Hi!
I’m 24 and I’m about a year in to my first full time job. I live at home still so I’m trying to take full advantage of that while I still can and save as much as possible. I have a budget and an emergency fund.
I don’t have an employer match, so i opted to open a Roth IRA instead for more flexibility and tax stuff. I maxed 2025 this year, and I’m about to max 2026 soon using savings. I haven’t gotten into any other investing or planning besides getting started on this account, because I know it’s important.
Looking at other things, like an individual brokerage account or CDs or whatever, I know it’s super important to have your goals defined so you can plan accordingly. The problem is, I have no idea what is realistic or reasonable. I sometimes see people with very clearly defined goals like an exact age they want to retire but I have zero clue how to define those.
Ideally, I’d want to retire at 55 and buy a house in the next 3-5 years. I think that is probably super unlikely though. But I don’t know! I also have more short term goals, like I want to buy a new car in the next year or less, but I don’t know WHEN I should start saving or HOW MUCH i need to save.
How are you guys determining a realistic timeline for things so you can plan accordingly? Is there some sort of calculator or rule of thumb? Sorry if I sound stupid. I am. Please ELI5!!!
Posted by snug666
4 Comments
Don’t stress – your future spending needs/wants, along with your income and financial ‘events’ are nearly impossible to predict at 24.
I look at it in terms of priority. Having basic needs like food/rent is #1. But once that’s met, savings goals for me are/were:
1) Retirement. Financially, retirement is when you have no job, no ability to get a job, and yet you need decades worth of savings. Lack of options == most important. 15% is a good rule of thumb (it was 10% when I was your age). Retiring at age 55 requires more planning, but honestly, 15% should get you there (very roughly saving 15% of your income at just 5% real returns gets you `=FV(5%, 55-24, -0.15)` =10x your income).
2) Big items (house, car): Estimate the money needed, and simple math (or time value of money equations) show you how much you need to save
3) Everything else. Having extra savings is nice, but if you’re not maxing #1 and #2 involves high-interest loans, you’ll not get here.
>Ideally, I’d want to retire at 55 and buy a house in the next 3-5 years.
>I want to buy a new car in the next year or less,
In a few sentences, you just defined 3 goals. Now you should identify what you need to achieve each goal by the specified date, and then work towards acquiring it. For example, to achieve the state of “retirement”, you need your passive income to cover 100% of your expenses (including tax and insurance expenses, which are normally hidden in paychecks). Find out how much your retirement accounts need to get to by age 55. And then calculate how much you need to save each year starting from now.
Success is relative. I try to make small improvements often so I know I am making progress and headed in the right direction. A year into your first full time job is a good place to focus on budgeting and increasing your savings rate. Track your expenses each month and evaluate your spending to see if you are doing better this month than last month, this quarter than the previous quarter, etc. The process of tracking your expenses will naturally cause you to evaluate your spending and for most people will tend to decrease frivolous expenses. This can help you bank more money each month and build up your emergency fund. The other side of the equation is your income. A year in at the job is a good time to start asking for a raise, and also to start looking at alternative job options to see if you can get better pay somewhere else. Roth IRA is good for retirement, high yield savings account is good for an emergency fund, and if you already have Roth maxed and already have your emergency fund at 6-12 months of typical expenses then you could consider a taxable brokerage account or CDs depending on when you will need the money. To even be thinking about it and working on it is a win. Best of luck!
You can sit down and see how much money you make, how much a house costs, and think “why do i want to a house”