Critique a New Grad's First Budget
Hello everyone, I'm a 23 year old recent grad with a MS who has secured a SWE position in a VHCOL area for around 135k base salary. This is my first properly salaried job so I've never needed to create a budget before, however I think it would be wise to instill some financial literacy preemptively instead of having to retroactively fix past mistakes. I would love some advice on how to improve upon my budget!
For some context, I have 0 dependents and plan on living with my parents for the first few months just to save effectively. I'm very fortunate to only be laden with 20k in student loans, which, given my high base salary, I was planning on paying off aggressively within the first 13-15 months despite 2.75 – 5.50% interest rates. I generally live frugally with potential aspirations to achieve FIRE in my 30s/40s, however this is not a hard guideline by which I abide. I like to enjoy things from time to time. My employer matches 100% up to 6% of my 401(k) contributions in addition to upwards of $1,000 annual contribution to a HSA. The position is hybrid with very limited time in office and the company offers pre-tax Transit/Parking Flexible Spending at $325/month each. I don't have a car so no car payments.
Within the first 4-5 months I would follow this budget:
- Income: $135k/year gross, $11,250/month
- 401(k): -$2,042/month (I want to max out my contribution)
- HSA: -$275/month (Also maxing out contribution here)
- Transit FSA: -$240/month (I'm uncertain how much I actually want to commit since the public transit can be kind of expensive)
- Taxes: ~$2,500/month (I would be paying non-resident taxes and get tax credit in my native state)
- Take-home: ~$6193/month
- Expenses:
- Student loan payment: -$1,500/month (At this rate, my student loans would be paid off in about 13-14 months.
- Discretionary funds: -$1,100/month (Stuff for helping my parents around the house, groceries/take out, hobbies etc.)
- HYSA: -$3,593/month
After I have about $14,000-$17,000 of backup in my HYSA, I'd direct some of the saving funds to max out a Roth IRA for $7,500 of this year which should take about 2-3 months. After it's maxed out, I would go back to funding the HYSA, which should net me about $30k in a year. Granted, I may choose to move out earlier but I'll cross that bridge if/when I get there. I know next to nothing about the stock market/investing/bonds so I'll have to do a lot of research to build a proper portfolio. I've also heard I could diversify my savings and put maybe half of the leftover into a HYSA and the other half into a CD account. I would greatly appreciate some advice here too.
My main questions are whether or not my priorities are in line. On one hand, I feel like I'm saving quite aggressively with a high monthly student loan payment, however, I also feel like I should actually be investing more into my 401(k) since I begin work about 1/3 of the way into the year, missing 4 months of potential savings. Is it even worth it to max my 401(k) given I'm not debt free? Furthermore, because I've never made a budget before, I don't know if $1,100/month is enough/too much for discretionary funds. Not having to pay rent frees my budget significantly, however I don't think using my grad school spending patterns is a good barometer for how much I would need to support a new lifestyle. Thank you and I'm wholly receptive to any feedback!