22 with first real job!! ...and lots of student loans.

[LEO2013]

Hello everyone. I saw some of the excellent feedback given on this forum and thought I would try my luck.

Background: almost zero financial knowledge, but I have been working since 14 yoa and just finished paying my way through school, so I have a little practical experience. I've recently started working at my first "real" job and realized how much I didn't know about retirement savings after speaking with our Union President.

Current Situation: I'm living with my fiance and paying about $500 per month in rent and I'll be getting married this September. No car payments. No credit card debt. I have about $14k in subsidized student loans at about 4% interest that I won't need to begin paying until July. My fiance has about $22k in private bank loans at 8% interest (I think?) and she will be continuing on to a graduate program this fall accruing god knows how much more in loans. She will end up with a degree as a Nurse Practitioner making much more than I but won't start earning for 3-4 more years. We have about $6K saved up left but all of it is budgeted toward the wedding, which should be completely paid for according to our budget (yes it will be a small $12k wedding :-D with parents help).

Finances: I'm starting out at $5k per month with guaranteed step raises to $6.5K per month in 5 years. Full benefits for both of us provided. The city also matches up to 2% in deferred comp in 457 / 401 plans. I have elected to defer 2% as of now but can change that at any time. I will be able to retire at 53 with a pension paying 62% of my ending salary, or if I continue to work, I get an additional 2% per year (i.e. retire at 60 and receive 76% of final pay). I receive no medical benefits after retirement however.

Additional expenses: Honeymoon, extra wedding expenses that "come up", needing to purchase a car for the fiance (maybe $2k-$5k), etc.

I'm feeling overwhelmed at where to even begin. We want to look at buying a home in the next 5 years or so, meaning we need to start saving for a down payment. I would like to invest in an index fund to start saving for retirement to have in addition to my pension. Mainly because after running the numbers on some savings calculators, I realized how insane compound interest can be when you start saving at my age. However, I'm wondering if I shouldn't pay off those loans asap? Then again, when do I start saving for a down payment on a home?

The last thing may be more of a needed attitude check than anything else: My fiance and I have worked very hard through school. We have lived on very little, and I am proud of paying my loans down to on $14k. With my first paycheck coming up, it's very tempting to get a little "spendy," and to treat ourselves to things that we shied away from as poor students. More importantly, I've wanted a motorcycle for longer than I can remember and it seems almost within reach, but I know that it would be a stupid, stupid decision :-D .

I have no desire to retire before 53 as my career is awesome and I still feel like I haven't worked at day yet (yes I've only been there for 3 weeks haha). And I may even decide to stay for a few years longer as I feel like I would get bored in retirement without having the means to travel and do fun things.

Sorry for being so long winded and if you are able to answer any of my questions it would be greatly appreciated. Additionally, if you have any general advice, criticism, or if you think I need to be slapped across the back of the head for even thinking about some of my options feel free to sound off :-D.

[heeyy_joe]

It's a long road and a little wheel, it will take a lot of turns to get there. LBYM, stay healthy and employed, have a little luck, and one day you will FIRE.

[Arifriekinel]

Hi! Welcome to the forum I'm just starting out with a lot of this saving stuff as well, been living with Boyfriend for a little under two years now, both saving and trucking on.

I'm so new here I feel like a blasphemer for being on the welcome squad, but phooey. Hi, good luck, congratulations on the wedding!

[racy]

Leo,
Relax, you're doing fine. You're tuned-in to financial planning and that's way ahead of most people ... regardless of age. My suggestion is to begin learning more about financial planning. I always recommend: Bogleheads

As heevy joe suggests, live below your means & stay employed. You'll do well with 2 of you having incomes if you also regularly invest. At your age, time is your best friend.

As for the motorcycle, you can find pretty nice used bikes at pretty low prices. One can LBYM, invest for the future and still have some fun along the way!

[Animorph]

Any loans near 8% ought to be high up on the list, equal to or higher than investing. Around 4% I'd probably invest first and make minimum loan payments, but many here would pay that off first as well.

Ideally, I'd like to set aside 15% of your gross income for retirement. Then see if you can handle the rest of your expenses with what's left. If that looks OK, then save for the house. Don't forget you'll need furniture, and budget some savings for cars so you can pay cash (unless they have 0% financing!). It's never bad to save more if you can do it comfortably.

If you are in the 15% tax bracket try to max out Roth IRA's for both of you. Those contributions can be withdrawn later if needed, so it's a good place for long-term not likely to be used emergency funds.

And don't forget an emergency fund to smooth out the once a year and longer expenses and job setbacks.

After that, spend away unless you want to retire earlier.