Too young to save, too afraid not to

Half way to China – Stay in school!

Read – Young, Fabulous and Broke by Suze Orman.

The best thing you can do for you and your kids is get your degree to get ahead in life and get a better paying job. 2nd of all once you are out, you will have a job career that will support you to pay back the loans and save for retirement. I know its hard when you hear people saying 'save now!' but its OK.
Go to the student financial aid office. STAY on your officer's tail about scholarships and grants you qualify for – during undergrad i was in a similar position (no kids but struggling) and by making myself known, it pays, trust me. They can also give you ideas on how to garner other scholarships for working adults.

Lastly, you want to help your kids – this will do it. This will help them more than paying for their college, because you will be able to pay for their lives til they leave home. Loans for school are NOT a burden but a blessing in disguise- they teach sound money practices and also help everyone learn not to take more than they need. Thats why the Federal gov't offers them. Plus working is good for students – though I hope I can pay for my kids, they will know how to earn a dollar too!
Mostly – just good luck, I know its hard.

"Always pay yourself first" — My Dad
I agree that there are so many variables but in general:
1. 401K – Save enough to get the company match; increase 1% each year as you get a raise
2. General – Save 3-5% in cash each paycheck
3. Exercise sound credit practices (e.g. pay bills on time, do not overdraft your account, etc.) those fees could equal the amounts you need for items #1 and/or #2
4. Decide what is "good enough" – it's ok to "splurge" on an item here or there each year, but everything else should be "good enough."

Best of luck!

Way to go, Jessica!

The most important thing is to set a goal and stick with it. Your 10% savings rate is plenty for now, and you can probably increase that as you get raises without feeling a pinch.

But who knows what the future will bring? The key here is that you have time on your side. At a 9% annual return, every $1000 you save today is $4000 that you don't have to dig up when you are 40. This allows you much more mid-life flexibility than you could ever have starting later.

I learned to save for retirement from a book I read called "The Automatic millionaire" by David Bach! Its the best book I have ever read for retirement!

You should read Dave Ramsey's book the Total Money Makeover, it will give you a good plan for your financial peace. I strongly recomend it. Please cut up your credit card, the rewards are not worth the risk you are taking. According to statistics over 60% of do not pay off their cards each month

Luckily I don't have any credit card debt – I pay the balance off each month, and only use my card to buy things because it's a rewards card. yay!

I allocate 10% into my 401k, which gets the company match of $2000k per year, and then I save $500+ a month on top of that.

I currently have about $10k in my 401k, $1k in company stock, and $5k in savings – I just turned 24, so hopefully by next summer when I'm 25, I'll have at least doubled all of those numbers

I just turned 25 and am maxing out 2 401ks and 2 roth IRAs every year for my wife and I. What do I do with the rest of the money?

BOOYAH – keep saving everyone!

Shoot, that is good advice, but I'm more intrigued by Jessica, I wish there were more people our age, I'm 24 as well that is concerned about those issues… that characteristic is a women is in the words of Paris Hilton, thats hot lol

Sizel in NY, NY says he has 200K in cash and 50k in mutual funds… and he works on Wall St…. What?!!! LOL!!!!
Just goes to show that the trained work force is trained like monkeys. Maybe he will figure it out some day. He has a good start.

Jess,

Don't save. Seriously. Start your own business with a solid model and get aggressive. Buy the BMW first, and begin "feeling" the life you want to have. Soon, you'll have more money than you know what to do with and be the owner of a profitable company. Then you sell, and you're out of the game by 40 – with enough cash to never worry again…sound good?

I think you are doing great! *girl power!* There's nothing wrong with saving as much as you can for retirement and emergency.
Oh by the ways I hope you do not have credit card or student loan with high interest rate because if that is the case you should worry about paying them off first and put money away only for emergencies for now.
However, you can allocate a portion of your take home income, in cash of course, for entertainment/fashion/etc.
You can and should have fun in moderation. I enjoy a nice dinner with my friends, I am just not going to order that $8 a glass wine. Like fashion or traveling? Save, plan, and wait for the best deal you can find.
Like BMW? Consider saving for one (new or used, after research) because unless you find a low, low rate finance plan with no hidden cost, leasing or financing a car are not really good ideas in general. But cars like these also come with a high insurance bill and maintenance cost.
Don't be stressed. Saving should be something fun, you are paying yourself and along the way watch your wealth grow like a tree with some planning on your part, not what your adviser told you to do. Many of them make commissions on how much money you invest in and/or how many transactions you make per year.

P.S. Some of you are worrying about not making enough to pay the bills let along saving…consider a second job and invest in education. Yes it is hard to work full time and keep a side job and complete a degree at the same time. But I did it, and I can say that I am not the most brilliant or organized person out there.

Saving for retirement is a noble goal, but what if you don't earn much?

I'm 31. I've been contributing 10% of my salary to my company's 401(k) for 7 years. They matched 50% of the first 10% until 3 years ago, when they stopped matching. Thanks to my pitiful salary, and the 2 degrees I earned trying to get out of my low-paying, dead-end job, I have just under $10,000 in my 401(k) and over $20,000 in student loans. Because I was single and childless, I didn't qualify for any aid besides loans, and my job doesn't do tuition reimbursement.

I was hoping to move after graduation, but I have to stay in the area for family reasons; Hubby and I both have sick parents (mine found out 2 weeks after graduation). It's hard to find a job in my new field (nursing) around here. Instead of starting a new career somewhere else, I'm forced to play Dutiful Daughter in an expensive city where I can barely afford a transit pass and half of a cheap apartment. A house in a neighborhood without flying bullets is a distant fantasy.

How is someone who earns less that $25,000 per year supposed pay for housing, utilities, groceries, and healthcare, have some kind of fun, and save for retirement?

One thing I've learned from all of this: liberal arts degrees are scams.

Walter always gives good advice. I've always been a saver, but in all honesty never saved much for retirement until the last 15 years before I retired. That was about the time my children married and left home for good. There were too many "emergencies" before that. How one spends is just as important as how one saves. Saving and paying cash for an automobile rather than paying interest is smart. Finally, live, enjoy life and don't save for a wheelchair. Strike that balance like Walter says. Most financial advisors are out of touch with reality and would have you live your life in poverty to save for a retirement when you may not be well enought to enjoy it!

Wow, thanks for all the amazing advice!

To answer some of the questions:

1. I make $35k a year in my full-time job and $5k in my freelance position.
2. I still live at home, so I can save the money that would be put towards rent for a down payment someday.
3. I dont actually want a BMW, it was more like a symbol for the enjoyable, fun, spontaneous things my friends seem to have. I drive an old Chevy

To the person who said I should not be around people who make $300k? Please. I went to college with kids who make more than that now, but unlike them, I chose not to be in finance, and thats cool with me. Luckily my $300k friends arent boastful with their salaries, because they are more proud of their intelligence (financial & otherwise), not their buying power.

I also agree with those who were saying that I need to enjoy my life and quit worrying. I just want to make sure I will be able to provide for my children someday (and I will only have them if I can reasonable afford to do so) and retire early enough that I can spend time with them.

I am thinking about purchasing a fixer-upper home in an area with a lower COA, like North Carolina for example, but well see how it all works out!

Thank you again for the fabulous advice

To "Halfway to China"

Concentrate on your own college now.
See if you can get more financial aid,
your need must be through the roof, your
whole cost of attendence should be eligible
for low cost subsided loans or work-study.
Make an appt. with a finacial aid counseler. If you have to, use subsidized
loans (0% intreset while in school, 6.8% after that) don't use private loans._

Worry about your kids college after you are out. If you work and live near a state college, they can always stay at home
to avoid room and board (now about
$6 to 7K a year) if they have to.

Be realistic in your retirement plans. My wife and I traveled extensively when we were younger, and could do things that are now a little tough, and had the income to travel and not worry about expenditures. Of course, we did not take the exotic and expensive vacations if we did not have the ability to pay cash, and we sure did not touch the 401k accounts. Now many of our friends want to take the trips to Europe and the tropics that we took, but no longer have the stamina or ability to travel sometimes on the cheap. This greatly increases their expenses, and reduces the quality of the trip.
We owned a smaller less expensive house, but lived at the beach. We bought our retirement home in the Florida Keys. A fixer upper that we would spend a couple of days each vacation working on and then enjoyed the Keys. Got great vacations and a nice retirement home. We would invite friends down to help, they got a nice vacation and we got specialized help on a project. We bought Toyotas instead of BMWs (mostly).
We borrowed against our 401s to pay for automobiles, and then realigned the allocation so all of the loan came out of that portion that was in fixed. Our plan charged 1% over the fixed rate, so we got the car and had a better return. This is why we bought Toyotas, never had enough in fixed to buy a BMW. Did not buy BMWs until we could pay cash.
But most of all, be smart. About your current life, enjoy it, and be realistic about retirement. The 80% number is bogus, unless you made lower than average income.
FYI We never made over $100K, I retired at 54. My wife quit working at 50. We moved to the Keys when I retired but moved back north to take care of my parents. We sold the house in the Keys for a nice gain and are now in the third retirement home in a great university town. Loving it.

Don't waste time saving money. It'll do no good once you're too old to have fun.

Jessica, although I’m 60 years old, I can relate to what concerns you. I’ve been there.

1. I was in my 20s during the 1970s, when money invested in stocks seemed to evaporate as quickly as it went in. Fortunately, my company had a savings plan pre-401[k] so I got some practice with investing in a bear market. My solution: ½ my monthly investment went into blue-chip stocks, ½ went into Treasuries. This way I saw enough dollar growth to keep me interested while at the same time I saw the number of shares accumulating on the equity side. I continued this plan into the mid-1980s when the stocks I had purchased finally began to take off.

2. During the 1980s, BMW 3-series were hot-hot-hot, and boy, did I want one! At the time I drove a 1982 VW Rabbit, which was in fine condition. My logical side said the Rabbit was all the car I needed. So, I wound up playing a bit of a game with myself. Every so often I’d detail my Rabbit on a nice Sunday afternoon when the nearby BMW dealer was closed. Once the Rabbit was spiffed and shiny, I’d drive it to the dealer, park it near the stock of new 3-series and walk up and down the rows of new cars, staring at their heart-stopping price stickers. After about 15 minutes of this, I’d get back into my clean, sweet-smelling Rabbit and drive off satisfied that I had no BMW payments to make.

Like some of the posters have shared, know thyself, and deal with thyself accordingly. Btw, I never knew what my “number” for retirement would be, but I just kept saving as best I could while still enjoying a fun but frugal life. I retired at 54 with more than I’ll ever need.

Good luck!

Marry me! Very rare to find someone, pardon, but to me seems especially women, who save or are concerned, so early, or even a decade later. Read about finance, and reflect on what will make you happy.

Ignore the naysayers, especially the morons who know a guy who knows a guy who got arthritis and died never having enjoyed life…? This idea has always left me rolling on the floor. I figure they're joking, but they're always serious! Ok, let's see either A) there's life after death – heaven or reincarnation, either of which are preferable to here and now, or B) no life after death, and guess what, you won't know you missed out on anything or care since you don't exist! Either outcome favors saving. Not to mention the odds of dying young are like winning the lottery. It could happen, it does to someone, but odds are it won't be you so don't waste your resources planning on the improbable. That's okay though. These same spendthrifts will keep up on the earn and spend treadmill ensuring the markets rise, and the savers will retire earlier – 50? Try 40! Average income, high cost of living area, visited a dozen countries, vacation nearly every year. Americans are SO materialistic thinking everything is required to enjoy life, but again, we must thank them for pushing up our stock prices. Someone has to keep working, and I'm grateful they want to do it for me!

I think everyone is kinda missing the point. Whether you save or not, spending money on silly, image-driven products, whether you're talking about a BMW or a Coach bag, or $300 high heels is just stupid! Are we all so weak-willed that we actually believe our worth is measured not by who we are and how we act, but by the trinkets that surround us? Shame on us for buying into juvenile marketing campaigns! A car should get you from place to place, and not burn more fuel than absolutely necessary. A purse should carry the items that you feel are necessary to have with you, and should probably match your outfit. Shoes should be comfortable, and support your feet! Stop worrying about labels and media-driven fashion, and start caring about workmanship, comfort, and common sense. If you just do that, you'll find yourself living within your means and saving in no time.

Jessica – Go get yourself a new BMW and enjoy it while you're young. Defer savings for four or five years till it's paid off then you can resume saving for retirement. Thirty-six years of continued savings will give you comfortable life when you retire. Enjoy when you can drive your BMW as oppose to having someone driving it for you.

If you can't afford to save now, it is very unlikely that you will be able to adjust to living on a fixed income in retirement and making it last.

Moderation is the key. If it were me, and I bought a BMW-the $35-$85K price tag would get much larger rather quickly. After all, I would need designer suits, new golf clubs to go in the trunk, and all sorts of other things befitting the driver of such a vehicle.

There is a lot of good advice from the people on this board. The fact that Jessica had the sense to ask her question in the first place leads me to believe that she probably already knows the answer.

Of course you save. Of course you spend. The most important thing??? To READ. Make it your goal to read every single book on finance at your public library. It may take you a year or more… but you won't believe how much more efficient you'll be (at spending and saving). Enjoy!!!

I am not much older than Jessica but I am afraid I have already screwed up my financial future.

I just turned 26. I am digging myself into a huge student loan debt trying to work my way through college. I work for living expenses and take out loans for tuition & fees. The problem is, I only make $9.25 an hour to support myself and my two children, ages 7 and 5. I have no savings whatsoever, because even in Kansas $20000 a year won't cut it. I have considered moving in with my mother but she lives so far from my school that I will spend all the money I save in living expenses on gas unless I put myself even further into debt by buying a small car (I have a 15 yr old gas guzzling van)
My question: How do I save for my retirement and my children's educations? Do I put off my education and continue trying to make ends meet on my current salary? Or do I pursue my degree (in computer engineering) which will triple my salary in a few years? This is what I would prefer to do but by the time I can graduate my daughter will be 10… can I save enough in 8 years?

I'm 25 and have over $50k in my 401k, $50k in mutual funds, and $200k in cash ready to buy a property once prices come down. I carry ZERO debt and live very comfortably, even if I am in the most expensive city in the world (NYC).

How do I do this? It's called doing what you love, and I happen to enjoy working on Wall Street. Where else can you be a 25 yr old kid making $300k?

Education is key. Success in middle school breeds success in highschool, which leads to a great university, which leads to your dream job. The point here is that you need to work hard to do what you want, and the money will come after that.

If you're in high school, just because you're above the average SAT score does not mean you're going to go to a great college. You need a 1400 on your Math / Verbal and a high class rank. Be active, meet people, figure out what other top students are doing.

If you do have the grades, go to a TOP college, not a state school. Money an issue? Well, if you're smart, you'll find the loans and grants to help you. Once you're in a top college (the ivy's, or even Emory, Duke, NYU, etc..), you meet like-minded (see: driven) people who don't let failure enter their mind.

And once you start working, no need to save every penny. You only live once. Enjoy your life, within moderation. If you make $30k a year, you should not be hanging out with those who make $300k on a regular basis.

Just my 2c.

What I find hard to do is exactly what some others have mentioned. In your 20's you don't know what future income you or your spouse will have.

In my case my wife has 3 years left of residency. Once she's done she'll be an orthopedic surgeon making 10-12x more than what she makes now. So should we try to save now? Knowing our money situation will be vastly different in 3 years?

Many people say to us "No, don't save now!" However, what I've been doing is maxing out Roth IRA's for us since we were in college. Now we have about $30k in each one, with the goal of contributing for three more years, after that we'll well exceed the $150k income limit to contribute. But hopefully the $45-50k in each Roth will be worth something in 35 years!

We live comfortably now, we still save about 10% of our income, but also live more lavishly then we need too.

We could probably make some changes, get rid of a car, etc, and save 20-30% of our income, but why? The extra money we could save between now and the next three years by skimping will probably be less than 1/2 of what a sign on bonus for my wife will be!

I am a proponent of living to enjoy life, don't get into bad debt, and save just enough and not so much that you lose out on living. Beside I can always count on social security, right?

I'm 33 years old and have 90k in an online account earning 3% interest and 15k in my 401k that my company does not match. I have no credit card or any other debt but my problem has always been not knowing how to make my money work for me. What do you all suggest? I know I could do better than 3%.

401k's are a sham. You have to fill out paperwork to get your own money. Ok, you get the tax benefit, but the government is imposing their will on people. Why does the American public put up with this nonsense?

My Grandfather saved almost every penny he earned minus living expenses. He had nearly 500k in saving plus a 250k house. Most of his money went to a nursing home for his wife to live miserably with Alzheimer's Disease. He lived a boring retirement and ultimately ended up leaving almost nothing to his 3 kids.

CNN really needs to provide a better calculator. I enter my salary of 140k and my age 28 and it tells me it can only account for a maximum salary of 80k. I agree with others comments of paying off debts, but I also believe your home should be purchased in cash.

There is no advice that will work for everyone because there are too many variables. It depends on your situation. My younger brother only makes 55k a year on the east coast, but because of his profession will be making 200k+ in 2 years. For him saving 5k a year is not worth the fun he is having with it now.
Also, for every year you don't save it's just one more year you have to work before you retire, pretty simple. Systematic savings is a way to retire on time. Yes, you'll have to start saving eventually and the sooner the better but enjoy it because as I said, a year of not saving now, theoretically means one more year later on.
2 pieces of advice I think are valid.
- Don't live past your means either way.
- You'll need to start saving eventually. Base it off when you want to retire and subtract 40 years (at 10% per year).

Plus, after inflation and us trashing the currency the 10% you didn't save for a year or two won't mean much. We're probably screwed either way.

If you're not rich or broke by age 26 you're not trying hard enough.

What's with all the BMW hatred? I'm all for savings and debt avoidance, but if you save and buy a $20000 Honda for cash it won't hurt you that much to save a little more and get a slightly used BMW – They really are the ultimate driving machine. Mine was worth every penny even though it was 3.5 years old when I bought it. If you must deride luxury car ownership can we at least mention another brand once in a while?

The most important thing in your twenties is to get in the habit of saving at least a little bit every month and not getting sucked into mindless consumption and credit card debt.

Whatever you are saving now may not seem like a lot, but anything you put in a retirement account today will compound tax free for 40 years, which gives you enormous leverage. And the amount that you can save will increase as your income rises.

Sounds to me like you're off to a great start. Keep up the good work.

Great article and comments. I'm 37 and my own savings rate has averaged 22% of my pre-tax salary over the past ten years (since I started saving). This may seem excessive to some, but increasing my chance of retiring earlier than 65-67 is far more important to me than having a "higher standard-of-living" (i.e. spending more) until then.

Let's put this idea of "standard-of-living" into it's rightful place. First, the U.S. consumes far more per capita than other countries. And if you're paying attention to the current financial crisis, we've been funding our increasing consumption for many years by debt, not higher salaries. We've come to expect the purchase of ever-pricier luxury items as our God-given American right, regardless of the fact that we're mortgaging our own futures to exercise it. Now here's the $64,000 question: has that made us any happier?

I'm perfectly O.K. without the latest flat-screen TV, my 13 yr-old car is not a status-symbol and gets me from A-to-B just fine, and I will use my 3-year old computer until it won't start-up at all anymore. Whereas this may sound shockingly "cheap" in our country, the truth is that the majority of the world lives this way. In the States, 72% of our economy lately has been fueled by consumer spending – a huge amount. Other countries export and produce more. We have built an economic system that inundates us with suggestions, advertisements, and cultural stigma to get us to spend, spend, spend. To see this difference on a gut level, notice the tiny size of other countries' trash cans when you travel. It's an obvious statement on how little trash they create in their daily lives (i.e. their low consumption). Their average savings rates are also usually much higher than our own near-negative number. And the statistics don't show that many of these countries are any less happy than we Americans are …

This isn't an America-bashing session, but an attempt to highlight our cultural immersion concerning spending. We even fight ourselves in order to spend more, with "what if I die before retirement?" a common question we ask. Here's one for you: bet on making it as the actuarial odds are higher that you will.

By living in a way similar to other cultures, I have intentionally trivialized the effect of our own consumption-oriented culture within my own life. This serves multiple purpuses: allows me to save more for my retirement, keeps the sheer volume of physical "crap" down in my life (that must be moved, insured, dusted, fixed-when-broken), and also keeps my expectations reasonable in a life that, let's face it, isn't defined by the equation "consumption = happiness."

Jessica,
Pick up a copy of "The Millionaire Next Door" by Thomas Stanley. You will see that you are on the right track, while your BMW-driving friends are spending everything to create an image of wealth. They will likely never have true wealth because they spend what they could be amassing. If you're spending all your income you are not amassing wealth – its that simple.
You will also see that the large majority of millionaires live well below their means, in modest homes, and they drive modest American made cars. The focus of their lives is work, not impressing people. They are wealthy because they don't waste their money.
My husband and I live on 1/4 of his income. We amass savings at a tremendous rate. That said, I wonder at times if I have an over-focus on growing our wealth, at the expense of enjoying things we could easily afford but choose not to. Like you, I second-guess due to looking around at others who have much less income than we but live a far more flambouyant lifestyle. Of course, they are living at the limit of their financial ability, have little savings and are leveraged to the hilt. While financial security is wonderful, I do wonder if the spend-aholics are enjoying themselves more than I am ?!

There is a case to be made for ENJOYING your life especially while you are young and beautiful. Don't miss out on things by relegating yourself to a nose-to-the grindstone existence. Remember the story of Scrooge!
To avoid getting trapped in savings obsession, decide on a percentage of income you will save. Then enjoy the heck out of the rest!
p.s. Stay away from financial advisors.

What I haven't seen anyone point out is that having enough money to keep up with your BMW-driving friends won't make you happy. I hope it is the friends that make you happy. If so, then saving a reasonable amount now, and having a very comfortable lifestyle in retirement (complete with whatever flash ride is stylish at that time) will bring you a lifetime of happieness. Tell your friends to turn in the Bimmers and sock a few bucks away so they can join you in Hilton Head in 35 years.

Jessica,

Saving 10 or 12% for retirement is not excessive. Just do it, don't think about it, and save some money on top of that for your down payment on a house when you turn 30 years old.

As for the rest, enjoy life. In particular your salary will hopefully go up throughout your career, so now is your best chance to explore ways to have fun without spending much money: travel to South America — Europe can wait until you are older and more wealthy. Stay at hostels or camp — luxury hotels can wait until your body ages and those thick mattresses become a necessity. Go to free exhibits and shows. Stroll the streets, do some people-watching, picnic at the beach and go swimming — boating can wait until you're not longer fit enough to swim. Learn to cook and treat your friends to nice dinners — it's a great way to enjoy life, and restaurants can wait until you're busy 24/7 with your career+family crazy life.

I object to the idea that enjoying life means spending money. Being young means being healthy and energetic and possibly having a fair amount of free time, and those are great assets that you should enjoy while they last. It has very little to do with how much money you're spending.

If you want a BMW, and got the money for it, go for it. After all you only live once. Of course, you still want to save and not spend waste but why suffer. How can one enjoy anything when you are old anyway? That makes no sense to me. It is all about balance, if you like BMW, cut down on something that you don't like. You will end up the same but you get to enjoy some too.

You're right in that the calculators used to project retirement data are somewhat useless for people in their early 20s. They are okay tools to estimate your savings compounded over the years or decades, but hard to estimate how much you will need in order to retire by a certain age. They say you need 80% of your preretirement income? How can anyone in their 20s estimate how much they will be making 30 to 40 years in the future given inflation, promotions, and possibly larger career advancements?

The fact that you are saving a designated portion of your salary each year is a good start. You shouldn't need to think about how much you will actually need to retire until you are much older. Especially if your lifestyle should change between now and then.

My wife started at age 21 saving for retirement. She has $75K. I started when I was 32. I have $250K. Financial Services industry created this myth of "save early… retire early" to fatten their balance sheets. And if they are so smart… why are these companies on the brink of bankruptcy?

I would like to thank everyone for their informative and very helpful threads. As a recent college graduate, this advice has taken a lot of stress off my shoulders.

Thank you

I recently just turned 22, graduated about 3 months from college, and started my first job. After interning at a financial planning firm for 2 years, I realized that the best thing I can do for my future is to be financially savy. In this case, it'll be to allocate my paycheck in the most efficient way possible: (1) put the absolute maximum in my ROTH IRA (which I started when I turned 17) (2) put about 10% in my company's 401k (3) 25% of my paycheck into into a high-yield savings account. [Btw, I cannot stress how amazing a ROTH IRA is for a person right out of college. You only contribute about $5000 a year, and the benefits are amazing.] After saving all that and deducting for rent, I realized I still have about $800/month for everything else.

I learned at the planning firm that if you really want to drive a BMW, nothing anyone can say can dramatically sway your decision. But please realize the cost you're undertaking. By taking on an extra $400 lease a month, you'll cutting down your budget dramatically for going out with friends, clothes (which is my downfall), and traveling. Not to mention you'll be paying a lot more for gas. It's a cost/benefit situation. Is the benefit derived from an expensive car really worth the costs?

Hope this helps.

I think Jayson summed it all up nicely. Just be sure you don't live with the moto of "Laugh now cry later." Lots of people live this way but end up on fixed incomes living in subsidized housing in retirement. That's not where you want to be.

I personally rather sacrifice what I want now (Porsche 911 Turbo) for what I really want later (RV with porsche in a trailer driving to vacation home with grand kids). I'm only 29 visualizing this stuff already..

Eitherway, when I was 24 I didn't think past my next paycheck. You're on the right path, just don't make yourself crazy. And please avoid one mistake I made when I was 25, Never Cash Out Your 401K. What's your vision?

I believe the advice to retire with 80% of your pre-retirement income is very flawed, and simply a way for Financial Advisors to convince you to invest more money with them. When most people hit the age of retirement they no longer have children as dependants, mortgages are paid off, as are most other debts. Unless you are planning for a very extravagant retirement than this is over kill. Even than if you retire at 65 many retirees have the energy to travel only for a few years, than they want to relax and enjoy their golden years.

Careful who you believe in the savings game, and remember those giving advice are also those who are looking to profit.

Remember…the guys getting off the subway advise the guys getting out of the limo's! In the end, you're gonna spend it, or give it away. So, decide what you want to buy, or who you want to give it to now, and plan for that goal, because you sure can't take it with you! I've been a financial advisor for over 20 years. Trust me on this.

You will not live forever and you must have life before retirement. What if you do not make it past 60? I love reading about future millionaires on this site and how they pinch every penny in order to collect that dreaded million by the age of 50. What is the point of suffering for half a century so you can live well for 20-30 years when you're old?

I say live within your means. If you can max out 401K, Roth IRA and have a decent emergency fund, do our economy a favor and spend well without getting into debt. Want a Rolex or a BMW? Go for it. After maxing out my retirement accounts I have no shame about eating out every day and enjoying travel. That's what you call life.

Save some, enjoy some… everything in moderation.

As long as you live within your means you're fine – live above and your broke, live below and you're missing out on the experiences that life may offer.

Chad you sound like a Dave Ramsey fan. Jessica you have a good start but don't listen to the fools who say spend enjoy and don't save.

One example Dave Ramsey uses in Financial Peace is two brothers that save $2,000 a year toward retirement. One brother starts at age 19 and stops saving at 26. The other brother starts saving at 27 and puts $2,000 a year in until he is 65. The first brother put in $16k and the second brother put in $76K.

At 65 using a 12 % return the first brother would have $2,288,996 and the brother that saved every year would only have $1,532,166. It is the power of compounding……and it shows how critical it is to start early.

Live on a budget, live on less than you make listen to what Chad lined out. Then when you are older and have TONS of money you can buy nice used Beamers for cash from fool who are bankrupt.

ASK YOURSELF WHAT YOU REALLY WANT…

Cars never turned me on. A good, safe, reliable, reasonable gas mileage car has always been fine…including driving them for 15-17 years before turning them in.

For me, traveling is the thing. But…everyone is different.

Expensive cars, routinely replaced is an ENEMY of retirement saving. If you must have an expensive car, at least drive it for over 10 years.

Readers here think you're doing fine. Most Americans never save enough for either retirement or a rainy day. Living from paycheck to paycheck destroys the ability to retire.

Any "plan of living" requires that you anaylze yourself, not what is expected of you from your friends, who overspend.

"Know thyself" is more important for retirement planning than looking at what your friends and acquaintances do. Sight unseen, you wouldn't want to trade financial positions with any of them.

Only you know what is really important to you. Never rationalize that because your friends have it, you must have it too. Chances are you won't even remember most of them when you're in your 50's-60's.

sanjosemike

To Chad: Thanks for the detailed breakdown. I'm not in Jessica's dilemma however I'm always confused on how much I have to save. Your breakdown gives me a good starting point.

Be careful going straight for the tax-exempt funds, there is a trade-off between the yield and and the tax-exemption on dividends and capital gains. Tax-exempt funds are more appropriate for those individuals in high tax brackets. Vanguard.com offers tax-exempt mutual funds with extremely low expense ratios and does not have any commission fees or loads on all of their funds.

Good Article. Jessica.. It is impressive that you are saving at an early age. Most people i talk to over 40 highly regret not saving early in life. Some say, dont save as much, some say save all you can. With Time, strange things happen. Forinstance, with me, i saved a little, but not enough. At age 37 i was diagnosed with MS. Well, you can imagine. The good part, is that i Focused on career versus partying. Even now, at this age, income is good, even with the sickness. If i had not put such an emphasis on my studying habits in the past, it would have destroyed me. BUT it was just a fumble.

I tell my Son, to SAVE-SAVE-SAVE.. Saving money in your 401k, a Roth, ALSO gives you that thing called GOOD Credit. Which will go much farther than a BMW will. SAVE- also means investments. Invest in yourself #1. Education, and experiences (vacations, toys/tools that will enhance you). Dont live life just to pay bills. Live it to live it, but in moderation. BMW will break down, eventually, Super TV's will get obsolete.. Investments just grow and grow.. In 7 years it takes to realistically pay for a BMW, (60 mos+maint+1 major repair), Get by with a Honda (mod it of course, to atleast enjoy the vehicle). Just 200 a month, ($6 a day) (cigarettes for instance, or 2 coffee's), 200 a month, for 7 years, in a investment plan, will BUY you a higher end BMW in 7, in which at 32, you will actually enjoy it much more, than at 25. At 32, you can /should be able to really live much better, with some 401k/roth/ Buying a house, will be much easier, as you are already used to saving$$$.

How many people here have heard of the concept: Compounded Interest? For those of you who say, "spend and live it up in your twenties, you have the rest of your life to save," makes me laugh. My advice is save in your twenties, and then live it up in your thirties if not forties, because 100k saved in your twenties will be worth a lot more then the same amount or even three times that saved in your thirties apon retirement. Let's be smart about this people.

The secret to financial stability is always planning for the future and the next event in life. If you always spend less than you bring in, you have a future, if not you had better plan on something. Driving a BMW is no better than the mentioned Toyota, unless you are Mario Andretti or too good to drive such a mainstream ride. Unless you have a stable career, at least one which is not associated with domestic autos, because this articles tells you to support imports, then you can focus on your finances. If you buy a Bimmer, then you can not save money, you'll have a huge monthly payment and huge insurance costs; or you could max-out your 401? Get you calculator out and see which works better: 150k+ or a 10k 10 year old Bimmer that costs $300 bills for oil changes? Thus, I suggest, save you money and don't add to the trade deficit and buy a 5 year old car with cash and liability insurance. You will probably have a lot of money left over to go on vacations, where nice clothes, and not have to eat hot dogs every night; unless you are too good to drive a Chevy!

My friends dad saved all his life. so many sacrifices, skipped vacations to save money. Drove old cars instead of new ones. Lived in a small 2br house even though we had the money to buy a really nice 4-5 br one. saved, saved and saved. Then one year he got sick, pneumonia and died at 48yrs old. never got a chance to enjoy life. very sad.

In response to "P"

Some individuals, particularly law and MBA grads, end up with six figure salaries right out of a top school. As long as a person doesn't go for a super swank apartment and too many luxury items and expenses, it's not that difficult to sack away about 10 to 12% of your gross salary for savings and still pay off the student loans in a reasonable amount of time.

The artical is right, life is unpredictable and you better be saving before you lose a limb or your back goes out. So what happens when the market is sour when you want to retire and you end up with the same amount of money you put in? That could have happened if your retirement date was 2000 or 2001. You would have to work longer. That's a probability, but if you are at the same age with no savings or even a debt, then it would be a fact.

Great comments here. Jessica – you are doing fine – enjoy yourself for the hard work and sacrafices you are making now.

Those who mentioned they earned even higher salary after grad school (mba, law, etc), thus leading to more savings: how were you able to go to grad school w/ tution bill of 100K+, yet still be able to save and do financially well now? It seems like a catch 22 to me…get into a top school to get a great job, yet be in 100K+ debt after the 2 years of schooling (which perhaps leads not having enough money to save for the future)

Jessica,

It is all about balance. Save, but do not make your life miserable in the process. There is no point in having all this money if you are never going to enjoy it. Also your friends with the BMW may not be as financially sound as you are. I have known people that buy expensive cars, but eat cereal and milk all the time so they can afford that car. You're on the right track. Save, but do not be extreme about it.

Jessica,

Just be aware that to some extent the pressure to live beyond your means NEVER goes away, no matter WHAT your income is.

At the same time, be aware that neither gobs of money nor tons of stuff really bring long term happiness.

I think doing 10% in your 401k is reasonable. Maybe shoot to gradually increase that to 15% over the next 5 years. If you ever end up making an above average salary, then feel free to bump it up even more. Otherwise, don't worry too much about it (unless you really really want to leave the work force at a young age). You're doing well to be saving 10% at age 24. If you can do that consistently, you may be able to retire in your early 50s if you're lucky.

I am one of those people who is "recovering" from being an oversaver. I saved about 1/3 of my salary for several years and I made myself unhappy in the process. Next year, I'm shooting for only 25% of my salary. I'm 38 with a low 6 figure 401K and a public sector pension to boot. I'm glad I have it, but I do think I missed out on some life experiences because I was too focused on amassing money.

Keep saving. 20-25 years from now, you will have a nice sum in the bank account, even be able to retire. And truly enjoying your life, not worrying about the next array of layoffs. Maybe even pursue your true passion.

While your friend who was driving the BMW, might be high in credit card debt, still paying mortgage, with hardly any money in the retirement fund and still funding kids 529 plan and constantly worrying if they will be the next one on line during the layoff season.

At age 44 and having done this for a while, if I were in your shoes, I would start with the 10% you're doing, then from now on, put 1/2 of every pay raise into retirement, then enjoy the other half. I bet before you know it, you'll be sitting pretty in terms of your retirement.

Jessica-congratulations! So many people in their 20s don't save at all. 401K is a great start, and you can slowly raise the percentage you contribute as you get raises. Maybe also consider a Roth IRA if your income allows it. I started saving right out of college (I'm only 26)-at first it was a game where every bonus went to the savings account with the goal being $10,000. Slowly it becomes fun and you can start finding little ways to cut back. But everyone is right-be sure to have a good time doing what you love too! Travel, spend time with friends, etc. I'm a big believer in owning a home, I just sold my first house last week and made a nice profit even in a down market.

A professor gave me a great analogy. Think of saving like eating sugar cane. Sugar cane is sweet and rewarding at the top and plain and uneventful at the bottom. Be frugal will start at the bottom in anticipation of the sweet reward in the end. Problem: You may never get there and you will have never tasted the sweetness of your labor. Start at the top and you can enjoy the sweetness, however the end will not be so pleasant. There is a solution. Start in the middle and have a little of both. Its a natural order of life with ups and downs.

Hiya Jessica.

Heres an idea for ya.

#1 Get out of debt before you do anything else. if you have any. and NEVER borrow money again except for a mortgage. Save up and pay cash for anything you may need or want. Life is much more managable and over time you're wealth will grow just from this alone as long as you dont go crazy when you do spend the cash.

2. Your friends are living the high life with a BMW. BMW's arent evil and if you WANT one, buy it smart. Save aggressively to have enough cash within a couple of years then find one that is 2 or 3 years old in Great condition and negotiate with the seller like crazy. Have a cool BMW in like new condition for about half the cost of buying new and no payments on it. Best of both worlds right there.

this is a great plan that works.
Just determine in this list where you are and work from that point. Do each step in order and dont move to the next until you complete the current step.

1. 1000 bucks cash in the bank for emergencies to begin.

2. List all your debts from lowest balance to highest balance (if you have any debt) take all extra money and pay them in the order on that list (doing just minimums on the rest) paying as much as possible on the smallest balance.. until its paid off and then move to the next and so on until all debts are gone. (most people will be debt free except for the house in about 2 to 3 years)

3 Go back to the 1000 dollar emergency fund bank account and put what you were paying on debt in to this account until there is enough money in that account to cover your living expenses for 3 to 6 months if you were to lose your job or for those big scary costly emergencies that like to creep up.

4. Put 15% of your yearly income in to Retirement in this order.
A. 401K/403b/457 plan up to the company match only if they match
B. Next put as much as you can or up to the 15% (which ever is bigger) in to ROTH IRA's
C. If you still havent used the full 15%, go back to the 401(k) until you max it out or run out of the 15%.
D. If you still havent used all 15%. Put as much in to a varible annuity as you can for the year.
E. if you still have some of that 15% left at this point (most wont) Put it in a taxable account using tax efficient or tax exempt investments such as index mutual funds or tax exempt bonds (munis)

5. Put as much extra as practical toward your mortgage and pay the house off as quickly as you can.

6. Take what all old debt payments (including the old mortgage payment that is no longer there, and invest a ton, spend some of it.. and pile up the cash over time.

This is a good plan to get you to your goals. I've been following it for the last year and a half after 10 years of being completely STUPID with money. After starting this path.. for the first time in my life, i am debt free, saving to buy a house and have the largest balance in my savings accounts that I have ever had in my adult life. And for the first time not only feel economically secure in the short time but also for the years when I want to slow down or even stop working and enjoy my golden years.

Jessica,

If you MUST have that BMW, at least buy a pre-owned BMW. I've purchased 4 new ones & when I see the cars my friends are purchasing (less the huge depreciation I incur) I realize it's the only way to go. Just get it from an authorized source & get some of the great BMW maintenance still provided.

But the REAL answer is to feel secure in yourself & not need a BMW (said by someone who has learned the lesson late & expensively… but my next car is a Prius!)

Good luck!

The calculator maxes out at an income of $120K. BY doing this your are leaving out 25% or more of households across the US and most likely a higher percentage of Money readers.

I'm 22 yrs old and I know how you feel. It's tough when your young and all your friends are living the high life. I've been out of college for a year and a half now and I've learned how to have my cake and eat to. You say your miserable because you can't spend money like your friends. Do you really think your friends are that much happier? The money you do have to spend, spend it on experiences and not on objects. forget the BMW (unless you love to drive)and travel Europe. go out to eat with your friends but if becomes routine and predictable then why spend the money on an event where you already know whats going to happen. occupy your time. If your busy you won't have as much time to spend money. Go to the gym, join Big Brothers Big Sisters, catch up on the news at the local coffee shop instead of the steak house or bar.

OK, Here's a suggestion that will make most financial planners cringe. Keep putting your 10% away, but spend the dividends from the stocks that you buy. Doing so will allow you to see some of the fruits of your labors. You almost always have the option of reinvesting or getting cash for your dividends. Of course, your nest egg will not grow as fast and the power of compounding will be limited, but it will be something tangible that you can spend and evidence of the pile of money that you have saved. It is much better than stopping all of your savings and buying a bimmer. This might be hard to do in a 401K or IRA, but my 401K allows me to do it. The dividends are taxable income, but the IRS does not penalize them. Perhaps one of these more knowledgeable folks will tell you about the downfalls of such a plan. I have been doing it for about 3 months, and the dividend checks are very nice and take the sting out of being so frugal! If you want you can save the dividends into a high interest savings account in order to buy your bimmer at a later date! It will feel oh so much cooler driving one that is paid for!!!

You have too much going into your 401K for someone without a home. Consider putting some into investments that pay a dividend or interest, preferably tax free, so you can enjoy the extra income throughout your life or make a down payment. Several muni bond funds pay 6.5% interest tax free, payable monthly. Every 10K you save at that rate gives you about $55/month you can enjoy…for life! Plus, you'll have the principal for a down payment.

The American way is now about consumption and living beyond one's means. Since I was 15, I save a minimum of 25% of every dollar I made, and now save about 40% of every check. The idea that retirement will somehow be partially funded by our over-indebted government is a fallacy and long term inflation will continue to be high as the growing population continues to compete for limited resources. The only path to a financially stress-free life is to save more than you think you should. Now, in my late 30's, I'm pretty well set…but it took patience and discipline, and choosing substance and quality over desire and vanity…and I've still had a great time every day of my life…

I agree with the savings balance. I was fortunate to be able to save half my paycheck growing up (I started working full-time in high school). Sure, as I've gotten older, my savings percentage versus my earnings has decreased, but I have plenty of sound investments (oil stocks).

Life's too damn short to be worried about having x amount of dollars when you're older, especially worrying about it at 24. Live it up! You've got plenty of time to worry about that when you hit your 30s, if you choose to follow the traditional route (marriage, house, kids, blah blah blah).

Jessica,

My comment is you are doing great at 10% savings especially since you are only 24. You are way ahead of many people who are much older than you. Find a happy medium where you don't feel deprived that you are missing out on life. It's not fun to see what you friends may flaunt in front of you now, but when you can comfortably retire, your friends will probably be struggling to end their working days.

I'm 36 and wish I would have starting saving earlier so you have a great head start. Keep up the good work!

sorry I didnt notice you are in Kansas. Thats makes sense now. When I think 20% down I think 100K-150K and not for a mansion by far.

Ic ould buy 3 homes in Kansas right now but not one in NY.

But today an MBA does nothing for you. People are coming out of college and having a hard time getting a secretary position. How do you save money when you only make enough to live to the next day?

Actually, nobody with basic spreadsheet and math skills really needs an online retirement calculator. You can easily build your own decent projection in Excel in 30 minutes using any age and income. You have to provide most of the inputs into online calculators anyway. Why not just create your own? That has the additional advantage of allowing you to tinker with all sorts of different real-world scenarios that don't fit the calculator model.

Jessica,
Someday your friends with the BMW's will be worried about retirement, paying the mortgage, bills, and being layed off in their 50's. If you live below your means, and save your money you will be very happy when you are financially independent. (You don't have to retire but you'll sleep great!)

I didn't like my job and left the corporate world at 57. I made only moderate money, but lived below my means. Now I have a carefree financial life.
Here is my formular. I always targeted saving 20% of my income.
Stay away from stocks . You won't find many folks who achieved financial independence buying equities. They're hype and they don't work. They'll make Wall street and your broker rich. Not you.I got out in 2001, and I'm happy I did. They don't get the job done.
Buy a home that you can afford and enjoy.
Stay away from bond mutual funds. They stink.
Stick with quality individual bonds, fixed rate annuities, stable value funds, inflation bonds, and CD's. Most of the rest out there is garbage.
Also, see if you can get a job that has a pension. They are still out there in government and private industry. They're golden !
Study up on the dynamics of money, Don't care about what your neighbor is buying and have fun with the whole experience !!

I'm also 24 and I save between 10-15%. I think of it this way: you're not choosing between you're 401k and a BMW, you're choosing between the BMW and your deam house or your kids education. By putting in a larger percentage now when you have no responsibilities makes it less painful to lower the percentage (even to <10%) when money does get tight. Like when those 2.5 kids pick expensive private schools and the house needs a new roof. (Sorry Dad)

Jessica,
I also know how you feel. I just turned 25 and have been working for 3 years. I contribute 6% to a 401(k) and my company matches it, so a total of 12%. My girlfriend just leased a brand new BMW (after leasing a Volvo for 2 yrs). We make about the same and I bought a new civic 2 yrs ago. I also get scared about future expenses if we end of getting married. I have about 20 grand saved up. I try and save over 10% and all of my bonuses. I make about $57,000 now (including my bonus) but still feel like I do not have enough to buy a nice house in Philadelphia. For about 1000 sq. feet it is about $275,000! My family says I am doing ok but I see friends buying houses and building equity. My current rent is $450/mon but have to deal with having 3 other roommates. I try not to spend money on stupid things. I try to cook more meals and maybe go out for dinner only once every weekend. Bought nice clothes after college but now only once in a while.

Is this good advice? What else can I do to be happier now and later? I wish I owned my own place and could still be in the city. Not that I want a BMW but if the gf didn't have one maybe in a few years she would have some saved up to contribute to a nice place.

Follow the old adage, "save for a rainy day." You are relatively new in the real world work force and i am sure you can already tell that the clouds are forming and the Storm has just begun. The economy is obviously only going to get worse and worse. Despite what the economy cheerleaders say. Best advice, dont buy a home right now, despite what you here its not the best time to buy because home prices are going to head south for quite a while. Also your friends that drive BMW's, they lease them and most likely spend every cent they make to have them. The savings rate in this country is down right sickening. Why not be different, start a trend and set an example that money saved is better then money spent.

I was in your shoes 20 years ago. My friends were driving new cars, going on vacations, and buying all sorts of new toys by going into debt. My wife and I lived below our means (Thankfully, we both had the same financial outlook), catching our friends lifestyles in a few years, and now far exceed theirs. By living within our means early, we can now afford to take two 2-week vacations such as a cruise every year while some of my friends who lived beyond their means still have to save six months for a weekend trip to Las Vegas. And, I'll be retired and travelling at 55, and they'll be working until 65 or 70. I'll admit the first few years can be discouraging, but the payoff even five years down the road are huge.

Suggestion: Every pay raise, put some/most towards retirement, but take some as take home pay so you can enjoy some of the nicer things in life now, even if it's just an extra meal out. You'll find that after awhile your retirement is fully funded and your standard of living has improved, too. Good Luck!!!

You're doing fine. I like yourself worked a full time job at a bank and a couple of part time jobs. I ultimately completed an MBA. Within 10 years, my salary tripled due to good work ethic and the additional education.

I am now 35. My wife and I (married about 8 years ago) are almost to a networth of $1M. I contribute most of this success to th early years of saving and being cautious on purchases. Although we bought our first house to avoid paying rent and own a home, we didn't buy the next home until we had enough for a 20% down payment + 12 months of living expenses saved up. I'm very cash conservative that way. Anyhow, if you save enough, early enough eventually you won't have this big retirement worry. That retirement worry will probably occur about the same time your future kids goto college/require cars ,etc. One less thing to worry about.

Socking away 10% of your salary is great if you can afford it.

What about the rest of us who are struggling to pay utility bills, rent, car payment, insurance, and loans on $25K or $30K? There's no deluxe, luxury life here, just normal expenses. What should we do?

Jessica, try this philosophy and you'll be on the path to financial freedom (that doesn't mean retirement).

1) spend your 20's (or the next 10 years) concentrating on saving for retirement in the lowest cost index funds available. the more you save early (% of income) the less you'll need to save later. Try to save 20% now.
2) spend your 30's saving for your kids education.
3) by your mid 40's you should have base of assets and spenging discipline that will prov ide you will the ultimate in retirement planning

that is FINANCIAL FREEDOM

You'll also look back on the foolish friends of yours that wasted mon ey on depreciating BMW's while you soak up the sun at your beach house on Cape Cod.

Some great comments. I actually like that a lot of you are very smart saving into some of the highest interest bank accounts and IRA's. I myself have not started saving yet but I plan to soon as it really is important as I don't want to have to work at an older age and I want to have a peace of mind at that point. Investing is also a good way to make money from your savings if you invest in the right thing. My advice on saving is to always look out for the highest interest banks that are around 5-6%. Also their are IRA's up to 9-10% if you look around online.

To M. in Baltimore – is it even worth putting money into a 401k that is losing money???
If you have a few years before you need the money, this is the best time to contribute. You are buying more shares at a lower price. You may notice the value of your account decreasing, but take a look at the number of shares you have increasing. Once the market turns around, your account value will increase rapidly.

To M (from Baltimore)

Your 401k might be going down today, but you better not miss these low times. Or else, you will miss the boom that will follow the bust. This is THE correct time to put money in index mutual funds. Everything is available at a discount

The young generation are totally screwed. All you older folk talking about how you racked up all kinds of debt when you were younger – you never had to pay it back, we do. We never had the chance to buy a home at an affordable price either and watch it more than double in value. We are not even going to have any social security to collect when we retire after contributing towards it our entire working careers. Watch in 10-20 years it is going to be completly normal for a child to live at home until they are 30. You have no chance unless your parents or someone sets you up. It's not even fair to have a child in these times – to the child. Wages have barely moved but price of living has increased tramendously. And college – what a crock of shit. Now they want secretaries to have a degree – what major in answering phones and minor in faxing. Are you kidding me. College is ridiculous. Those who cant do teach and an education from them is supposed to be impressive?

I agree with several other comments already posted – CNN should create a calculator that does not have max income limits.

Hey Kansas Dude

I probably earn your life savings each year….the problem is that living in NYC i spend it in half the year.

You have to live when you are in your 20's. Buy that sports car or BMW…thats what I did when I was 24 and yeah I blew tons of cash doing it that could have gone in a 401K or IRA, but it was worth it…but I also save a little too..its all about balance. Life is too short to be worrying too much about 30 years from now…so save 10% of your income and you should be golden.

Jessica,

I'm in similar shoes. I graduated from college and started working right at age 22 in the heart of Chicago. On top of living expenses, college loans and the highest sales tax in the country it can be hard to budget yourself to start saving. I always figured that if I paid myself first I forced myself to save. On top of my 401k, my first paycheck of every month I pay myself first by putting a budgeted amount into a high yield savings account, a Roth IRA and another securities account. Then from there I pay all my bills and what ever is left over I get to spend on myself. So if it's the last friday of the month and all I have is $10, I better find a bar with a great happy hour deal, but at least I don't have to worry about not funding my retirement.

My question– is it even worth putting money into a 401k that is losing money??? My money in an ING account is doing better than my company's 401k which just declines in this slow economy.

Jessica,
I was in your shoes before. It’s hard to start contributing to 401k/IRAs when you are young. I used to be wasteful – blew money on new cars, buying stuff I didn’t really need, going out to different restaurants all the time and etc. But over time economy/finance college courses and military experience (I am an Army Finance officer) shifted my perspective and I learned that I can control my budget and live below my means. Since I was 25, maxing out my 401k and Roth IRA became the number one priority. The only thing that I do regret now is that I didn’t start doing it earlier. Don’t look at your friends that choose immediate consumption of their expendable income vs. long-term benefit. Just picture your final goal in mind – you sitting on a porch of your own waterfront property sipping margaritas.
Good luck to you!!!

Way to go on starting early on savings. That is an awesome attitude that most young people do not have.

At your age, One of the best things if not the best thing you can do for your retirement is to do a ROTH IRA. When you are ready to cash it out after you retire, it will be tax free. Do a little research on that matter if you need to, but it makes a lot more sense than a traditional IRA for a young person.

Do go out and enjoy life a little. You earned it and you deserve it.

I’m 30 and I go to the extremes saving, mostly because I enjoy saving and have no need for shiny new gadgets. With that being said, I’m beginning to think that people who spend every dime they have and save nothing are getting it right.

If you follow what going on in the USA you cannot deny that this is credit happy nation of spenders: from individuals who cannot afford things they buy to the government that is spending social security money and racking up record deficits year after year. However, it doesn’t take a genius to figure out that somebody will have to pick a tab one day, most likely through higher taxes.

So who is that “somebody”? Well, if you don’t have millions in your retirement account they can’t take it from you, can they? The people who make good money now, spend every dime of it and keep demanding low taxes are going to reverse “180” when they retire. They will consistently vote to increase taxes to pay for their SS and medical benefits. And retired people have strong voting power (AARP is the strongest lobby in the USA) Guess why congress hasn’t tried to fix the SS by cutting the benefits.

Sooner or later they will pass a law that will make you ineligible for SS benefits if you have large nest egg. That combined with higher taxation might mean that your actual retirement income will be only slightly greater than those on SS. To put in another words, the money you are saving now will bankroll somebody else’s retirement later.

And don’t think that your roth IRA account will save you. They will find a way to tap that too.

You're doing well, Jessica. When I was your age, I was out living beyond my means on credit cards, trying to live the high life I thought was just around the corner.

While things are going fine, the hihg-roller-level salary didn't materialize, and instead of saving I had racked up a whole bunch of new debt.

Save now, as young as you can, and watch the magic of compound interest! Those people in their BMW's will either regret it, or have trust funds, so what can you do to compete anyway?

Often people with the flashiest lifestyles are much more financially on edge than you'd think. Often they have a ton more debt than you do.

Jessica,

I too am just getting started in my savings habits. I'm 25 and have only been out of college and working for about 3 years. What I've found works best for me is to plan a set amount from each paycheck (other than my 10% 401K contributions) to go directly into another high-interest (what's high these days anyway) account. I use ING direct, but there's HSBC and a bunch of other online banks that have higher interest rates than your regular banks. Once that and my Roth IRA deductions are taken out, I know that whatever money is leftover is fair game. I can use it to go out to dinner without feeling guilty for not immediately saving it. These deductions work for me, but making sure you find a plan to work for you is the most important. If you try to save everything you make, you will deprive yourself and most likely fail, but if you stick to your plan, which includes some wiggle room for fun things, its a lot nicer.

Many of my friends buy new cars, etc but I know I have the peace of mind to have a financial cushion if something happens in my life out of my control on top of my retirement accounts – and your friends are probably building up crazy amounts of debt and don't even understand the financial impact that they're having on their future right now. I wish more people in their twenties (and some in their forties!)would understand how important it is to save SOMETHING!! Good luck to you!

Shaun in KS, Mike in Boston said $200 k is not "rich" and if you lived on East coast you too would understand what he is saying. Jessica, you are off to a great start, keep doing what you are doing, but enjoy life, you do not want to have regrets, but a lot of cash. Balance is the key to everything in life. Great job, good luck.

Hi Jessica, I just turned 25 and had the same frustration with retirement calculators. Another idea is to estimate what you will save this year (say $10,000 for example) and add it to the amount you already have saved (maybe $20,000) and put in your age as 25. It's as if you fast forwarded to what your account will look like when you actually are 25.

Way to go on your saving! I know how it feels when friends are cruising around in nice cars – I am still driving my 1999 Chevy Cavalier I bought used in college. I'm saving my money for a nice new Chevy Malibu instead of a BMW though. That will be enough of a splurge for me!

To the guy who said $200K a year is not enough to live on, I would say that is the most ridicolous thing I have ever heard. $200K a year is alot of money, regardless of if you live in New York or New Delhi. If you can't make it on that then you have issues.

The job market is too flaky for stable living these days. Unfortunately, that means living very well below your means to compensate. Live "temporarily" as i like to say. Don't plan on buying a lot of possessions (furniture etc) straight out of school… save every penny you make for atleast 2-5 years.

Once you have a nice pillow of money stored away, life becomes a lot more enjoyable!

While we're on the topic of overly-restrictive limits on the "What You Need To Save" tool, why are the income limits so low? For a 30 year old, it can't handle an income higher than 80,000. A couple of married 30-year olds with a household income over 80,000 are hardly "rich." (or even a household income of 200,000 in expensive coastal areas, in spite of what some politicians think.)

CNN Money has been touting this tool for a while. Why not put in a little effort to make the calculations work for any age above 18 and for any income level?

Good Tool. IF it just let you do more than 100K for someone who is 35 years old.

You are right track about savings , but as already mentioned dont feel guilty every time , have decent spending for your current life and enjoy. If you like BMW go for it , this is the age for that , once for life time event may be , not to make a habit.

Jessica,

If you're saving 10% of your income, you're off to a great start. Just make sure to tilt your portfolio heavy toward stocks for maximum growth. Time will work in your favor. As long as you are saving at least the 10%, you can afford to spend some money on yourself – 41 years is a long time to deprive yourself.