7 ms·

How much should I think of saving every month as a 29 year old?

42 points by yoran 7y ago

lurquer 7y ago
You only have, at most, 12 months to worry about... I don't think it will make much a difference.
- sambull 7y ago
  It's a hard pill to swallow. So I bought a paramotor, might as well enjoy the time there is. It does seem faster than expected.
  - koolba 7y ago
    I had to look up “paramotor”[1] as had never heard of it. That looks pretty fun but it’s definitely in the splurge category. Looks like it might lead to some extra medical bills too! [1]: https://en.m.wikipedia.org/wiki/Paramotor https://en.m.wikipedia.org/wiki/Paramotor
- distantaidenn 7y ago
  What's supposed to happen in 12 months?
  - Cofike 7y ago
    Turn 30, I presume.
chubs 7y ago
I am not a financial advisor, but... start with 10%. Use high-interest savings accounts if you need to dip into the money unpredictably. Use term deposits if you'll need to access the money in a year (shares might dip in that time). Use index funds if you won't need the money for a decade (index funds aren't very risky at that time horizon). And start putting away money for your kids the moment they're born, find something that tax-effectively allows you to transfer the money into their name when they turn 20ish without some form of capital gains on their behalf. Consider spreading it around to some different accounts so that if one investment goes under you don't lose the lot.
- bloaf 7y ago
  https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si... Savings rate is basically the only number that matters in determining how long until you can comfortably retire. A 10% savings rate puts you on track to retire in ~50 years, starting from zero and given some conservative assumptions.
  - chubs 7y ago
    Wow, 10% really doesn't get you very far, does it! Well, maybe people should aim higher. In my case, i'm less worried about retiring early, and more interested in saving so my kids can more easily buy their first house.
ram_rar 7y ago
Please dont ruin your present to become financially independent. I know people who cut their own hairs and do a whole lot of stuff to micro optimize their savings. That kind of lifestyle is just not worth it. As long as you're being mindful of being cash flow +ve and save some $ for rainy day, you're good. I Started with 1. Emergency fund (6months+ expenses or whatever you're comfortable with), 2. 401(k) / IRA (if you're employer provides it), 3. indexing (simple plain old vanguard low fee fund). thats about it, nothing more. I am a chase private client, own a house and could probably retire within next 3 yrs or sooner if I really wanted to... I dint think of FI all the time, it just happened.
- droithomme 7y ago
  > I know people who cut their own hairs I've had my partner cut my hair for many years; this was less time investment than going to a stylist. Now I just shave it. For some it's fine. If someone wants to have it styled that is great too.
- neilv 7y ago
  Emergency fund + max out tax-advantaged account contributions + your-age-in-bonds-percent low-expense-ratio index investing = great Bogleheads advice. What's funny is a marine biology grad student in the article wondering how much they should be saving. Until one finishes that PhD, career investment and putting the, say, $100/month discretionary stipend funds towards healthy food and bicycle safety maintenance, rather than eating instant ramen noodles to save an amount that will make negligible difference in retirement, makes sense. (Or, if trust fund grad student, especially in a difficult field like marine biology, live like a grad student on stipend, and Bogleheads the rest.)
- bloaf 7y ago
  >That kind of lifestyle is just not worth it. Different people have different tolerances. For some, a spartan lifestyle "costs" them nothing at all.
- ianai 7y ago
  I seriously hate 401k-s. I’ve got about 20 options to choose from and all of them tank if the market tanks. (This is what’s available through my employers plan) I should be able to specify that for the next 12-months I want everything going into precious metals, if I want. I think having to wait until retirement age for tax purposes is ridiculous as well. The street clearly benefits more from it than I do.
droithomme 7y ago
At least 10% annually and give another 10% at least to charity. I liked to put some in stocks I already had decided on, but also a bit in cash, then when there was a panic and prices dropped, I grabbed a bunch of things I already had and knew were solid. Not a gambler, just an observer that likes a bargain and is patient.
- vips7L 7y ago
  10% to charity? I don't think that is realistic at all.
  - droithomme 7y ago
    That's great! It really should be more as you point out, I typically give around 30% each year. But I know that is a bit higher than most. 10%'s kind of traditional "tithing" which is why I mentioned that, but that should be the lowest probably. Of course people can also choose not to give back at all. One of the great things about being in the tech field and making an enormous salary is it gives us the power to influence the direction of society through targeted donations. One charity I've supported for years keeps trying to have a "gala" in my honor. I tell them forget it, and for goodness sake keep me anonymous. Sheesh. Trouble like a gala I don't need.
    - geowwy 7y ago
      This sounds a lot like a humble-brag :)
      - grandmczeb 7y ago
        > One charity I've supported for years keeps trying to have a "gala" in my honor. I tell them forget it, and for goodness sake keep me anonymous. More than sounds like IMO...
      - eagletusk 7y ago
        supporting those less fortunate, that's admirable.
dannykwells 7y ago
I am the same age - we save/invest around 30-40% of our post-tax income.
wsdfsayy 7y ago
$800k for retirement seems very low...
- bloaf 7y ago
  "Low" is a relative term, and so we must ask "low compared to what?"
  - temp99990 7y ago
    If you retire at 65 and live to 100, you’re supposed to live on $20k a year pre-tax (assuming you’re withdrawing from a pre-tax account like a 401k)? That isn’t going to work.
    - Izkata 7y ago
      Those numbers seem to assume none of it is invested... You can get, averaged over several years, something like $50k/year from that.
      - temp99990 7y ago
        And if the market crashes when you are retired? What are you supposed to do? I don’t think it’s sound advice to keep your retirement in stocks when you’re actually in retirement...
        richardw 7y ago
        You only need to keep "crash /recovery" money around, which is a risk because you don't know how long that is. 5? 10? But you also don't know how long you'll live for, so to have your money doing nothing for 20/(30?!) years could hurt. My wife's grandmother is 99. That's a long time in low-growth near-cash.
    - mgkimsal 7y ago
      if that money is coming from selling off some equities, it would likely be long term capital gains, which... I believe the first $x000 are taxed at 0%. Your point about $20k not being much is true, but I also would presume that someone who's saved that much probably would have some social security coming in, at least doubling that.
deleted 7y ago
[deleted]
temp99990 7y ago
I never thought it made sense that people should expect to do nothing for 30+ years of their life. For most the anxiety of boxing yourself into that belief that after a certain day of your life that you can’t earn another dime makes no sense. If you look at the current stats there’s a huge % of people nearing “retirement age” who have nothing saved. Personally I have had a surprising number of Uber drivers who are retired and bored and drive to socialize with others. Although they may be lucky to have saved enough I don’t necessarily think it would be “depressing” for someone who was otherwise of retired age to take on a job that they felt they were capable of doing instead of sitting at home doing nothing all day
JaggedNZ 7y ago
Something I have not seen mentioned yet, it might be obvious? Pay off your debt first! It has a guaranteed return on "investment". The following scheme has worked well for me. First take any employer matched retirement scheme (401(k) / IRA, etc.) and keep some money to build up a rainy day fund if you don't have one (a few weeks income is a good starting point) as theres no point defaulting on a loan because you made extra payments the week or month before. But there is no point saving or investing money that could be going towards paying down a 22% credit card debt or 16% car loan, or even a 5% House loan. The only exceptions would be low interest loans (i.e. <1-2%) with a fixed payoff date. On Mortgages, there are many schemes but I'd advise, 40% 1 year fixed, 40% 2 year fixed, 20% revolving credit, dump any rainy day funds, and any other spare funds, on the revolving loan == interest you don't pay. Keep the fixed term loans expiring every other year so any interest rate spikes only hit half your capital. Disclaimer: I am not a financial adviser and this is not intended as "investment" or "financial advice".
rayraegah 7y ago
;not advise Don't focus on a number but focus on giving yourself some room to breathe. Slowly build a habit of saving money by snowballing money into a savings account to start. Don't measure your worth by money. I didn't consider saving until I bought the engagement ring (which left me at a bank balance close to 0 and it wasn't the first time). I was 27 years old. I started setting aside some money as a cash reserve (bucket #1) and I made sure there was enough money to: - get me through two months on rent (3,000 GBP) - feed myself for two months (400 GBP) - buy one flight ticket home (to parents basement)(700 GBP) Once bucket #1 was full, I started tossing money into bucket #2 which was disposable income stashed in a decent interest paying savings account. This was for rainy days and the future. By the time I was 29, I had about 10,000 GBP in savings between the two buckets. A good portion of it was spent on our wedding and honeymoon (from #2). By 30 I had 15,000 GBP in savings. Most of that was spent when I moved to Tokyo (damn moving costs). I had $1,000 USD left; it was a fresh start. I'm 32 now and I have about one year worth of living expenses in savings and then some. I make monthly contributions towards a pension, life-insurance, and a retirement fund (bonds).
RickJWagner 7y ago
Very glad to see this article, packed with good advice. Financial education is so important, yet so seldom presented. It literally can make a HUGE difference in quality of life. Everyone should at least understand the basic blueprint of how to care for your own financial future. For those who haven't seen it yet, a great next step is to visit Bogleheads.org. A great community of knowledgeable savers, including many who never earned a great salary but still have managed to assure their own future. If you haven't seen it, check it out!
ojhughes 7y ago
The big problem I have with saving lots is expensive hobbies! My current dilemma is whether or not to embark on a campervan conversion project.

42 points by yoran 7y ago

lurquer 7y ago

You only have, at most, 12 months to worry about... I don't think it will make much a difference.

sambull 7y ago
It's a hard pill to swallow. So I bought a paramotor, might as well enjoy the time there is. It does seem faster than expected.
- koolba 7y ago
  I had to look up “paramotor”[1] as had never heard of it. That looks pretty fun but it’s definitely in the splurge category. Looks like it might lead to some extra medical bills too! [1]: https://en.m.wikipedia.org/wiki/Paramotor https://en.m.wikipedia.org/wiki/Paramotor
distantaidenn 7y ago
What's supposed to happen in 12 months?
- Cofike 7y ago
  Turn 30, I presume.

chubs 7y ago

I am not a financial advisor, but... start with 10%. Use high-interest savings accounts if you need to dip into the money unpredictably. Use term deposits if you'll need to access the money in a year (shares might dip in that time). Use index funds if you won't need the money for a decade (index funds aren't very risky at that time horizon). And start putting away money for your kids the moment they're born, find something that tax-effectively allows you to transfer the money into their name when they turn 20ish without some form of capital gains on their behalf. Consider spreading it around to some different accounts so that if one investment goes under you don't lose the lot.

bloaf 7y ago
https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ https://www.mrmoneymustache.com/2012/01/13/the-shockingly-si... Savings rate is basically the only number that matters in determining how long until you can comfortably retire. A 10% savings rate puts you on track to retire in ~50 years, starting from zero and given some conservative assumptions.
- chubs 7y ago
  Wow, 10% really doesn't get you very far, does it! Well, maybe people should aim higher. In my case, i'm less worried about retiring early, and more interested in saving so my kids can more easily buy their first house.

ram_rar 7y ago

Please dont ruin your present to become financially independent. I know people who cut their own hairs and do a whole lot of stuff to micro optimize their savings. That kind of lifestyle is just not worth it. As long as you're being mindful of being cash flow +ve and save some $ for rainy day, you're good. I Started with 1. Emergency fund (6months+ expenses or whatever you're comfortable with), 2. 401(k) / IRA (if you're employer provides it), 3. indexing (simple plain old vanguard low fee fund). thats about it, nothing more. I am a chase private client, own a house and could probably retire within next 3 yrs or sooner if I really wanted to... I dint think of FI all the time, it just happened.

droithomme 7y ago
> I know people who cut their own hairs I've had my partner cut my hair for many years; this was less time investment than going to a stylist. Now I just shave it. For some it's fine. If someone wants to have it styled that is great too.
neilv 7y ago
Emergency fund + max out tax-advantaged account contributions + your-age-in-bonds-percent low-expense-ratio index investing = great Bogleheads advice. What's funny is a marine biology grad student in the article wondering how much they should be saving. Until one finishes that PhD, career investment and putting the, say, $100/month discretionary stipend funds towards healthy food and bicycle safety maintenance, rather than eating instant ramen noodles to save an amount that will make negligible difference in retirement, makes sense. (Or, if trust fund grad student, especially in a difficult field like marine biology, live like a grad student on stipend, and Bogleheads the rest.)
bloaf 7y ago
>That kind of lifestyle is just not worth it. Different people have different tolerances. For some, a spartan lifestyle "costs" them nothing at all.
ianai 7y ago
I seriously hate 401k-s. I’ve got about 20 options to choose from and all of them tank if the market tanks. (This is what’s available through my employers plan) I should be able to specify that for the next 12-months I want everything going into precious metals, if I want. I think having to wait until retirement age for tax purposes is ridiculous as well. The street clearly benefits more from it than I do.

droithomme 7y ago

At least 10% annually and give another 10% at least to charity. I liked to put some in stocks I already had decided on, but also a bit in cash, then when there was a panic and prices dropped, I grabbed a bunch of things I already had and knew were solid. Not a gambler, just an observer that likes a bargain and is patient.

vips7L 7y ago
10% to charity? I don't think that is realistic at all.
- droithomme 7y ago
  That's great! It really should be more as you point out, I typically give around 30% each year. But I know that is a bit higher than most. 10%'s kind of traditional "tithing" which is why I mentioned that, but that should be the lowest probably. Of course people can also choose not to give back at all. One of the great things about being in the tech field and making an enormous salary is it gives us the power to influence the direction of society through targeted donations. One charity I've supported for years keeps trying to have a "gala" in my honor. I tell them forget it, and for goodness sake keep me anonymous. Sheesh. Trouble like a gala I don't need.
  - geowwy 7y ago
    This sounds a lot like a humble-brag :)
    - grandmczeb 7y ago
      > One charity I've supported for years keeps trying to have a "gala" in my honor. I tell them forget it, and for goodness sake keep me anonymous. More than sounds like IMO...
    - eagletusk 7y ago
      supporting those less fortunate, that's admirable.

dannykwells 7y ago

I am the same age - we save/invest around 30-40% of our post-tax income.

wsdfsayy 7y ago

$800k for retirement seems very low...

bloaf 7y ago
"Low" is a relative term, and so we must ask "low compared to what?"
- temp99990 7y ago
  If you retire at 65 and live to 100, you’re supposed to live on $20k a year pre-tax (assuming you’re withdrawing from a pre-tax account like a 401k)? That isn’t going to work.
  - Izkata 7y ago
    Those numbers seem to assume none of it is invested... You can get, averaged over several years, something like $50k/year from that.
    - temp99990 7y ago
      And if the market crashes when you are retired? What are you supposed to do? I don’t think it’s sound advice to keep your retirement in stocks when you’re actually in retirement...
      - richardw 7y ago
        You only need to keep "crash /recovery" money around, which is a risk because you don't know how long that is. 5? 10? But you also don't know how long you'll live for, so to have your money doing nothing for 20/(30?!) years could hurt. My wife's grandmother is 99. That's a long time in low-growth near-cash.
  - mgkimsal 7y ago
    if that money is coming from selling off some equities, it would likely be long term capital gains, which... I believe the first $x000 are taxed at 0%. Your point about $20k not being much is true, but I also would presume that someone who's saved that much probably would have some social security coming in, at least doubling that.

deleted 7y ago

[deleted]

temp99990 7y ago

I never thought it made sense that people should expect to do nothing for 30+ years of their life. For most the anxiety of boxing yourself into that belief that after a certain day of your life that you can’t earn another dime makes no sense. If you look at the current stats there’s a huge % of people nearing “retirement age” who have nothing saved. Personally I have had a surprising number of Uber drivers who are retired and bored and drive to socialize with others. Although they may be lucky to have saved enough I don’t necessarily think it would be “depressing” for someone who was otherwise of retired age to take on a job that they felt they were capable of doing instead of sitting at home doing nothing all day

JaggedNZ 7y ago

Something I have not seen mentioned yet, it might be obvious? Pay off your debt first! It has a guaranteed return on "investment". The following scheme has worked well for me. First take any employer matched retirement scheme (401(k) / IRA, etc.) and keep some money to build up a rainy day fund if you don't have one (a few weeks income is a good starting point) as theres no point defaulting on a loan because you made extra payments the week or month before. But there is no point saving or investing money that could be going towards paying down a 22% credit card debt or 16% car loan, or even a 5% House loan. The only exceptions would be low interest loans (i.e. <1-2%) with a fixed payoff date. On Mortgages, there are many schemes but I'd advise, 40% 1 year fixed, 40% 2 year fixed, 20% revolving credit, dump any rainy day funds, and any other spare funds, on the revolving loan == interest you don't pay. Keep the fixed term loans expiring every other year so any interest rate spikes only hit half your capital. Disclaimer: I am not a financial adviser and this is not intended as "investment" or "financial advice".

rayraegah 7y ago

;not advise Don't focus on a number but focus on giving yourself some room to breathe. Slowly build a habit of saving money by snowballing money into a savings account to start. Don't measure your worth by money. I didn't consider saving until I bought the engagement ring (which left me at a bank balance close to 0 and it wasn't the first time). I was 27 years old. I started setting aside some money as a cash reserve (bucket #1) and I made sure there was enough money to: - get me through two months on rent (3,000 GBP) - feed myself for two months (400 GBP) - buy one flight ticket home (to parents basement)(700 GBP) Once bucket #1 was full, I started tossing money into bucket #2 which was disposable income stashed in a decent interest paying savings account. This was for rainy days and the future. By the time I was 29, I had about 10,000 GBP in savings between the two buckets. A good portion of it was spent on our wedding and honeymoon (from #2). By 30 I had 15,000 GBP in savings. Most of that was spent when I moved to Tokyo (damn moving costs). I had $1,000 USD left; it was a fresh start. I'm 32 now and I have about one year worth of living expenses in savings and then some. I make monthly contributions towards a pension, life-insurance, and a retirement fund (bonds).

RickJWagner 7y ago

Very glad to see this article, packed with good advice. Financial education is so important, yet so seldom presented. It literally can make a HUGE difference in quality of life. Everyone should at least understand the basic blueprint of how to care for your own financial future. For those who haven't seen it yet, a great next step is to visit Bogleheads.org. A great community of knowledgeable savers, including many who never earned a great salary but still have managed to assure their own future. If you haven't seen it, check it out!

ojhughes 7y ago

The big problem I have with saving lots is expensive hobbies! My current dilemma is whether or not to embark on a campervan conversion project.