Investing / WWYD with $30K in savings?
P
0Feb 01, 2022
WWYD with $30K in savings?
I've been saving up and wondering what you all would recommend for someone who is new to investing? I had a goal to get my savings to this amount and now that I'm there, I'm wondering what I should do with it? I'm 27, working full-time, live in a high cost of living market. I've been interested in passive income and building wealth but buying real estate is really out of the question where I am right now. I'm also saving about 6% into my 401k (no match), only debt is a car loan, and I have a pretty high tolerance for risk (or so I think). Thanks!
Replies (15)
J
123Feb 01, 2022
@PerceF6W, the lazy portfolio is a great option, my friend.
You may find this lesson relevant and helpful.
Click on it below and a new tab will open and take you directly to the lesson.
Create a Simple 3-Fund Portfolio
Investing Basics
6 min
D
20Feb 02, 2022
@PerceF6W, How about a S&P 500 index fund and call it a day? I'm not a financial advisor and this isn't advice. But it's crazy to open up my Fidelity brokerage account and see how my portfolio returned only 4.5% last year compared to 26% for the S&P 500 indedx! If only I had just invested in it and set & forget it. As they say, hindsight is always 20/20.
M
0Feb 01, 2022
@PerceF6W, I'd start investing if I were you. Start with VOO or VTI and keep it simple. Maybe even dollar cost average if the idea of putting it all to work right away doesn't sit well. Do you have an emergency savings fund? If not keep a few months worth of expenses in your savings and invest the rest.
P
0Feb 17, 2022
@Michael318, thanks!
M
30Feb 01, 2022
@PerceF6W, you're young and you have the power of time and compounding in your favor. Invest with a long term mindset! If you have the option to move elsewhere and buy cheap, that's an idea too. (but I have no clue where these cheap markets are if they even exist)
P
0Feb 02, 2022
@Molly140, that's the thing! Even 1-2 hours away from where I am is still relatively expensive. I could possibly buy something like 2 hours away but I'm not sure prices will hold if things go to hell.
E
62Feb 02, 2022
@PerceF6W, You should figure out what your monthly expenses are and have 8 months of living expenses. If this adds up to $30k; put it in an online savings account. Emergency funds should be liquid and readily available when/if you need it. Afterward, max out ROTH IRA - $6K since you are already contributing 6% to your 401k. You mentioned that there is no match. Is there profit sharing? Contribute maximum amount to HSA account, if applicable. Then, go back to your 401k and contribute enough to get to the next lowest tax bracket. Once achieved, if you still have discretionary income to save and/or invest, open a taxable brokerage account.
P
0Feb 02, 2022
@ElizabethMH3, practical advice, thank you for it! 8 months of living expenses I suppose make sense in such a crazy world we live in. I don't contribute to a Roth yet (and will) and unfortunately there is no profit sharing. My company is pretty much a startup with less than 100 employee so the idea is that there will be match as it gets more mature. We do have an HSA and I have about $1K in it and will look into that too!
You may find this lesson relevant and helpful.
Click on it below and a new tab will open and take you directly to the lesson.
HSA Basics
Benefits @ Work
7 min
E
62Feb 03, 2022
@PerceF6W, In that case, I would recommend maxing out your HSA; which for single payer is $3,600. Does your employer contribute to the HSA? Most advisors will suggest 3-6 months of living expenses. However, yes, I think 8 months is more practical, but it also depends on the industry you work in and your career and how quickly you may be able to recover in case of job loss. Without a 401k match, I'd fund the ROTH IRA first because it is a triple tax benefit. Although it won't help to defer your taxes now, but money goes in tax free, grows tax-free and come sout tax-free. Plus, after 5 years, you can make withdrawals tax-free and also has an investing component as well. After age 65, it works just like a regular IRA.
P
0Feb 04, 2022
@ElizabethMH3, those are good ideas. Hadn't thought of prioritizing the Roth IRA it's a good idea since it's tax free once it is in and from there on out. Food for thought! My employer doesn't contribute to the HSA but hopefully they will at some point. That seems like a no brainer to max out. Thanks for your help!
E
62Feb 04, 2022
@PerceF6W, You're welcome!
P
0Feb 01, 2022
@PerceF6W, Are you wedded to your current location or do you have flexibility to move around? If you did move or were close to a lower cost of living market could you possibly buy? Yeah, real estate is high flying right now but it is smart to think about building wealth through RE and renting it out. Too many people realize this too late in their lives... and then wonder why they didn't think of it earlier.
P
0Feb 02, 2022
@Piers217, I do have the flexibility to move since I'm working remotely but I like where I am and that's the issue. Expensive as hell but worth it I suppose. There are some areas about 1-2 hours away from here and I'm open minded to buying something out there but need to be realistic too.