Earning, spending, saving, and investing — a mastery of these four matters creates a financially healthy life. But what steps should you take to get there? How do you set yourself up for success? In this article, I am combining some common questions asked by savvy new investors, especially those who are new adults or recent graduates.

How much should I save for retirement?

By default, we recommend that you save at least 15% of your after-tax take-home income.

This recommendation comes from the assumption that you have a default 40-year working career (age 25 to age 65). In that assumption, you can stay on track for retirement by saving and investing 15% in each of those 40 years.

Your after-tax take-home income would be how much you are earning minus your total taxes owed (you can use withholding as an estimate) minus minimum payments on your student loans. The remainder can be thought of as the money which is supporting your lifestyle, and it is saving 15% of that which gives you the best chance of meeting your retirement needs.

How much should I save for… a down payment, a car, having children, etc.?

The question of how much you should save for any financial planning goal is a standard financial planning math problem. The information that must be gathered to complete the calculation includes (1) how much you are trying to save and (2) when you are hoping to make the payment. If you know those, the calculation can be simple.

However, it is more common not to know these details than it is to know them. When you don’t know these details, then you may as well save as much as you can; no math problem necessary.

You didn’t ask this, but there’s another savings goal to have.

In addition to your future retirement and your spending goals of choice, another savings goal I highly recommend is budgeting for unknown emergencies. It is our recommendation that you save 10% of your after-tax take-home income for unknown emergencies. None of us can predict how you will use it and you don’t necessarily need to earmark it as “special” in your savings. However, by having your lifestyle 10% smaller than the maximum, you can provide extra protection for yourself from life’s financial shocks.

You can read more about this strategy in our article series “How to Budget for Emergencies” or about my personal experience with an emergency fund during my twenties in the article “Life Lesson #1: You Shouldn’t Need Saving.”

How to prioritize my savings goals?

I would suggest starting with prioritizing setting a low standard of living. How little can you spend and still meet today’s goals? If you spend less, you will always have room to do more.

Our article series “How to Spend” goes through many steps to keeping your expenses low, and the article / podcast “How to Spend: Align With Your Goals” might provide some inspiration here.

Where to save?

Most investors have access to several different types of retirement accounts, each of which is useful for different needs and goals. For this reason, most investors benefit from designing a custom savings waterfall, tailored to their specific goals and situation.

Our account funding priorities are written up in detail in our Account Funding Priorities article series. Currently, our most recent one is “Account Funding Priorities: A Savings Waterfall for 2025,” but you can find the whole series here. The current summary is:

• By default, choose Roth for both your 401(k) and your IRA.
• Fund your 401(k) sufficiently (or make payments on qualified student loans sufficiently) to get the full amount of any offered employer match.
• If you qualify for a health savings account (HSA) through your insurance, open and fund that to the maximum next.
• Then, open and fund your Roth IRA for at least $1 but up to its maximum if you have the savings for it.
• Finally, finish funding your 401(k) with what remains of your savings goals.

What to invest in?

By default, we would recommend utilizing either our Do-It-Yourself investment services or our free Gone-Fishing Portfolio to pick your asset allocation.

Or, if you are looking for one fund that provides a diversified investment, you could consider Vanguard Total World Stock ETF (ticker VT, expense ratio 0.06%) or the mutual fund version Vanguard Total World Stock Index Fund (ticker VTWAX, expense ratio 0.09%). Both of these provide low-cost exposure to all stock markets around the globe.

Photo by Art and Soil Bangalore on Unsplash. Image has been cropped.