving all the money that I would put towards loans during my second year, however, this plan does not allow for an exit at the 12 month mark.

Year two:

Mostly the same as year one, except once my loans get paid off at the 17th month I will have an extra $3,500 + salary increase.
1. Put 5k in an IRA and backdoor it to a Roth
2. Hit 10k in cash in a savings account
3. Put the rest in a medium-risk Index that can be liquified relatively easily.

Thoughts?

Also, I think you would do well to refinance your student loans and make minimum payments for 10 years while you dump your money into mutual funds.

I graduated Law School a little over a year ago with $50,000 in student loan debt at a 6.8% fixed interest rate. I researched the pros and cons of student loan refinancing and determined it was right for me. I wound up refinancing to an adjustable rate of 3.8% and saw immediate results. My monthly payment went from $575.00 a month down to $500.00 which is a net savings of close to $10,000 over a ten year period.

Refinancing is certainly not for everyone. I would only recommend refinancing if (1) you will pay off your loans within the traditional 10 year period, (2) you are not planning on relying upon Public Service Loan Forgiveness, IBR, PAYE, or REPAYE, (3) you understand if something happens to you and you are no longer able to work the private servicer may go after your estate, (4) you don’t foresee the need for a deferral down the line, and (5) you would rather dump extra money into investments (riskier) than take the safe route and pay off student loans early. I went with Sofi and they are great. The application is simpler than their competitor’s and they were the only lender that approved me for refinancing. You can use my referral link for a bonus $100.00 if you elect to refinance with Sofi (I will get $100.00 as well), but I strongly encourage anyone to apply to all lenders they can for refinancing and go with whomever gives them the best rate. My referral code is: https://www.sofi.com/refer/234/11233

Other options to consider are:
DRB - https://student.drbank.com/
earnest - https://www.meetearnest.com/
CommonBond - https://commonbond.co/

[Danger Zone]

Hello, I am C/O 2016, and with 3LOL have had enough time to start planning my financials. I will be working big law in SoCal making 160k. I will be 25 years old when I start.
Vision: Plan for both the best and worst case scenarios: 1. try to have enough liquidity after the two year mark, should I or firm decide big law is not for me 2. have a good start on retirement (I am a big believer in the power of compound interest i.e. 'snowball effect') 3. Be mindful with money. Mindful is different from frugal insofar that the former recognizes that I am willing to put up certain costs to improve my QOL (e.g. living close to work to not have to deal with horrible traffic).

Stats:
1. Projected Debt at first day of employment -- 56k stafford
2. No liquid assets, but I own my car.

Budget for first year:
1. Max out 401k. This will probably put my post-tax income at $7,200 a month
2. $3,500 towards loans: this is the part where I am curious as to what TLS'ers think. I could easily get away with putting only 2k a month given my low debt.
3. High deductible health insurance, with a couple grand shored up in an HSA: $250 a month
4. COL: $3,200.
5. Remaining cash --> rainy day fund. If I put $3,500 towards loans that only leaves me with $250 a month. I could overcome this by saving all the money that I would put towards loans during my second year, however, this plan does not allow for an exit at the 12 month mark.

Year two:

Mostly the same as year one, except once my loans get paid off at the 17th month I will have an extra $3,500 + salary increase.
1. Put 5k in an IRA and backdoor it to a Roth
2. Hit 10k in cash in a savings account
3. Put the rest in a medium-risk Index that can be liquified relatively easily.

Thoughts?

You gave yourself too much wiggle room imo, unless you spend ALOT. I'm a 2014 grad that made 70k and had 47k (originally 50k but it was down to 47k when I started working) in student loans. I put 18k into my 401k, 11k into IRAs (2014 and 2015), 3.25k in HSA, 1k in taxable account, and an additional 3k in student loans in my first year. I may be more frugal than most here but I think with a 160k salary you can increase your networth by 75k a year. A large chunck will go to taxes and housing since you live in CA but even after taxes and housing you have atleast 80k left right? I live in a state that has less taxes and is lower COL so I may be completely off.

LMAO

[Anonymous User]

Hello, I am C/O 2016, and with 3LOL have had enough time to start planning my financials. I will be working big law in SoCal making 160k. I will be 25 years old when I start.
Vision: Plan for both the best and worst case scenarios: 1. try to have enough liquidity after the two year mark, should I or firm decide big law is not for me 2. have a good start on retirement (I am a big believer in the power of compound interest i.e. 'snowball effect') 3. Be mindful with money. Mindful is different from frugal insofar that the former recognizes that I am willing to put up certain costs to improve my QOL (e.g. living close to work to not have to deal with horrible traffic).

Stats:
1. Projected Debt at first day of employment -- 56k stafford
2. No liquid assets, but I own my car.

Budget for first year:
1. Max out 401k. This will probably put my post-tax income at $7,200 a month
2. $3,500 towards loans: this is the part where I am curious as to what TLS'ers think. I could easily get away with putting only 2k a month given my low debt.
3. High deductible health insurance, with a couple grand shored up in an HSA: $250 a month
4. COL: $3,200.
5. Remaining cash --> rainy day fund. If I put $3,500 towards loans that only leaves me with $250 a month. I could overcome this by saving all the money that I would put towards loans during my second year, however, this plan does not allow for an exit at the 12 month mark.

Year two:

Mostly the same as year one, except once my loans get paid off at the 17th month I will have an extra $3,500 + salary increase.
1. Put 5k in an IRA and backdoor it to a Roth
2. Hit 10k in cash in a savings account
3. Put the rest in a medium-risk Index that can be liquified relatively easily.

Thoughts?

You gave yourself too much wiggle room imo, unless you spend ALOT. I'm a 2014 grad that made 70k and had 47k (originally 50k but it was down to 47k when I started working) in student loans. I put 18k into my 401k, 11k into IRAs (2014 and 2015), 3.25k in HSA, 1k in taxable account, and an additional 3k in student loans in my first year. I may be more frugal than most here but I think with a 160k salary you can increase your networth by 75k a year. A large chunck will go to taxes and housing since you live in CA but even after taxes and housing you have atleast 80k left right? I live in a state that has less taxes and is lower COL so I may be completely off.

LMAO

Take home, after tax, is like 95 k in NYC. Rent is like another 25-30k.

[abc987]

I think OP is undervaluing the long-term financial impact of renting rather than owning a place. I'd shift some of the loan repayment money or retirement money (if not matched) to saving for a down payment. I know nothing about the CA real estate market, but at least elsewhere I think it almost always makes sense to stop paying for your landlord's mortgage, and start building equity in your own, as soon as you are confident you'll stay in the area longterm.

I'd be curious to know whether others see property ownership the same way.

[ponderingmeerkat]

I'm already seeing several people advocating for "market timing" strategies in here. Let me be the guy to beat this drum: "It's about time in the market not timing the market". Basics people...seriously do your self a favor and set your portfolio allocations based on your risk tolerance...nothing more. Not how "frothy" you think Dec 2015 is (you have a 40 year investment horizon). I promise you that you are incapable of adjudicating market fundamentals better than the 1000's of quants and market makers on the street.

If anyone reading this thread is "holding off" on their portfolio allocations because they have a hot-tip from Uncle Vinny that the market is "frothy", slap yourself for being stupid, and stick to the plan.

That is all...

you're missing the point

Go on...

Waiting for an answer still....

And 24 hours later, still no response. So, back to the OP: dude, do yourself a favor, while you're building your financial plan, keep in mind that anyone who tells you hot stock tips like "wait for the market to become less frothy" or "dump your entire nest egg into X...it's about to skyrocket" doesn't have a clue what they are talking about. They like sounding smart and playing games in the market but they aren't serious people and their advice should be ignored.

Consistent and persistent investment into a broadly diversified portfolio of assets (example: 60% VTSAX, 20% VBMAX, 20% VTIAX, or their Fidelity/Schwab equivalents) with low fees and no loads is the only consistently proven way for a retail investor to maximize returns over a 40 year investment horizon. It's boring, it's not sexy...and that's a good thing.

[AVBucks4239]

I'm already seeing several people advocating for "market timing" strategies in here. Let me be the guy to beat this drum: "It's about time in the market not timing the market". Basics people...seriously do your self a favor and set your portfolio allocations based on your risk tolerance...nothing more. Not how "frothy" you think Dec 2015 is (you have a 40 year investment horizon). I promise you that you are incapable of adjudicating market fundamentals better than the 1000's of quants and market makers on the street.

If anyone reading this thread is "holding off" on their portfolio allocations because they have a hot-tip from Uncle Vinny that the market is "frothy", slap yourself for being stupid, and stick to the plan.

That is all...

you're missing the point

Go on...

Waiting for an answer still....

And 24 hours later, still no response. So, back to the OP: dude, do yourself a favor, while you're building your financial plan, keep in mind that anyone who tells you hot stock tips like "wait for the market to become less frothy" or "dump your entire nest egg into X...it's about to skyrocket" doesn't have a clue what they are talking about. They like sounding smart and playing games in the market but they aren't serious people and their advice should be ignored.

Consistent and persistent investment into a broadly diversified portfolio of assets (example: 60% VTSAX, 20% VBMAX, 20% VTIAX, or their Fidelity/Schwab equivalents) with low fees and no loads is the only consistently proven way for a retail investor to maximize returns over a 40 year investment horizon. It's boring, it's not sexy...and that's a good thing.

Came here to piggy back on this. 98% of people on TLS (and in general) should simply be invested in index funds and call it a day. If you doubt this, go read Common Sense Investing, A Random Walk Down Wall Street, Bogleheads Guide to Investing, etc. TL;DR is that you should be invested in low cost index funds, diversify, and not react to the volatility of the market because you (or anyone) cannot time the market.

Hello, I am C/O 2016, and with 3LOL have had enough time to start planning my financials. I will be working big law in SoCal making 160k. I will be 25 years old when I start.
Vision: Plan for both the best and worst case scenarios: 1. try to have enough liquidity after the two year mark, should I or firm decide big law is not for me 2. have a good start on retirement (I am a big believer in the power of compound interest i.e. 'snowball effect') 3. Be mindful with money. Mindful is different from frugal insofar that the former recognizes that I am willing to put up certain costs to improve my QOL (e.g. living close to work to not have to deal with horrible traffic).

Stats:
1. Projected Debt at first day of employment -- 56k stafford
2. No liquid assets, but I own my car.

Budget for first year:
1. Max out 401k. This will probably put my post-tax income at $7,200 a month
2. $3,500 towards loans: this is the part where I am curious as to what TLS'ers think. I could easily get away with putting only 2k a month given my low debt.
3. High deductible health insurance, with a couple grand shored up in an HSA: $250 a month
4. COL: $3,200.
5. Remaining cash --> rainy day fund. If I put $3,500 towards loans that only leaves me with $250 a month. I could overcome this by saving all the money that I would put towards loans during my second year, however, this plan does not allow for an exit at the 12 month mark.

Year two:

Mostly the same as year one, except once my loans get paid off at the 17th month I will have an extra $3,500 + salary increase.
1. Put 5k in an IRA and backdoor it to a Roth
2. Hit 10k in cash in a savings account
3. Put the rest in a medium-risk Index that can be liquified relatively easily.

Thoughts?

You gave yourself too much wiggle room imo, unless you spend ALOT. I'm a 2014 grad that made 70k and had 47k (originally 50k but it was down to 47k when I started working) in student loans. I put 18k into my 401k, 11k into IRAs (2014 and 2015), 3.25k in HSA, 1k in taxable account, and an additional 3k in student loans in my first year. I may be more frugal than most here but I think with a 160k salary you can increase your networth by 75k a year. A large chunck will go to taxes and housing since you live in CA but even after taxes and housing you have atleast 80k left right? I live in a state that has less taxes and is lower COL so I may be completely off.

LMAO

Not quite sure why this is "LMAO" worthy (outside of maybe his after tax/housing calculation...but he's not that far off). OP could probably increase net worth by $50-60k if he used pre-tax accounts right. Hell, I make about $50k and next year intend to increase net worth by about $24,000. Life is fairly simple when you don't waste money on dumb shit...and OP (and the quoted poster) seem to be on the right track.

Only thing I'd change for OP is build emergency fund first, then max 401k, max IRA, then worry about student loan payments.

[Danger Zone]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

[AVBucks4239]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

[krads153]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

Most legal employers don't match 401k....also if you're doing high deductible plan + HSA you have to use it or you lose everything you put in, and it might make more sense to do another healthcare plan that costs more each month

[ponderingmeerkat]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

Absolutely agree here. You'll be able to stash 15-20K (6 months expenses) in a handful of months tops and that'll be invaluable as you're moving forward on your plan. You'd be hard pressed to find a financial advisor anywhere that doesn't consider this 6-month buffer the number one priority. (For some personal anecdata, it's saved my ass a couple times...you'll be glad you did.)

And then once you're on the path...resist the lifestyle inflation urge. Don't get caught spending money to buy things you don't need to impress people you don't like. Hedonic adaption is a real thing...use it to your advantage, not to your disadvantage.

[Danger Zone]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

Most legal employers don't match 401k....also if you're doing high deductible plan + HSA you have to use it or you lose everything you put in, and it might make more sense to do another healthcare plan that costs more each month

HSA's are not use it or lose it. That's an FSA.

[AVBucks4239]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

Most legal employers don't match 401k....also if you're doing high deductible plan + HSA you have to use it or you lose everything you put in, and it might make more sense to do another healthcare plan that costs more each month

My HSA is not use it or lose it. And my employer matches 3%, which is apparently somehow more than big firms.

[krads153]

$50k is waaay less than $75k. I was lmaoing at that absurd figure.

You're probably right.

$160k gross - $18k to 401k - $3.25k to HSA = $138,750 net taxed at call it 40% = $83,250; minus 39,600 for COL = $43,650.

Paying down student loans with $42,000 of that (as OP claims) would mean a huge majority is going to principal. Getting out of the student loan red is increasing his net worth.

So $18k to 401k, call it $4k employer match (pure guess) + $3k to HSA = $25k. Too lazy to run the numbers but he will probably knock off about $32-33k in principal on his student loans.

So he's likely to increase net worth by about $55-60k if he plays his cards right.

But anyway, I'm giving it more thought: OP, just want to emphasize that you should get that emergency fund built up first. You can't get cash back when you pay it towards a debt. First thing GF and I did was save about $15k cash and it's made unfortunate hiccups a lot less stressful. You're walking a bit of a tightrope with your plan of paying off debt so fast, so make sure you get that emergency fund in tact before you go bonkers towards saving for retirement or paying down debt.

Most legal employers don't match 401k....also if you're doing high deductible plan + HSA you have to use it or you lose everything you put in, and it might make more sense to do another healthcare plan that costs more each month

My HSA is not use it or lose it. And my employer matches 3%, which is apparently somehow more than big firms.

yeah, big firms don't match. they start with a high salary but the benefits are atrocious (cost of health insurance is also ridiculous (~400/month for a single), no 401k matching). if you want additional life/lt disability insurance, the costs are pretty high too.

[AVBucks4239]

yeah, big firms don't match. they start with a high salary but the benefits are atrocious (cost of health insurance is also ridiculous (~400/month for a single), no 401k matching). if you want additional life/lt disability insurance, the costs are pretty high too.

Wow. Never even crossed my mind that my benefits at a small firm in rural Ohio are better than big law. Crazy to me considering the shit big firm attorneys put up with.

[dixiecupdrinking]

It's becoming increasingly common for employers to make HSA contributions for people who elect high deductible health plans, though. Not exactly a "match" but it's similar.

[dudders]

Actually, upon reflection, budgeting 3.2k CoL for SoCal seems unduly restrictive when the benefit is paying off the loan within 2 years instead of 5. Not familiar with the rental market but I'm guessing it's at least 1.6k-2k for just a decent studio. With coffee, utilities, food, non-edible groceries you'll basically have no discretionary income whatsoever.

Also you have to at least have SOME initial up front overhead in establishing yourself like furniture, wardrobe, getting dishes, new TV, etc.

The thing about this though is that presumably the extra loan payments can be adjusted downward in any particular month. If you had to buy plane tickets or a couch or whatever, then just pay the minimum that month.

I think it looks like a pretty legit budget. Would agree not to worry about 401k until January though, assuming you have a stub year. Use the first few checks to build up the rainy day fund.

I agree with this poster .... even if you're not building up a huge rainy day fund, you have flexibility with such a high loan payment if you do have unexpected expenses and need to pay less one month. Lack of savings would be more of a concern if you weren't planning to pay off your loans in two years.

I'm assuming this doesn't include bonus? Just throw that bonus in your rainy day fund. Problem solved.

[sublime]

..

[BigZuck]

It's hard for me to keep track of all the mentally ill TLSers who pontificate on finances/the economy. TLS is good at telling people to retake, but some of the posters who post about this kind of stuff a lot, eh...There might be good info in here, or there might be life-ruiningly bad advice.

OP- I'm not sure this is the best place to seek advice, maybe find a real human who knows about this stuff?

[AVBucks4239]

It's hard for me to keep track of all the mentally ill TLSers who pontificate on finances/the economy. TLS is good at telling people to retake, but some of the posters who post about this kind of stuff a lot, eh...There might be good info in here, or there might be life-ruiningly bad advice.

OP- I'm not sure this is the best place to seek advice, maybe find a real human who knows about this stuff?

What exactly do you disagree with?

The advice in here generally parallels what I'd see on r/personalfinance, Bogleheads, and Mr. Money Mustache--it's all basic personal finance stuff.

[AVBucks4239]

Actually, upon reflection, budgeting 3.2k CoL for SoCal seems unduly restrictive when the benefit is paying off the loan within 2 years instead of 5. Not familiar with the rental market but I'm guessing it's at least 1.6k-2k for just a decent studio. With coffee, utilities, food, non-edible groceries you'll basically have no discretionary income whatsoever.

Also you have to at least have SOME initial up front overhead in establishing yourself like furniture, wardrobe, getting dishes, new TV, etc.

The thing about this though is that presumably the extra loan payments can be adjusted downward in any particular month. If you had to buy plane tickets or a couch or whatever, then just pay the minimum that month.

I think it looks like a pretty legit budget. Would agree not to worry about 401k until January though, assuming you have a stub year. Use the first few checks to build up the rainy day fund.

I agree with this poster .... even if you're not building up a huge rainy day fund, you have flexibility with such a high loan payment if you do have unexpected expenses and need to pay less one month. Lack of savings would be more of a concern if you weren't planning to pay off your loans in two years.

I'm assuming this doesn't include bonus? Just throw that bonus in your rainy day fund. Problem solved.

Buying plane tickets and a couch are expected purchases that you can adjust in advance. In other words, it ignores completely unexpected life events that might happen after you've sent in your payments.

Within the past year and a half, my GF has had to get her gallbladder removed ($6k), I had to go to the hospital for getting absolutely fucking drilled in the face in softball (playing shortstop, grounder took a bad hop and hit so hard off my face that it went into foul territory)...anyway that was $1.8k, and we had to replace our garage door ($1.1k). Other unexpected stuff can happen--car accident, fire, etc.

Shit happens. It's better to just build up that liquid cash at the outset and replenish as necessary.

[abl]

What are folks' thoughts about Roth vs Traditional-type retirement plans? At what levels of savings / debt / salary does it make sense to do one over the other?

[ponderingmeerkat]

So could somebody summarize the basic/standard advice for someone in a similar position as OP (approx. same debt load -about $60k) but in MFH.

From the thread, it looks like it would be something like this, in order of priorities:

1. Try not to waste money on dumb shit.
2. Refinance Loans and don't worry about paying much over the minimum (assuming a favorable interest rate).
3. Create a rainy day fund that can cover you for 6 months in a savings account.
4. Max out 401k
5. Put money in an HSA (? - I am a little confused on what the priority level of this is)
6. Put extra savings in a diverse index fund

Is that just about right? I don't know much about all of this and would appreciate input.

The standard advice as far as priorities are concerned are this:

Step 1. Build emergency fund (6 months of expenses)
Step 2. Contribute to 401K up to match
Step 3. Pay off high interest loans (high interest being somewhere between 5-6% and up)
Step 4. Max IRA
Step 5. Max 401K (IRA first because of flexibility...most 401K plans have higher expenses than an IRA with Vanguard/Fidelity etc. with expense ratios around .05%)
Step 6. Pay down low interest debt
Step 7. Save for other goals

[AVBucks4239]

What are folks' thoughts about Roth vs Traditional-type retirement plans? At what levels of savings / debt / salary does it make sense to do one over the other?

Play around with this calculator (make sure you open the "investment returns and taxes" tab): http://dinkytown.net/java/RothvsPreTaxAccount.html

Largely depends on your tax rate now vs tax rate at retirement age. Also depends on whether you want that cash to be liquid (Roth) or whether you want to get a tax break on the money invested now (Traditional).

[TFALAWL]

OP here:

I have a question regarding rainy day and index funds:

1. Should I put my 20k cash in a regular savings or can I get away with a money market or medium-term bond?
2. Regarding indexes, is Vanguard TCR given its low fees?
3. If so, would it be imprudent of me to only invest a small portion in the Big Cap S&P in lieu of Small Caps?