Now’s the time get on track, to make the right moves that will build on this first big milestone and set the course for a comfortable financial future. Knowing what the “right moves” are to be sure you are “on track” is the tricky part.

Job? Check!

Congratulations! No matter what road you took, you are now in the work force with a real job.

At least for a while, there is no “out” any more – no more schooling or Uber driving at night. You’re full-time now.

So now’s the time get on track, to make the right moves that will build on this first big milestone and set the course for a comfortable financial future.

Knowing what the “right moves” are to be sure you are “on track” is the tricky part.  They differ for everyone. As a result, experts are shy about giving specifics and published information on the topic is usually so general that it essentially gives no guidance at all.

With a clear bogey of what being “on track” means when it comes to your money, most people can people figure out the moves that are right for them.

So here goes — here’s where you should be by your late 20’s with your money:

  1. Saving 10% of your income overall, and each month spending less than you earn.
  2. Carrying no credit card debt. Credit cards are being paid off in full every month.
  3. Maxing out on your 401(k) and other available retirement accounts.  Maxing is challenging but at a minimum you should be contributing enough to get matching contributions from your employer available.
  4. Keeping an emergency fund of 3-6 months of expenses in a handy account. Sometimes expenses spike in a given month but you are ready with this cushion. Replenish it every time you use it.

Consider Anthony and Eliza below who represent two people who are “on track” in their late 20’s – based on the Fidelity Retirement Score calculator.

anthonyAnthony, 28
Lives with roommates in Chicago

  • $45,000 salary
  •  $10,000 retirement savings at work
  • $6,000 IRA
  • No credit card debt
  • Saves $600/mo total in retirement vehicles
  • $9,500 in savings account

What’s next for Anthony:

  • Try to max 401(k)
  • Extra savings for a home

Eliza, 29
eliza
Lives with parents in Boston

  • $32,000 annually
  • Company has no 401(k)
  • $19,000 IRA
  • No credit card debt
  • Saves $400/mo total in retirement vehicles
  • $12,000 in savings account

What’s next for Eliza:

  • Keep paying student loan

Where you live geographically and whether you live on your own determine how quickly you can get to these levels.  How much you go out and eat out is also a factor for most people.  With these principles, and these examples in mind, however, you can get aggressive about socking away the savings that will get you on track.

Doing this in your twenties puts time on your side.  Plus, you’ll have the peace of mind that comes with simply knowing how to do it.  Later, when life throws its inevitable curve balls your way, getting back on track will be easier, with a good base in place.

2 thoughts on “Where you should be by your late 20s with your money”

  1. I love the way you gave scenarios to help illustrate the many different situations our young adults experience. I am sharing this with my oldest three kids – ages 23, 25, 27. These three are all out of college and working; somehow I ended up with a spender, a saver, and one in between. I keep talking with them about saving for retirement. Surprisingly it is the youngest that has set up her IRA.

    1. Please share their thoughts. I’ve heard from one woman in her 20’s that she “cannot get behind this” because it does not fit the model of the person in their 20’s pursuing the entrepreneurial/start up model. It’s true, it doesn’t, because entrepreneurs are forgoing savings now in the hope/plan of having more later, which works just fine as long as they eventually get there. There is no “model” of how to get there so we want to hear and learn from everyone’s stories.

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