23 and on my own, what should I be doing?
"Congratulations on earning a great income. However, you have a lot of debt and very high living expenses. This will eat all of your income if you don't get a hold of it now. I have a few recommendations for you.  At the beginning of each month, write down your income, and write down all your expenses for the month. Include everything: rent, food, utilities, entertainment, transportation, loan payments, etc.  After you've made this plan for the month, don't spend any money that's not in the plan. You are allowed to change the plan, but you can't spend more than your income. Budgeting software, such as YNAB, will make this easier.  You are $51,000 in debt. That is a lot. A large portion of your monthly budget is loan payments. I recommend that you knock those out as fast as possible. The interest on these loans makes the debt continue to grow the longer you hold them, which means that if you take your time paying these off, you'll be spending much more than $51k on your debt. Minimize that number and get rid of them as fast as possible. Because you want to get rid of the debt emergency as fast as possible, you should reduce your spending as much as you can and pay as much as you can toward the debt. Pay off that furniture first (the interest rate on that ""free money"" is going to skyrocket the first time you are late with a payment), then attack the student loans. Stay home and cook your own meals as much as possible. You may want to consider moving someplace cheaper.  The rent you are paying is not out of line with your income, but New York is a very expensive place to live in general.  Moving might help you reduce your expenses. I hope you realize at this point that it was pretty silly of you to borrow $4k for a new bedroom set while you were $47k in debt. You referred to your low-interest loans as ""free money,"" but they really aren't. They all need to be paid back. Ask yourself: If you had forced yourself to save up $4k before buying the furniture, would you still have purchased the furniture, or would you have instead bought a used set on Craigslist for $200? This is the reason that furniture stores offer 0% interest loans. They got you to buy something that you couldn't afford. Don't take the bait again.  You didn't mention credit cards, so I hope that means that you don't owe any money on credit cards. If you do, then you need to start thinking of that as debt, and add that to your debt emergency. If you do use a credit card, commit to only charging what you already have in the bank and paying off the card in full every month. YNAB can make this easier.  $50/hr and $90k per year are fairly close to each other when you factor in vacation and holidays. That is not including other benefits, so any other benefits put the salaried position ahead. You said that you have a few more years on your parents' health coverage, but there is no need to wait until the last minute to get your own coverage. Health insurance is a huge benefit. Also, in general, I would say that salaried positions have better job security. (This is no guarantee, of course. Anyone can get laid off. But, as a contractor, they could tell you not to come in tomorrow, and you'd be done. Salaried employees are usually given notice, severance pay, etc.) if I were you, I would take the salaried position.  Investing is important, but so is eliminating this debt emergency. If you take the salaried position, one of your new benefits will be a retirement program. You can take advantage of that, especially if the company is kicking in some money. (This actually is ""free money."") But in my opinion, if you treat the debt as an emergency and commit to eliminating it as fast as possible, you should minimize your investing at this point, if it helps you get out of debt faster. After you get out of debt, investing should be one of your major goals.  Now, while you are young and have few commitments, is the best time to learn to live on a budget and eliminate your debt. This will set you up for success in the future." "Assuming the numbers in your comments are accurate, you have $2400/month ""extra"" after paying your expenses.  I assume this includes loan payments. You said you have $3k in savings and a $2900 ""monthly nut"", so only one month of living expenses in savings. In my opinion, your first goal should be to put 100% of your extra money towards savings each month, until you have six months of living expenses saved.  That's $2,900 * 6 or $17,400.  Since you have $3K already that means you need $14,400 more, which is exactly six months @ $2,400/month. Next I would pay off your $4K for the bedroom furniture.  I don't know the terms you got, but usually if you are not completely paid off when it comes time to pay interest, the rate is very high and you have to pay interest not just going forward, but from the inception of the loan (YMMV--check your loan terms). You may want to look into consolidating your high interest loans into a single loan at a lower rate.  Barring that, I would put 100% of my extra monthly income toward your 10% loan until its paid off, and then your 9.25% loan until that's paid off.  I would not consider investing in any non-tax-advantaged vehicle until those two loans (at minimum) were paid off.  9.25% is a very good guaranteed return on your money. After that I would continue the strategy of aggressively paying the maximum per month toward your highest interest loans until they are all paid off (with the possible exception of the very low rate Sallie Mae loans).  However, I'm probably more conservative than your average investor, and I have a major aversion to paying interest.  :)" You are asking all the right questions. I predict a bright future! In addition to the excellent advice from Phil, I would add that NOW is the time to think about investing. If you have not yet started a retirement account, open up a Roth IRA and max it out ($5.5k in 2014) every year. The time value of money is strong and you will be thanking yourself in 40 years for starting now. Yes, paying down debt is important, and you should do that, too. It's a balance. If you get converted to a full-time employee, take part in any retirement plan they offer, and max out any matching because it's free money. Okay, since you work hourly there are two substantial changes you can make: 1) Move out of Astoria and closer to Jersey City, such as, to Jersey City. Move out of NYC into Jersey!? Heresy! But that ship sailed when you started working there. 2) Work more hours now that you aren't spending 2 hours and 30 minutes of your life commuting. You can make an extra $125 per day, in theory. Since this is $625 more a week, and $2500 a month, it is a substantial change you can make. Presupposing that your current contract has more hours to work. "You are doing Great! But you might want to read a couple of books and do some studying on budgeting and personal finance - education yourself now and you will avoid pain in the future. I learned a lot from reading Dave Ramsey's Total Money Makeover, and I have found some great advice from the simple budgeting guidelines on LearnVest. Budget in these three categories with these percentages, You may find that your ""essentials"" lower than 50%, because you are sharing room and utilities. You want to put as much into ""financial"" as you can for the first 1-2 years, to reduce (or eliminate) your student loan debt. Many folks will recommend you save six months (salary/expenses) for emergencies and unexpected situations. But understand that you are in debt now, and you have a unique opportunity to pay off your debt before your living expenses creep up (as they so often do). Since you are a contractor, put aside 2 months expenses (twice what I would normally advise), and then attack paying off your debts with passion. Since you have a mix of student loans, focus on paying them off by picking one at a time, paying the minimum against the others while you pay off the one you picked, then proceed to the next. Dave Ramsey advises a Debt Snowball, paying the smallest one first (psychological advantage, early wins), while others advise paying the highest interest off first. Since you have over $2400/month available to pay down debt, you could plan on reducing your student loan debt substantially in a year.  But avoid accumulating other debt along the way. Save for larger purchases. Your bedroom purchase may have been premature, but you needed some basics. But check your contract. Since many 0% furniture loan deals retroactively charge interest if you don't pay them off in full - you might want to make regular payments, and pay the debt off a month early (avoid any 'gotcha's). You might want to open a retirement account - many folks recommend a Roth account for folks your age - it is after tax, but you don't pay tax when you withdraw money. Roth is better when you have lots of deductions (think mortgage, kids). But some retirement account would be great to get started. Open a credit union account (if you can), that will make getting a credit card or personal loan (installment) easier. You want to build a credit file, but you don't want credit card debt (seems contradictory), so opening 2 credit cards over the next year will help your credit. You want a good credit mix (student loans, revolving, installment, and mortgage - wait on that one)." I also had a student loan and glad you are taking a good look on interest rate as it really makes a huge difference. One of the strategies I followed was since my credit improved as I stepped out of school. I took advantage of a good 0 percent credit card. I applied for discover and got a decent credit limit. There are 2 particular things you are looking for in a credit card in this situation  Usually the initial $0 transaction charge is only for a couple of months so ensure you take advantage of that. What is the benefit: Imagine being able to pay off that higher interest rate balance with 0% and not have to worry about it immediately. That way you save on the interest you would be paying and stress as well Watch out for: Although you have to ensure that you do payoff the money you paid through the 0 percent credit card ( which may have been put off for a year or even 15 months or so) other wise you may have to pay it all at once as the offer is expiring. Note: for credit cards ensure to note when the 0% is expiring as that is usually not mentioned on the statement and you may have to call the customer service. I was in a similar situation and was able to pay it all off fairly quickly. I am sure you will as well.
"You should certainly look into investments. If you don't expect to need the money until retirement, then I'd put it in an IRA so you get the tax advantages. It makes sense to keep some money handy ""just in case"", but $23k is a very large amount of money for an emergency fund. Of course much depends on your life situation, but I'm hard pressed to think of an unexpected emergency that would come up that would require $23k. If you're seriously planning to go back to school, then you might want to put the money in a non-retirement fund investment. As I write this -- September 2015 -- the stock market is falling, so if you expect to need the money within the next few months, putting it in the stock market may be a mistake. But long term, the stock market has always gone up, so it will almost certainly recover sooner or later. The question is just when. Investing versus paying off debts is a difficult decision. What is the interest rate on the debt? If it's more than you're likely to make on an investment, then you should pay off the debt first. (My broker recently told me that over the last few decades, the stock market has averaged 7% annual growth, so I'm using that as my working number.) If the interest rate is low, some people still prefer to pay off the debt because the interest is certain while the return on an investment is uncertain, and they're unwilling to take the risk." "You are your own worst enemy when it comes to investing. You might think that you can handle a lot of risk but when the market plummets you don't know exactly how you'll react. Many people panic and sell at the worst possible time, and that kills their returns. Will that be you? It's impossible to tell until it happens. Don't just invest in stocks. Put some of your money in bonds. For example TIPS, which are inflation adjusted treasury bonds (very safe, and the return is tied to the rate of inflation).  That way, when the stock market falls, you'll have a back-stop and you'll be less likely to sell at the wrong time. A 50/50 stock/bond mix is probably reasonable. Some recommend your age in bonds, which for you means 20% or so. Personally I think 50/50 is better even at your young age. Invest in broad market indexes, such as the S&P 500. Steer clear of individual stocks except for maybe 5-10% of your total. Individual stocks carry the risk of going out of business, such as Enron. Follow Warren Buffet's two rules of investing:  a) Don't lose money b) See rule a). Ignore the ""investment porn"" that is all around you in the form of TV shows and ads. Don't chase hot companies, sectors or countries.  Try to estimate what you'll need for retirement (if that's what your investing for) and don't take more risk than you need to. Try to maintain a very simple portfolio that you'll be able to sleep well with. For example, check into the coffeehouse investor  Pay a visit to the Bogleheads Forum - you can ask for advice there and the advice will be excellent. Avoid investments with high fees. Get advice from a good fee-only investment advisor if needed. Don't forget to enjoy some of your money now as well. You might not make it to retirement. Read, read, read about investing and retirement. There are many excellent books out there, many of which you can pick up used (cheap) through amazon.com." Congrats on making it this far debt free. It is rare, but nice to be in the situation that you are in.  The important thing here is that you want to remain debt free. That's really what the emergency fund is all about: it keeps you from needing to go into debt should something unexpected happen.  You've got 1.5 months worth of expenses saved up, and that's great. If you don't have a family or other responsibilities, that might be enough, but think about this: how are you paying for school, and what would happen if those funds stopped coming in? If you are paying for school out of your own income, what happens if you lose your job? If someone else, perhaps your parents, is paying for school, what happens if they are suddenly no longer able to do so?  While you have extra cash, you want to be saving it up for situations like this.  If I were you, I would build up that emergency fund until it got to the point where it could pay all your expenses and tuition until graduation. Hopefully, you won't need to touch it, but it will be there if you need it.  Since you need to be able to access your money quickly, it is generally recommended to park this money in a savings account, where it is very safe. Mutual funds are a great way to invest, but they are not safe in the short term.  Don't stress out about not being able to start retirement investing just yet. Making sure you can finish school debt free is the best investment you can make right now. After you graduate and land a job, you can start investing aggressively. The compound interest argument is a good one.  While you are young, it is important to save, since time is on your side for compounding of interest.  I think the 401K is a good idea, but not for all of your savings.  Think about saving a percentage of your income, but put it in a couple places. Your Roth is also a great thing, since you'll be able to remove money without paying tax again.  The 401k (tax deferred) is a good idea if your company matches any of it (FREE MONEY!), and because it lowers your taxable income now, and it's taken out of your check before you see it, so you don't miss it.  It's still important to save other money that you can have for ready cash (unexpected dead car, for example, or medical bills, or what have you.) I find that I don't want to be managing my investments from minute to minute, or doing my own trades (I'd rather do other things), so I have a mix (Roth, 401k, cash savings) of automated contributions for savings, and I think hard before buying new stuff.  The point is to save, and if possible, try to save at least 10% of your income. "It all depends on what your financial goals are when you are ready.  You sound like you could be ready today if you wanted to be.  The steps that I would take are. Create a monthly draft budget.  This doesn't have to be something hard and fast, just a gague of what your living expenses would be compared to your after-tax salary.  Make sure there  would be room for ""fun"" money. a. Consider adding a new car fund line item to this budget, and deducting that amount from your paycheck starting now so that you can save for the car. Based on the most realistic estimate that you can make, you'll get a good idea if you want to spend the money it takes to move out alone now or later.  You'll also see the price for various levels of rentals in your area (renting a single family home, townhouse, condo, apartment, living in a rented room or basement, sharing a place with friends, etc) and know some of the costs of setting up for yourself.  Since you're looking at the real estate market, you may want to do a cost comparison of renting versus buying.  I've found the New York Times interactive graphic on this is excellent.  If you are looking to buy, make sure to research the hidden costs of buying thoroughly before taking this step. To answer your last question, if you have the cash you should consider upping your 401K investment (or using Roth or regular IRA).  Make sure you are investing enough to get your full employer match, if your employer offers one, and then get as close as you can to government maximum contribution limits.  Compound interest is a big deal when you are 23." "Your goals are excellent. I really admire your thoughts and plans, and I hold you in high esteem. Good credit is indeed an important thing to have, and starting young is THE smart idea with respect to this. I see that you have as a goal the purchase of a home. Indeed, another fine ambition. (Wow, you are a different breed from what I normally encounter on the internet; that's for sure !) Since this won't happen overnight, I would encourage you to think about another option. At this point in your life you have what few people have: options, and you have lots of them. The option I would like to suggest you consider is the debt free life. This does NOT mean life without a credit card, nor does it mean living with ones parents all their days. In its simplest form, it means that you don't owe anybody anything today. An adapted form of that; with the reality of leases and so on, is that you have more immediate cash in the bank than you have contractual responsibilities to pay others. e.g., if the rent on a place is X, and the lease is 12 months, then you don't sign until you have 12X in the bank.  That's the idea. If there is anything good that these past 10 years of recession and financial disasters have provided us as a nation, it is a clear picture presented to our young people that a house is not a guaranteed way to riches. Indeed, I just learned this week of another couple, forced out by foreclosure again. Yes, in the 1970s and 1980s the formula which anyone could follow was to take a mortgage on a single family house; just about any house in any community; and ten years later double your money, while (during those ten years) paying about the same (and in a few years, actually less) amount of money as you would for an apartment with about half the space. Those days were then, not now, and I seriously doubt that I will ever see them again in my lifetime. You might, at your age, one day. In the mean time, I would like to suggest that you think about that word options again; something that you have that I don't. If your mind is made up for certain that a house is the one and only thing you want, okay; this does not apply. During this time of building your credit (we're talking more than a year) I would like to encourage you to look at some of the other options that are out there waiting for you; such as... I also encourage you to take a calculator and a spreadsheet (I would be surprised if there is no freeware out there to do this with a few clicks) and compare the past 30 years of various investments. For example... It is especially educational if you can see line charts, with the ups and downs along the way. One last thing; about the stock market, you have an option (I love that word when people your age are actually thinking) called ""dollar cost averaging"". If you are not aware of this concept, just ask and I will edit this post (although I'm confident it has been explained by others far better than myself on this very site). Hit just about any solid stock market investment (plain old mutual fund, even with a load, and it will still work) and I believe you'll see what I'm trying to get across. Still, yes, you need a roof, and a young person should clearly plan on leaving parents in a healthy and happy way; so again, if the house is the one and only goal, then go for it kid (uhm, ""kid"", if you're still under 18). All the best. Do remember that you will be fixing the pipes, not the maintenance guy." "First of all, kudos for thinking about budgeting at 21 years old.  So many people don't plan with their money, and years later wonder where it all went. You are doing a lot of things right with your budget.  You've got saving goals, namely your next car and a down payment on a house.  You are saving almost 20% of your income for retirement, which is amazing. I like the luxury fund, too.  It is good to put some money aside that you can spend on whatever you want, guilt free, because you know that everything important is already planned for. When it comes to budgeting, one thing to remember is that your budget does not have to be perfect, and it is not set in stone.  If you find that your amount for ""living costs"" (which I'm assuming includes things like food, utilities, and rent) is too low, you can allocate more money to it and reduce something else.  There is no need to feel bad if you end up having to change some things around in the budget. Congratulations on being debt free!  I would encourage you to stay out of debt.  Keep the credit cards paid in full each month, and save up for your next car so you can pay cash for that, too. Another saving goal that I would recommend adding to your budget would be an emergency fund.  This is basically a pile of cash that is available to you in case something unexpected and urgent comes up that you haven't planned for.  By having the emergency fund in place, you won't be forced to go into debt due to an emergency.  The amount recommended is usually 3 to 6 months' worth of your expenses." "Excellent questions!  Asking such questions indicates something special about yourself.  The desire to learn and adjust your beliefs will increase your chance of success in your life.  I would use a wide variety of authors to increase your education.  Myself I prefer Dave Ramsey to Clark Howard, but I think Clark is very good. The first thing you should focus on is learning how to do and live by a budget.  Often times, adults will assume that you are on a budget because you are broke.  It happens with my friends and my youngest child is older than you.  Nothing could be further from the truth.  A budget is simply a plan on how you will spend your income so you don't run out of money before you run out of month. Along with budgeting I would also focus on goal setting.  This is the type of ""investing"" you should be doing at your age.  For example if your primary goal was to become an engineer, my recommendation is to hold off buying stocks/mutual funds and using your current income to get through school with little or no student loans.   Another example might be to open your own HVAC business.  Your best bet might be to learn the trade, working for someone else, and take night classes for business management. Most 18 year olds have very little earning power.  Your focus at this point should be increasing your income and learning how to manage the income you have.   Please keep in mind that most debt is bad.  It robs you of your income which is your greatest wealth building tool.  Car loans and credit card debt is just plain stupid.  Often times a business case can be made for reasonable student loans.  However, why not challenge yourself to take none.  How much further ahead could you be if you graduate, with a degree, when your peers are strapped with a 40K loan? Keep up the good work and keep asking questions." Try to cash flow as much as you can. You can work and go to school, if you replace playing beer pong with a job you'll be in a lot better off at graduation, grade wise and debt wise. Make a budget, for each month and for each semester, plan cut cost accordingly. Used books, sometimes even the next to recent version. Read this book for more info Debt-Free U: How I Paid for an Outstanding College Education Without Loans, Scholarships, or Mooching off My Parents You have great intentions, and a great future. As far as investing goes, you're a bit early. Unless your parents or other benefactor is going to pay every dime of your expenses, you'll have costs you need to address. $1000 is the start of a nice emergency fund, but not yet enough to consider investing for the long term. If you continue to work, it's not tough to burn through $200/wk especially when you are in college and have more financial responsibility. https://www.google.ca/amp/s/amp.businessinsider.com/most-important-finance-books-2017-1  Bloomberg, finacial times, chat with traders, calculated risk, reuters, wsj, cnbc(sucks), bnn (if canadian)  Audio books on youtube helped me read a lot of finance books in a short amount of time, listen while working out.  One thing that helped me stand out at my student terms (4th year here) was learning outside of the classroom and joining an investment club. Learning programming can help if thats a strength, but its really not needed and  it can waste time if yoi wont reach a point to build tools.  Other than that at 18 you have more direction than i did, good luck! You are kicking butt and taking names, especially compared to most people in your age bracket. I wish I'd had the opportunity (and the sense) to live rent-free and max out my 401(k) when I was 23. Keep doing what you're doing and you'll be able to pull off a Mr. Money Mustache style retirement.  I think you might have misunderstood the question and answer nature of this site. Typically, questions aren't laden with answers, explanations, and suggestions; it should just be the question! You can always ask the question and answer it yourself down below, as some SEers do. To answer your questions towards the end of the post: Good luck, and again, keep doing what you're doing! "I recently moved out from my parents place, after having built up sufficient funds, and gone through these questions myself. I live near Louisville, KY which has a significant effect on my income, cost of living, and cost of housing. Factor that into your decisions. To answer your questions in order: When do I know that I'm financially stable to move out? When you have enough money set aside for all projected expenses for 3-6 months and an emergency fund of 4-10K, depending on how large a safety net you want or need. Note that part of the reason for the emergency fund is as a buffer for the things you won't realize you need until you move out, such as pots or chairs. It also covers things being more expensive than anticipated. Should I wait until both my emergency fund is at least 6 months of pay   and my loans in my parents' names is paid off (to free up money)? 6 months of pay is not a good measuring stick. Use months of expenses instead. In general, student loans are a small enough cost per month that you just need to factor them into your costs. When should I factor in the newer car investment? How much should I   have set aside for the car? Do the car while you are living at home. This allows you to put more than the minimum payment down each month, and you can get ahead. That looks good on your credit, and allows refinancing later for a lower minimum payment when you move out. Finally, it gives you a ""sense"" of the monthly cost while you still have leeway to adjust things.  Depending on new/used status of the car, set aside around 3-5K for a down payment. That gives you a decent rate, without too much haggling trouble. Should I get an apartment for a couple years before looking for my own   house? Not unless you want the flexibility of an apartment. In general, living at home is cheaper. If you intend to eventually buy property in the same area, an apartment is throwing money away. If you want to move every few years, an apartment can, depending on the lease, give you that. How much should I set aside for either investment (apartment vs   house)? 10-20K for a down payment, if you live around Louisville, KY. Be very choosy about the price of your house and this gives you the best of everything. The biggest mistake you can make is trying to get into a place too ""early"". Banks pay attention to the down payment for a good reason. It indicates commitment, care, and an ability to go the distance. In general, a mortgage is 30 years. You won't pay it off for a long time, so plan for that. Is there anything else I should be doing/taking advantage of with my   money during this ""living at home"" period before I finally leave the   nest? If there is something you want, now's the time to get it. You can make snap purchases on furniture/motorcycles/games and not hurt yourself. Take vacations, since there is room in the budget. If you've thought about moving to a different state for work, travel there for a weekend/week and see if you even like the place. Look for deals on things you'll need when you move out. Utensils, towels, brooms, furniture, and so forth can be bought cheaply, and you can get quality, but it takes time to find these deals. Pick up activities with monthly expenses. Boxing, dancing, gym memberships, hackerspaces and so forth become much more difficult to fit into the budget later. They also give you a better credit rating for a recurring expense, and allow you to get a ""feel"" for how things like a monthly utility bill will work. Finally, get involved in various investments. A 401k is only the start, so look at penny stocks, indexed funds, ETFs or other things to diversify with. Check out local businesses, or start something on the side. Experiment, and have fun." First of all, make sure you have all your credit cards paid in full -the compounding interests on those can zero out returns on any of your private investments. Fundamentally, there are 2 major parts of personal finance: optimizing the savings output (see frugal blogs for getting costs down, and entrepreneur sites for upping revenues), and matching investment vehicles to your particular taste of risk/reward. For the later, Fool's 13 steps to invest provides a sound foundation, by explaining the basics of stocks, indexes, long-holding strategy, etc.   A full list Financial instruments can be found on Wikipedia; however, you will find most of these to be irrelevant to your goals listed above. For a more detailed guide to long-term strategies on portfolio composition, I'd recommend A Random Walk Down Wall Street: The Time-tested Strategy for Successful Investing. One of the most handy charts can be found in the second half of this book, which basically outlines for a given age a recommended asset allocation for wealth creation. Good luck! Then: (do these in whatever order)  35 is not mid-life.  You're on the tail end of the age to get started on retirement planning. Being single, relatively young, and a great income level, you are ideally situated to consider FIRE'ing yourself. (Financial Independent, Retire Early).  The basic idea is to invest a large chunk of your income and establish your comfort level balancing frugality and comfort.  There's a table on one of the FIRE websites that shows a graph between % of income saved and the number of years it takes to save enough to be financially independent.  If you can go over 50% savings, you can get down to about 10 years.  In this case, financially independent is where you can live on a safe percentage of withdrawal from your savings without depleting the savings.  At that point, you no longer need to work for a paycheck.  You would only do so to extend the savings, increase the safe withdraw rate, or because you want to do something that makes you feel productive.