This really really depends on how much debt you have and how young/old you are.
Here's my strategy, which served me well in my 3 years at Bain just out of college. I saved pretty aggressively to give me the flexibility to leave consulting - part of that means squirreling away cash, but part is also about managing your lifestyle and expectations. It's hard to go back to Motel 6 when you're used to the Ritz. It's a three-step process:
1) Max out your 401(k), with most of it in Roth, while you can
2) Pay your student loans. Your interest rate should be close enough to zero that you shouldn't pay any extra principal.
3) Live on half your net salary (your actual
paycheck, less your loan payments). Save the other half. Save 90%+ of any bonuses.
This will mean you're saving 40-45% of your gross salary (the number on your contract), so after 3 years you'll have a bit more than a year's gross salary in the bank. Trust me when I say that that kind of flexibility feels amazing! Plus, you'll still get to do all the things your friends are doing (no need to pass up any dream vacations) - you'll just feel a little poor all the time, but that's healthy.
Later in your career, you'll want to buy real estate and/or have a kid and/or start a business, all of which will change the game significantly. All the more reason to save now!
Category: Personal Finance