Financial Planning, Millennials

A Young Professional’s Financial Blueprint

A few posts back, I wrote about what I consider to be some low hanging fruit for young professionals. As I read through responses, I came across a ton of questions that required more than a quick response. I decided the best way to help was to take that post to another level. This time I created an example with actual numbers to break down the ‘low hanging fruit’ even more. Hopefully this example will be applicable and can help bring more clarity to your own situation.

This is not a recommendation, but of one potential way to build a plan for a fictitious individual.

Sarah is a young professional with the following situation:

  • Income: $60,000
  • Estimated Taxes: 21%
  • Debt
    • Student Loans 
      • $10,000 @ 5% (minimum payment $225)
      • $3,000 @ 7% (minimum payment $75)
      • $20,000 @ 4% (minimum payment $300)
    • Credit Card Debt
      • $2,000 @ 22% (minimum payment $150)
  • 401(k) 
    • Company matches 100% up to 6% of income 
  • Monthly Expenses 
    • Rent and utilities: $800
    • Groceries and food: $400
    • Entertainment and going out: $300
    • Other: $100
    • Total Minimum debt payments $750
    • Total monthly expenses ($2,350)

Following the steps in the infographic below, here is what I would do if I was Sarah.

Note: It’s broken down in two phases. First is until the credit card debt is gone, and the second is until the emergency fund is built. 

Monthly Breakdown Until Credit Card Debt is Gone 

Income$5,000
Taxes$1,050
401(k)$300
Take Home$3,650
Expenses$2,350
Remaining$1,300
Emergency Fund Savings$500
Extra Towards Credit Card Debt$500
ROTH IRA$300
Remaining Dollars$0

Monthly Breakdown Until Emergency Fund is Built  

Income$5,000
Taxes$1,050
401(k)$300
Take Home$3,650
Expenses$2,350
Remaining$1,300
Emergency Fund Savings$500
ROTH IRA$500
Extra towards high interest student loan @ 7%$300
Remaining Dollars$0
Note: After the credit card debt is gone, Sarah would start putting all extra dollars ($300) towards the highest interest student loan that is at 7%.

Once her emergency fund is built, Sarah would then start putting her extra surplus towards her remaining student loans or towards saving for a different goal. It all depends on her life at that point. Remember, this isn’t a perfect science. Your goals, how you feel about investing and debt, and your risk tolerance all matter when deciding how to go about handling your finances. But, don’t let time go by and do nothing. Start now and be purposeful with your planning! 

Disclaimer: Nothing on this blog should be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor. For all of the disclaimers, please see my disclaimers page.

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