Paycheck Breakdown, Debt/Savings/Investment Plan

Investing
#1

Hey Jeremy! Hope all is well!

I wanted to reach back to you to speak about my budget and retirement plans. I just started working about 2 weeks ago and wanted to plan ahead for my paycheck. I live with this concept of giving every penny a home.

Right now, I am investing in my 401k up to my company’s match which is about 5% of my income. Roughly $160 per paycheck. I get paid bimonthly

I’m also contributing about $50 per paycheck to my HSA.

I haven’t gotten my paycheck after I enrolled in my 401k and HSA so I am ball-parking part of my paycheck but roughly about $2,200 (post tax) bimonthly.

My first paycheck will be used for bills, housing, food, bills etc.
My second paycheck, I am trying to break up into the following. (This is what I would love your advice in)

  • 2,200
    -> $500 into a RothIRA (still contemplating about going with Vanguard or Fidelity, any advice between the two)
    -> $800 - credit card (I’ve paid about $8k in the last couple of months. Still have about $12k left. So I am putting more money into this) I have 0% APR until January so that’s why I decided to contribute to my Roth before paying off my credit card.
    -> $500 in a high yield savings account, currently have about $4,400 saved.
    -> $400 paying off student loans. All of my loans are federal and below 5%

Is there anything I should change or move around? Any advise would be great. Thank you again!

#2

Welcome @AvocadoSTEM!

Well damn. Congrats to you on killing it. That’s exciting and amazing that you are this focused with this kind of plan early in your career. If you change nothing, I’m sure you will be a great financial success in your future.

BUT SINCE YOU ASKED, I’d probably take a more focused approach. Right now with that second paycheck you’re trying to do 4 different things. Just do one thing at a time, that’s the next most optimal thing. In my opinion, that’s the credit card debt. So put 100% of it toward the credit card debt. When that’s gone (in about 6 months, right?!) then you have ZERO CREDIT CARD DEBT FOR THE REST OF YOUR LIFE. That means more of your income, no longer encumbered by making the banks rich and further accelerating your wealth building process. Next up, the student loans. Pay them down to zero. Same logic. No debt = no anchor weighing you down. Then the savings. THEN when you’re in a position of ZERO DEBT, ZERO PAYMENTS, no negative interest, cash buffer. You can put ALL $2,200/month into investing with no risk. That spells building massive wealth very quickly. I break down this priority more in the phases of investing:

You don’t want that second paycheck going to debt your whole life. Attack it early and hard to break out of the trap. :slight_smile: