Finance for hitting 25

[Chitownfinest]

I'm always curious as to what I should be targeting, financially, when I reach the age of 25. What is "in good shape" for a 25 year old? I've been out of college and working since September of 2012, where I started with a bank account of $0.

Savings: $17,600
401k: $570 (I place 4% of my salary, and my company matches 3%)

Salary: $45,000
Rent/utilities/bills/groceries: $800/month

I have no debt, and a car with about 60,000 miles on it that I drive once every 3 months, so I shouldn't need a replacement for quite awhile.

Should I start putting my money in mutual funds for it to grow? I turn 25 in about 8 months, so I'd like to see what my next steps should be. I generally save about $1,200 a month, so I know I should probably be putting more into my 401k, but I never know what the average person should be spending a month.

Thanks!

[snafu]

simple rule of thumb...3 months basic expenses for an Emergency Fund, should you lose employment, ill - medical costs,something goes truly awry. 20% savings of which 10% to retirement plan. you need to know what you hold in your 401k, fees and MER [management expense ratio]. Ideally, no more than 50% of income for living expenses like rent, insurance, auto, food, utilities. That leaves 30% for the things that you enjoy. Call them 'wants,' Clothes, fun, entertainment, family, friends, TV, cable, restaurants, vacations - pleasure.

Obviously if you make more save more, invest more. Where are you with 20/50/30 formula?

[Eagle]

I'm always curious as to what I should be targeting, financially, when I reach the age of 25. What is "in good shape" for a 25 year old? I've been out of college and working since September of 2012, where I started with a bank account of $0.

Savings: $17,600
401k: $570 (I place 4% of my salary, and my company matches 3%)

Salary: $45,000
Rent/utilities/bills/groceries: $800/month

I have no debt, and a car with about 60,000 miles on it that I drive once every 3 months, so I shouldn't need a replacement for quite awhile.

Should I start putting my money in mutual funds for it to grow? I turn 25 in about 8 months, so I'd like to see what my next steps should be. I generally save about $1,200 a month, so I know I should probably be putting more into my 401k, but I never know what the average person should be spending a month.

Thanks!

Re: Debt
Congrats on being debt free at such a young age!

Re: Savings
Looks like you have a nice savings account balance. Congrats! Saving $1200 a month is great! How many months of expenses is 17.6k? What are your total monthly expenses?

Re: Retirement
Consider opening up a Roth IRA. You can put $5500 in a Roth IRA each year.

A Roth IRA is similar to a savings account, but unlike a savings account, you invest this money to generate a sizable profit. That profit is then reinvested in the Roth IRA until the maturity date of the account. Because you invest your money into a Roth IRA after taxes, you don't have to pay taxes on the earnings upon withdrawal of the funds at or after the maturity date.

Soruce: http://money.howstuffworks.com/perso...g/roth-ira.htm

Also, consider boosting your 401k by contributing an additional $200-300 per month.

Yes! Consider opening up a mutual fund. Most people I would imagine recommend low/no cost index mutual funds. Consider Vanguard and/or Fidelity when looking at your options.

[dczech09]

It is recommended that you put 15% of your income into retirement investing. You can use a combination of your 401k and a Roth IRA. Opening a Roth IRA at age 25 is an EXTREMELY good idea!

But first, you should do some reading and studying. Understand stocks, bonds, and mutual funds. Be comfortable with the financial markets before you put money into them. This is extremely important, otherwise you risk making stupid decisions like pulling money out when the market is rocky. Gain confidence in the market place for the long-term, then get going on investing.

I would recommend EASING into the investing world. You don't jump into a hot tub; you ease into it. Same with investing. Start out small and build up your investment contribution gradually.

Your goal for investing is as follows:

Income: $45,000
Investment: $6,750 (15% of income)

Start by contributing enough to get employer match (3%): $1,350
Roth IRA: $5,400
Total: $6,750

The Roth IRA maxes at $5,500, but 15% of your income is only $6,750. So I would consider just contributing 15% for right now, then build a savings for a house down-payment, etc. Set a date when you want to be investing 15% of your income systematically every month. Then gradually build up to that point.

You only drive your car once every 3 months? I would try to drive it more frequently than that, or possible sell it and use public transit or rental if and when you need a car. The reason why is that a car becomes less and less reliable the longer it just sits. I had a 2005 Toyota Corolla that I drove very infrequently as I have a company car. The Toyota would just sit there and whenever I would take it out, it would have some problems. Mechanics said it is because of sitting and not operating, the gears and such get "used" to sitting still. Your car may actually become more of a liability due to sitting idle so much. Just a quick thought!