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I've finally gotten a good job after several years of searching after I graduated uni. I'm making 80k starting and it's bound to go up (I think) since it's in software/engineering. I'm honestly at a bit of a loss as to what to spend my money on. All of my hobbies require little to no money such as gaming and reading.

This is definitely at least 3x more than I've made. Should I look into investing? If so, what kind, how high of risk (I'm in my 20's)? I could buy a house but I don't like the idea of being attached to one place.

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    I would build your savings up first. Funding an IRA isn't a bad idea other. Once you solidify the bases, buying a house isn't a bad idea.
    – Machavity
    May 11 at 19:17
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    I'll echo the suggestion to save. Investing can be a good method, especially if you impress to the advisor that you are seeking long term investment return. You are not "obligated" to spend money simply because you have it.
    – fred_dot_u
    May 11 at 19:34
  • Or maybe money.stackexchange.com/questions/47856/…
    – yoozer8
    May 12 at 2:33
  • you are going to need approximately $1,000,000,000,000,000 in the distant future if you don't want to be a rent slave, so remember that...
    – user253751
    May 12 at 11:33
  • I heard about this new crypto...
    – user26460
    May 12 at 14:28

9 Answers 9

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Assuming that you don't have credit card debt or student loans, then the things to focus on are:

  • Life happens fund to handle an unexpected bill like an emergency car repair.
  • Emergency fund. Three to six months to cover an employment gap.
  • Retirement.

When those things are covered, and yes you will probably be contributing money for retirement for many years, if you still have money leftover each month then you can start saving money to upgrade your housing situation.

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  • Any tips on what to do after establishing some savings/emergency funds? I imagine retirement funds will be paid for continuously so it'll always be there.
    – Uguu
    May 12 at 0:21
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    I also recommend an emergency fund as a first step. Then invest in a good bed and great shoes. Then focus on limiting risk. Pay off debt, 3-6 month expenses saved up. Healthcare, living conditions, etc.
    – Nathan Goings
    May 12 at 5:41
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    good jobs often have employer-matched 401k or similar. That should often be prioritized even above fully-funding an emergency fund, because otherwise you're just throwing away money
    – thegreatemu
    May 12 at 20:57
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Compound interest is an amazing thing. Putting $2000/year into your retirement fund for your first 10 years of employment can actually do more good for you than putting $2000/year into the retirement fund for the next 30 years.

This is further magnified if your company offers any kind of match on retirement savings. That's guaranteed free money; you really want to claim as much of it as you can.

Putting aside that much in your first few years may be tough; you're still setting yourself up as an independent adult. But it is very much worth doing as much as you can manage, as soon as you can manage it. And if you get in the habit of having the money taken out of your paycheck before you see the cash, you may find that you don't actually miss it; the after-retirement-savings income becomes the amount that you tune your lifestyle to, just as with health insurance and tax withholding.

But I agree that first priority is to build up enough non-retirement reserves that you can survive being out of work for half a year to a year if something weird happens to your job.

Lots of other good financial advice for folks new to the work world is available in other questions here. And elsewhere on the web. But you asked what to spend the money on first, and my answer is that the first priority after necessities and basically pleasant lifestyle should be to save now, and defer larger discretionary spending until you've got that basic structure in place.

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    +1 for being financially disciplined now and deferring extra spending. It's very easy to have "lifestyle creep" where your expenses grow with your income, but much more difficult to cut back an existing spending pattern. Of course it's worth it to spend some on yourself, but it can be a profitable time when you're used to living like a poor student but have started earning like a career professional, if you can resist the urge to spend the extra.
    – Nuclear Hoagie
    May 12 at 15:35
  • Possibly useful approach: Set up a separate bank account for splurges, and set up automatic transfer to that account -- basically an allowance for frivolities. That's a low-effort way to maintain a budget that lets you splurge periodically but makes you very aware of the trade-offs when you do so
    – keshlam
    May 12 at 17:19
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Your Health

When you are used to living on a low income, it is very easy to skip regular doctor visits for eye exams, dental, vaccines, etc. It's also tempting to buy cheap food that happens to be unhealthy. The most valuable thing to you is actually your health, but often times we don't learn this until we lose it. Being young makes you especially blind to it if you aren't already suffering from a disease.

So get used to spending a certain amount of money each year on regular checkups, even if you don't feel like you really need them. It's always easier to prevent a condition from getting worse than to fix something that has progressed to an advanced stage that you wrote off as insignificant.

Food especially is an investment in your health that you make every day of your life. Going cheap on clothes is one thing, but going cheap on food is penny wise and pound foolish. You don't need to buy the most expensive food, but you should try to buy the highest quality, healthiest food you can reasonably afford, and form good eating habits right now. That means reducing frozen/packaged food (which tends to have a lot of sodium) and buying more fresh fruits and vegetables (and eating them rather than throwing them away after a week or two!).

Also, you should try to get 150 min/week of Zone 4 exercise (heart rate at 80-90% of maximum). Whether you have a favorite sport/activity that achieves this, or you need to get a gym membership is up to you. Do the thing that you are most likely to continue for a long time. If you like bike riding, get yourself a nicer bike to motivate yourself to ride it more. If you like to skate, splurge a bit on skates, etc. Find an activity that gets that HR up and splurge a little to help motivate you to stick with it and do it regularly. As an engineer, I am certain that you do more sitting than is healthy and probably not enough activity right now. If you've never tried rock climbing, and you have a gym near you, that is a nice splurge that is both fun and doesn't require much investment.

It's also not a bad idea to get a fitness tracker that helps keep you accountable and can even recruit friends to keep you engaged.

If you are willing to cook your own food, investing in some nice kitchen tools is a good way to spend a bit of money. A quality chef's knife, cutting board, and saute pan go a long way. Having good tools will make it easier to cook and help keep you motivated. If you work from home and like coffee, getting a nice coffee machine can be a good splurge. If you like espresso drinks, there is probably no better investment than a decent equality espresso machine. Of course, you will want to buy whole beans and a grinder to complement that.

If you have a cheap bed, consider investing in a nice memory foam mattress, and possibly upgrading the size. You spend a third of your life in bed, so this is a stupid thing to skimp on. Also get pillows that help give you a restful sleep, even if you have to spend a little extra.

Finally, get yourself a bidet toilet seat. I recommend Toto, especially a model with a water heater. This will change your life, I swear. You will feel like a Neanderthal every time you have to dry wipe, and you will realize how backwards cultures are that have not recognized the obvious benefits of bidets. Again, don't cheap out and get a $50 seat. Those have cold water and are probably not much better than none at all. Look to spend at least $200, but more if you are willing. It should last for many years, and you will probably use it every day. You can fit it to most normal toilets, so it will work even in apartments. It requires no special tools to install.

Many of these suggestions are one-time investments, while others are an ongoing expense. You have to decide how much to spend on them. But at least think about them and weigh them against other possible uses of your hard-earned cash. When you are young, it is easy to take your health for granted. But as you get older, you will be very happy if you spent a little extra time and resources maintaining your health at a high level. This is especially true of sedentary office jobs. Good luck!

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    Don't forget to get yourself a good chair as well when you spent a long time at the computer. It is the small things you can upgrade that you will keep for a long time. A bigger table, a better chair, things that were working before but down the line they can improve your health by not degrading it further
    – Zibelas
    May 12 at 11:28
  • If he's in the US, his employer most likely provides health insurance, so things like regular checkups shouldn't cost much money (probably just a $25 copay per visit).
    – Barmar
    May 12 at 14:34
  • @Barmar true, but if you've ever lived paycheck to paycheck as a young person, then even the copay is something you can easily justify avoiding. But if you go to the eye doc and they suggest glasses, even just for using the computer, then it will easily increase your out-of-pocket costs unless you get the absolute bare bones options.
    – Lawnmower Man
    May 12 at 20:03
  • @LawnmowerMan That's true, but we're not talking about someone living paycheck to paycheck. The question is about what to do when you're making a decent amount of income.
    – Barmar
    May 12 at 20:05
  • @Barmar but that's my point. They said this job was a big upgrade, so they have probably neglected visiting the dentist. I'm reminding them that even if the dentist tells them they need some cavities filled, it's worth spending the copay and patient responsibility even though they might be used to avoiding that. You're thinking like a person who has always had high-quality, affordable insurance and for whom small copays were a non-issue. I'm thinking like a person who has worked minimum wage jobs before and know what kinds of mental patterns that forms.
    – Lawnmower Man
    May 12 at 20:10
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Maintaining a low-cost lifestyle can make a huge difference over the long haul. Many people increase their spending as their income increases and end up ill-prepared for retirement and/or experience significant financial stress throughout their lives. There's a balance to strike between enjoying your money and preparing for the future, but you have to decide what is right for you.

Think about your financial goals and build a plan for your money now that will help you achieve them. If you want to buy a house in 1-2 years, don't expose all your extra money to market risk or lock it up in retirement accounts. If you want a chance at retiring really early, live on as little as possible and invest like crazy.

Regardless of your personal goals/plans, you should be reasonably prepared for an emergency: major car/house repair, health issue, job loss, etc. About 6 months of expenses saved up is a common goal.

How much of your income you save/spend/gift is your call, but for retirement a popular priority list is:

  • 401k to employer match
  • HSA to max contribution
  • Repay high interest debt
  • IRA/Roth IRA to max
  • 401k to max contribution
  • Repay medium interest debt
  • Non-retirement brokerage account investing
  • Repay low interest debt

I like the list but the HSA priority depends on whether or not you have solid investment options in your HSA account and if you are inclined to fuss with saving receipts and seeking reimbursement years down the road. I think the most important thing is to educate yourself on the options available to you and understand which fits best with your plan.

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A very wise man told me once “if you have money in the bank, that’s an excellent place for your money to be”.

I saved up some generous amount of money, then invested the money in a nice flat. Which was empty. Then I filled it with items that were so cheap I wouldn’t mind throwing away in a year or two, and very few selected expensive bits.

Make sure that you have enough cash to have total freedom. That’s the most valuable use of money.

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    Thanks. I've never looked through the lens of saving money as buying freedom but it makes sense. I'll keep this in mind.
    – Uguu
    May 12 at 0:21
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As several others have said, saving your money now will pay off significantly in the future.

You have a modest lifestyle now, so you don't need to spend all the money you're taking in. But down the line you'll probably get married, buy a home, and have kids, and that will all be expensive. While your salary will almost certainly increase, you'll still likely need a significant portion of it to pay for the day-to-day expenses.

For instance, when you decide to buy a house, you'll need money for the downpayment, that will likely be at least $50K. Start saving for this now, and you won't have a problem then.

Others have mentioned setting aside a rainy-day fund. Try to keep 3-6 months of expenses in your bank account.

This is a perfect time in your life to start investing. I started a year or two into my first real job, and it has worked out well. Depending on how much research you feel like doing, you can either invest in some index funds (easy, inexpensive) or check out rankings of managed mutual funds, periodically reviewing what you have to make sure they're still doing well. Plan on letting this sit for the long term, so start with something like 5% of your money after taking out regular expenses and savings.

Once you've prepared for the future, there's nothing wrong with splurging on yourself. What you spend on will depend on what you like. Start saving for a nice car, take a trip, etc.

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I'm also a software engineer who had your exact situation when I graduated (and then again when I got a huge raise by switching jobs). Everyone else has covered the "boring" things so let me give you some advice about other things that I found are good to spend on. Although these are all "unnecessary", they really are investments in your health and happiness.

  • Clothes
    • The answer by @anjma covered this, but clothes are good to invest in. I always wore cheap ill-fitting clothing until I could afford better stuff. I didn't realize how much cheaper high-quality clothing is in the long run. I'm also a lot happier and confident now too.
  • Healthcare
    • Have you been putting off any concerns or issues because the doctor is too expensive? Do you need glasses/contacts? When is the last time you saw a dentist? These are all things that I neglected when I was a broke student. I even started the "unnecessary" things like braces, a dermatologist, electrolysis etc. I've never felt better about myself and my body before.
  • WFH Setup
    • Do you have any work-from-home opportunities at your job (Even a couple days a week)? Make the investment to upgrade your setup: a new desk, a comfortable chair, better monitors, a good keyboard and mouse. It's indescribable the difference a good setup makes.
  • Car / Transportation
    • Get a new(er) car if needed, or fix anything on your current car that you've been putting off. Same could be said for bikes, skateboard, whatever you use for regular travel. Not only will this save money in the long run, it's safer too.
  • Hobbies
    • You said your hobbies are cheap (gaming and reading). Is there anything within those hobbies that you've wanted but always dismissed as not worth it? I'm an avid PC gamer myself and I threw a few hundred dollars upgrading my computer. Did I need it? No. Is it fun? Yes. Are there any more expensive hobbies you've always wanted to try?
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Obviously a lower priority than other things, but don't be afraid to spend money on good quality clothes. Clothes that fit well and are comfortable can significantly improve how you feel day-to-day. Also, good quality clothes last longer than a lot of the really cheap stuff (cheap fabric and stitching will wear out or rip sooner), so it can actually save you money long-term as long as you get enough use out of it.

Beware, though, that expensive does not necessarily equal quality. Some brands do prioritize quality, and that is what you pay for, but with other brands, you're paying for the brand and not much else.

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Max out the 401(k) option.

If this is your first "good job" it is likely you are starting your real career late. The benefits of saving a little "early" go away because your early is already passed. You need to start preparing for retirement as quickly as possible and the maximum yearly contribution to a 401(k) is only $22,500 (in 2023). You should max that out as soon as you are able to budget for it to catch up.

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