I’m a new government employee working in law enforcement. Right now, I have about $20k in student loan debt, a vehicle that will be paid off within a year, and I’m married with young kids.
My long-term goal is to retire debt-free, buy or build my dream home, and be able to travel. I feel a little lost when it comes to retirement planning and benefits.
What should I be doing now in terms of savings, investments, and making the best choices with my TSP contributions? Any advice would be appreciated!
Start by saving for things instead of taking on debt. When it’s time for your next car, try to pay in cash so you don’t have a loan. Buy used cars and drive them as long as possible.
Do you have an emergency fund? Start with 3 months of expenses and work toward saving a full year’s worth. Life happens, and having that cushion will make things a lot easier.
As for travel, start budgeting for it now so you can fit it into your life instead of waiting for retirement. Also, when it comes to your kids, make sure you’re raising them to be independent so they don’t rely on you financially in adulthood. That way, you can focus on your own goals when the time comes.
A simple but effective move is to keep as little money as possible in your checking account—just enough for bills and expenses. Put the rest into a high-yield savings account so it earns a little extra.
And if you use credit cards, only use them for what you can pay off in full every month. High-interest debt is a major setback, so avoiding it is key.
Financial independence comes down to three things:
Discipline – Always live below your means.
Margin – Build a gap between what you make and what you spend, and invest the difference.
Time – Let your investments grow over the long term.
For now, focus on paying off debt and saving cash. Once that’s under control, max out a Roth IRA (consider investing in something like VOO), invest in a taxable brokerage account, and make sure your TSP contributions align with your long-term goals.
The best thing you can do right now is start learning about personal finance. Spend 30 minutes a few times a week reading up on investing, budgeting, and retirement planning. You’ll be dealing with money for the rest of your life, so taking the time to learn now will pay off in the long run.
Sarah said: @Nicholas
Right now, I’m contributing 11% to my TSP. Yes, I pay into both Social Security and my pension.
Since you’ll be getting a pension and Social Security, that means you’ll have a decent amount of taxable income in retirement.
It might make sense to switch some of your TSP contributions to a Roth IRA so that you’ll have tax-free withdrawals later on. Having a mix of taxable and tax-free income in retirement gives you more flexibility when it comes to withdrawals and tax planning.
Sarah said: @Julia
It feels like there’s so much to learn, and it can be overwhelming. Is there a clear path to setting yourself up properly?
There’s definitely a lot to learn, but don’t stress too much. Just take it step by step, and over time, you’ll start to feel more confident about your plan.