I'm 22 years old, my first job out of college pays 135k and I have no idea what to do. Help!

[netseeker09]

Hello, My apologies in advance as this may be a bit of a long read.

I recently graduated from a Top 20 school earlier this year. I wanted to go into consulting but due to my laziness I didn't prep at all (too busy on this site lurking and Four Pins I suppose) and ended up being unemployed. I I ended up taking a job in consulting at local firm in Atlanta, (paid 38k + bonus of around 2k). Needless to say, out of my entitled ass (Generation Now) and my egotism I immediately started gaining some hard skills so I could get away from that company where the best and brightest of local state school kids went. Learning how to use Excel without a mouse, learning SAS and Stata.

After a month i started looking around at other places and found a position that was extremely lucrative (a boutique consulting firm that was completely comprised of Harvard alumni). I've had over 20 interviews for consulting before, this time I was gonna destroy the interview. Well I had the interview, and I got the position...sort of...they wanted me part time to see what I could do.

The next month or so I worked my Full- Time job (which eventually fired me because they found out I was looking elsewhere) the Part Time job at this firm, while interviewing at other places. I ended up getting an offer from an investment bank in New York, a semi-elite boutique, good gig ( 70k + 10k in bonus). I was deliriously happy. wooo! I made parents uber proud and I was like " to hell with the part time place...its been over a month, they don't wont me"

Well turns out they did, got the offer. 85k + around 35-50k in bonus ( yes I know how crazy this is for consulting)

So now I work here.....but I don't know where to go from here. I can't work here forever, but I'd rather avoid going to b-school. I've interviewed before at investment banks, PE firms, before so I have a good sense of what finance is "like". Although I've heard its uses are limited, given my lack of a finance background (I'm an econ major) I plan on at least taking the CFA Level 1.

So some thoughts that have been running through my head as a recent college grad kid:

- why is income tax so damn high?
- how much do I put in 401k?
- Should I be looking to lateral in finance immediately ( at probably a crazy paycut?) or should I wait a year (leaning towards this)
- HF? AM? PE? IB? ER? Continue with consulting? Industry?-_-; part of the reason I did not do as well as I wanted in interviews was because I applied for both IB and Consulting rather than focusing on one. I'd rather not make the same mistake again, but at the same time I don't know what I want to do yet.
- how do I network?
- how the heck do I invest all this money? ( or rather learn to how to invest? should I get a financial advisor?)
- where do I go from here ( to me, a job is just a means to money, I believe that an occupation shouldn't define who I am unless I am proud of it. I don't pride in saying " my name is joe, im a consultant/banker/ etc." I want to be defined on what I do off the clock, not on)

Forgive me if this sounds like an open ended question from a spoiled kid, but I feel that my position is a bit unique. I try networking with some friends of friends who graduated from some top b schools (chicago, Northwestern) and they make less than I do now ( I understand may be small sample size) so I am unsure if MBA would be best route for me.

Advice is appreciated,

Thanks from a long term SF lurker!

 

[otc]



- why is income tax so damn high?
It is actually on the low side historically. But unless you want to be a cranky old man, just ignore it. You have no real ability to change it, so just take your after tax money and be happy.
- how much do I put in 401k?
Up to your employer match, then max an IRA, then look back to the 401k. Since you magically started making that much money and haven't grown a lifestyle around it...I would suggest maxing the 401k too. It is pretax so it won't hurt your bottom line as much, and since you aren't used to having the money, you won't miss it. You can always cut back in the future if you need to, but it is much better to get lots of money in tax sheltered investment accounts early in life where they have time to grow.
- Should I be looking to lateral in finance immediately ( at probably a crazy paycut?) or should I wait a year (leaning towards this)
WTF dude. You've barely even started the ******* job. Maybe try it out for a bit? Otherwise good luck making yourself unhirable.
- HF? AM? PE? IB? ER? Continue with consulting? Industry?-_-; part of the reason I did not do as well as I wanted in interviews was because I applied for both IB and Consulting rather than focusing on one. I'd rather not make the same mistake again, but at the same time I don't know what I want to do yet.
These things are all very different. They take different skills and attract different people. The fact that you are asking means that you have probably not done even the most basic of research.
- how do I network?
See above comment about not having done even the most basic of research.
- how the heck do I invest all this money? ( or rather learn to how to invest? should I get a financial advisor?)
WTF did you research if not what kind of work you want to do? The people in half of those professions you listed should know the answers to this question (even if that answer is "Invest it in my fund, duh"). You probably should talk to a fee-based advisor. But mostly index funds.
- where do I go from here ( to me, a job is just a means to money, I believe that an occupation shouldn't define who I am unless I am proud of it. I don't pride in saying " my name is joe, im a consultant/banker/ etc." I want to be defined on what I do off the clock, not on)
So don't say "My name is joe....". Always funny when someone breaks out the "I don't want to be defined by my job" but can't seem to find anything interesting to do with their lives besides their job. Just go do some ****. Take a music lesson, try a new sport, I don't know. God knows you have enough money to pay for it.

In summary, yes, open ended question from a spoiled kid. I don't know how you managed to fall into this job despite apparently knowing nothing, but you probably want to hang onto it.

 

[ter1413]

Great response....

 

[BrooksLauren77]

$135K right out of college? Stay in it and save money; much as you can. Or blow it all on Gaziano and Girlings.

 

[emc894]

Money goes away damn quick if you allow yourself to spend it. Max your 401k and IRA (unless your are above limit). Sweep 10% of your income to a brokerage account invested in low cost index funds. Do a good job at work and keep your head up for other opportunities that will inevitably come along.

Source: been at BB investment bank since i graduated college.

 

[netseeker09]



Money goes away damn quick if you allow yourself to spend it. Max your 401k and IRA (unless your are above limit). Sweep 10% of your income to a brokerage account invested in low cost index funds. Do a good job at work and keep your head up for other opportunities that will inevitably come along.

Source: been at BB investment bank since i graduated college.

That sounds like a sound strategy, what about student loans? should those be paid off first?

 

[ter1413]



That sounds like a sound strategy, what about student loans? should those be paid off first?

Plan a budget that you can live off of. Disregard the 135K. Get a min budget. Pad it a bit for shopping/nights out/coke/etc. The rest(and that should be a good amount) should be into a 401/IRA/etc and pay off any bills that you have.

Why wait until you are older, possibly going to get married, etc to do these things and be debt free. After a few years, you will be waaaayyyyy ahead of the curve.

 

[otc]



That sounds like a sound strategy, what about student loans? should those be paid off first?

What rate are they at/how many are there?

Even if the rate is kind of on the high side, I would hesitate to put the loans ahead of IRA and 401k contributions.
Remember...if you go back to school, those loans go back into deferrment so you get to keep the money for free for another couple of years (hence why I am not as concerned about a highish rate). You can always pay more on your loan next year, but 401k and IRA maximums are annual...if you don't contribute to them this year, you can't go back and catch up next year.

 

[ellsbebc]

That sounds like a sound strategy, what about student loans? should those be paid off first?

What rate are they at/how many are there?

Even if the rate is kind of on the high side, I would hesitate to put the loans ahead of IRA and 401k contributions.
Remember...if you go back to school, those loans go back into deferrment so you get to keep the money for free for another couple of years (hence why I am not as concerned about a highish rate). You can always pay more on your loan next year, but 401k and IRA maximums are annual...if you don't contribute to them this year, you can't go back and catch up next year.

There are many variables to the student loans, as @otc outlined above. Regardless, I would put maxing employer 401k contributions and IRA as top two priorities. After that, you can debate between hitting the $17.5k ceiling for 401k or pay off loands.

 

[netseeker09]



There are many variables to the student loans, as @otc
 outlined above.  Regardless, I would put maxing employer 401k contributions and IRA as top two priorities.  After that, you can debate between hitting the $17.5k ceiling for 401k or pay off loands.

No employee match, company just "matches" 3% of my salary and puts it in regardless of my actual contribution.

I have around 16k-19k in student loans.

I don't plan on going back to school but I got it deferred or something recently, I believe its still accumulating interest but I don't have to make payments on it yet.

I created a budget/financial model that calculates everything out (even including my bonus since my bonus is based off of a formula off hours, not discretionary) and it leaves me around a good chunk in savings, reasonably speaking, would taking at least half of this and putting it into various index funds seem sound?

 

[mackguy]

I will concur with others, as new parents with a combined income just a smidgen less than yours (I'm an engineer, she's a teacher)... what you think should be good money has a way of evaporating.

At 22 with that kind of income make a good budget that allows you to enjoy it some but save save save. I'm going to go a little against the grain here... yes pile on the retirement accounts but keep some in places where you won't be penalized.

Someday you will want to buy a house, or a car, or something, and cash on hand is good to have. I'd aim to have $1k/mo going to a good savings account that you save for big/strategic purchases.

 

[netseeker09]



I will concur with others, as new parents with a combined income just a smidgen less than yours (I'm an engineer, she's a teacher)... what you think should be good money has a way of evaporating.  

At 22 with that kind of income make a good budget that allows you to enjoy it some but save save save.  I'm going to go a little against the grain here... yes pile on the retirement accounts but keep some in places where you won't be penalized.

Someday you will want to buy a house, or a car, or something, and cash on hand is good to have.  I'd aim to have $1k/mo going to a good savings account that you save for big/strategic purchases.  

I think the main thing that I am considering is inflation, I'm all for saving money as long as it allows me at least somewhat within the range of purchasing power I had when I earned it.

I definitely you about having cash on hand.

I've already re-adjusted my thinking from thinking I can afford a 3k a month place to a 1.5 a month place, and then my dreams of an Audi R8 before I'm 24 to a "Honda's dont break that much I'll just an accord."

 

[mackguy]

Since it appears you sort of stumbled into this job and income by accident, and don't seem to have any idea where you're going from there, my thought is that you should determine what a more average/typical salary would be for someone at your age in your profession in your area, and build your budget for any fixed expenses (housing, car, student loans etc and so on... this is a LONG list) around that number. That way if your 97th percentile income disappears and you have to go find another job, you won't find yourself having to drastically alter your lifestyle.

Now, what you do with the extra is the real question. Of course maxing out IRA/401K is a good idea. This is the place where it would be good to find a reputable professional to give you some advice.

You may have to wait some time for that R8, and an accord is a perfectly fine car, but if you wanted to have a bit more fun here (I'm a car guy, so other than family my basic thought is the only reason for having money is to buy cool cars... we currently have 6 cars and a motorcycle), you can get some real bargains in lightly used premium cars. My daily driver now is a 2012 Chrysler 300c that had a sticker price of $42k, I bought it with 16k miles, in like-new condition with the "certified pre-owned" warranty for just under $25k. I was looking at 2013 Lincoln MKSs that had sticker prices just shy of $60k going for under $30k. Luxury cars with a CPO warranty are a great value. The obvious choices like Mercedes, BMW and Audi don't depreciate quite as quickly but can still be found at significant discounts. Just a thought.

Also, how long do you expect to stay in your current area? Real estate is still at low pricing, and interest rates are at historic lows. With your $1500/mo expectation you're looking at a $250-275k place depending on what you have on hand for a down payment and what the real estate tax structure is in that area. Of course all markets are unpredictable but if you're going to be in the area for at least 5-10 years it's probably a good thing to look into.