What to allocate towards after emergency fund is built?

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muitu
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Joined: Thu Feb 03, 2022 8:48 am
Location: Buffalo, NY

What to allocate towards after emergency fund is built?

Post by muitu »

My soon-to-be-wife is 23 and makes approx. 74k gross (nurse). I am 24 and make 45k gross (banking). We both started working & saving in November of 2021, so it hasn't even been a full year working for us.

We are very disciplined in our finances. Max Roth, high % allocation for 401k, put a portion into savings every paycheck and do not touch it.

I currently have around 5k in savings. She, on the other hand, has around 20k. We just moved into an apartment that costs $1,200/month. We have no loans besides her student loan (65k) - she doesn't pay it yet, her father hasn't switch the payment to her and has been paying it for her. She will take it over in the short future though.

I feel like we're doing all we can saving and investment wise. We keep around $200 to $300 in our checking after our paycheck to last us 2 weeks. She has that 20k in her savings though. I feel like 20k from her and 5-10k from me is a good emergency fund. After that, I feel like that money should be not be sitting in savings. Should we both allocate what we would put in savings toward her loan? Or maybe tell her to increase her 401k %? The Boglehead in me says hammer the loan down - suggestions?
"Wealth consists not in having great possessions, but in having few wants." - Epictetus
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retired@50
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Re: What to allocate towards after emergency fund is built?

Post by retired@50 »

muitu wrote: Sat Jul 02, 2022 8:14 am ... suggestions?
It looks like you're off to a solid start.

When deciding about investment priority, the Bogleheads have a wiki page that might help.

Prioritizing Investments: https://www.bogleheads.org/wiki/Priorit ... nvestments

Keep in mind that all the steps may not apply to your situation, but it may also give you some new ideas about ways to save you hadn't yet considered.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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retiredjg
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Re: What to allocate towards after emergency fund is built?

Post by retiredjg »

You are definitely off to a solid start.

At your ages, saving anything for retirement puts you way ahead of normal. By that I mean saving anything in Roth IRA and/or 401k is a huge plus. I would not worry about not max-ing them out because your early starts have put you ahead of schedule.

I would put extra money, when you have it, toward the loan. When that is done, I would start saving for house/kids because both of those things are very expensive but you should be able to afford them long before your peers.

An alternative approach would be to take care of the loan and then max the retirement accounts. When you want to save for house/kids, you can stop retirement savings entirely for a few years (except for getting a match)....again, because you are already ahead of schedule.

The bottom line is that it does not matter exactly where you put the extra money because it is all moving you toward the same goal.
toddthebod
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Re: What to allocate towards after emergency fund is built?

Post by toddthebod »

  • Increase 401k contributions
  • Save for a downpayment
  • Save for other anticipated large expenses (new car? wedding?)
  • Take a nice vacation to Hawaii
I wouldn't rush into paying down her student loans. Consider the interest rate and look into the Public Service Loan Forgiveness program (most hospitals are non-profit and qualify.)
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AnnetteLouisan
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Re: What to allocate towards after emergency fund is built?

Post by AnnetteLouisan »

Since you both just started working, in your shoes I would build up savings to $60k and only then start investing. You will need work wardrobes, you may have unreimbursed job expenses and you will need to learn the ropes at work and get to know your colleagues better over meals and activities, while making time for stress relieving activities and furnishing your home. You both need to get past any probationary period at work before relying too much on those incomes. Agree that the student loan can be paid off gradually over time.

Full Disclosure: I did the opposite. In my 20s I paid off my loans (student loans and cc debt) instead of building a proper work wardrobe and professional image for my field (too expensive), joining professional associations to learn more about my field (too expensive) and taking care of my health / vacations given the stress of transitioning from school to FT employment (a stressful and major life transition). In my case that was penny wise and pound foolish and I wish I could have done things differently. I had very few opportunities to get appropriate guidance. My student loans would have been far easier to pay off had I waited until my income was a bit higher.

Take the long view and prioritize the intangibles that will help you maintain your productive employment for life. Listen to your generous father in law and cultivate that relationship. Congratulations on your engagement.
Dottie57
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Re: What to allocate towards after emergency fund is built?

Post by Dottie57 »

You are doing well.

Make sure you enjoy your life too. There are inexpensive things to do. Save for a vacation. These are worthy too.
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