Budget Breakdown: 22-Year-Old Software Engineer Making $164,000 in NYC
How a new grad with a $164k salary can capture their full 401k match, build an emergency fund, and retire early
Today I’m budgeting for a 22-year-old Software Engineer living in NYC with one roommate, fresh out of college, earning $164,000/year (wow!)
They told me they felt that their finances weren’t great at the moment, but with this income and zero debt, they’re starting from an incredible position. They just need a framework.
Their top financial goals are:
Start investing
Build an emergency fund
Create a flexible budget to guide future money decisions
They value putting their money towards Food & Dining, Travel, and Savings.
Let’s dive in!
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Current Budget
Income
After taxes, they take home $7,433 per month. This is an incredibly good income for anyone, let alone a 22-year-old!
Retirement
They currently have $0 saved for retirement, which makes total sense for someone just starting their career.
Here’s the exciting part: their employer offers a 50% match in their 401(k), up to $24,500. They plan to max, so that’s an extra $12,250/year invested just from the match!
They also plan to max out their Roth IRA, which is currently capped at $7,500 per year.
Their goal is to retire by 50 at the latest spending $140,000 annually. Since they are starting early and are able to put a HUGE chunk away every month, they are right on track to retire by 50!!!
Budget
Their largest expense is rent at $2,465/month, which they split with a roommate.
At a $164k salary with a completely blank slate and no debt, this is honestly one of the best starting points I’ve seen.
The 3 Key Changes I Recommend
1. Look into more investing options
I would encourage them to look into their health insurance plan. If they are on a high deductible plan (many healthy, young people choose a high deductible plan) then they have access to funding their HSA. Here they can invest money completely tax-free!
What is an HSA?
HSA stands for Health Savings Account. It’s a tax-advantaged way to put money aside for qualified health expenses. The money you put in is tax-free, you can invest the money and grow it tax-free, and then you take it out tax-free for qualified medical expenses. It is a powerful account!!
Additionally I would look into employer stock discounts. Many larger companies allow employees to purchase company stock at a discount (like 15% off share price). This is a great opportunity to get some free money.
Lastly I would open up a taxable brokerage account and start investing $500/mo here. They are maxing out all of their current retirement account options, so to build a healthy bridge for retirement we can begin putting money towards a taxable account. The money here could also be used towards a down payment in the future, if that becomes a goal long-term.
Learn more about taxable brokerage accounts here.
If they use that $500/mo towards retirement, it would help them retire almost 1.5 years sooner:
2. Increase Emergency Fund Savings
Their current emergency fund sits at $100, they’re just starting off! I’d recommend going aggressive here, funneling $1,000/month toward a HYSA for their Emergency Fund. At that pace, they will have an almost 2 month Emergency Fund by the end of the year, and a 6 month Emergency Fund by May 2028.
Once that fund hits its target, that $1,000 can either stay put to build towards a 12 month fund, go towards their taxable brokerage for an even earlier retirement, or go to fun! They already hit their major goal so they have wiggle room here.
3. Increase Vacation Fund
They mention they value putting their money towards Food & Dining, Travel, and Savings. Their budget puts a healthy amount towards Food & Dining and Savings, but vacation feels a little low at $200/mo. I would increase this to $500/mo!
Updated Budget
Even though they're starting with nothing, having a plan from day one puts them on a trajectory most people don't get access to until much later in life.
They have an amazing head start and I’m really excited for them to hit all of their goals in the future!!!
Q&A
What advice do you have for people who are job searching right now?
It’s annoying, but I would advise trying to reach out to people on LinkedIn with similar experience (i.e. from the same school, former company, background, etc.) who work at companies/have a career that you are interested in.
Scheduling some time to learn about their job function and hopefully landing a referral(!) can help a ton in even getting an interview, which was often a really hard step to reach for me. Also, do your best to apply for jobs within the day they are posted by setting up alerts on job boards.
Want to map out your own plan?
Do it yourself here:
Need more guidance while building your plan?
Friendly neighborhood disclaimer: I am not a licensed financial professional and this is not financial advice. These are the changes I would personally make based on assumptions and the limited data I have received. Please do your own research and work with a professional for your unique situation.