Young Professional in a fortunate financial position asking what's next?

[GratefulGuy1]

Hello MMM community! I am a 27 year old professional working in consulting in Washington DC. I just started a new job that substantially raised my salary over $28k to $110,000. Prior to this sudden windfall of income I had no debt at all. No student loans, no credit card debt, nothing. I have been very vigilant since I learned from MMM that debt is an EMERGENCY. For the past 2 years I've been doing my best to reduce my living expenses so I am able to max out my 401k and Roth IRA. With my new job I have access to an HSA (which I also am maxing out) and also comes with a 6% match from my company. On top of all this I just inherited an extra $100,000 from a family member I was not expecting. Using previous savings and some of this windfall I have built up an emergency fund of over $20,000 which should be more than enough to fund my living expenses for the next 6+ months.

Now that you know my situation I was wondering what is next? I am essentially maximizing all of my retirement accounts, have my emergency fund in place, and a decent chunk of change resting in an account that has a paltry 1% interest rate. If you were in my position what would you do? I think the next logical step would be to save up to buy a house but I am still young-ish and plan to move cities at least a few more times before I settle down. Given the current pandemic I am grateful to have a job at all but it seems like stocks have been seeing gains that don't accurately reflect what's going on in the economy. Placing the money in a Betterment account and just buying ETF's is another option I was considering. Any thoughts?

-Grateful Guy

[Lady SA]

For questions like these, 99.9% of the time the investment order will give you information on next steps/progression! https://forum.mrmoneymustache.com/investor-alley/investment-order/

You might also be fast approaching SWAMI status - satisfied working advanced mustachian individual; a SWAMI essentially has their account deposits on auto-deposit, a plan in place, and solidly along the path to FIRE, and now there aren't any further "actions" you need to/can take. It is just a matter of waiting until your accounts hit that magic number.

With what you've written, you have done most of the investment order already. So I'd advise you to take a look at the investment order, make some minor tweaks if you need to, and then sit back and let your plan run in the background.

[Eowyn_MI]

I think the next logical step would be to save up to buy a house but I am still young-ish and plan to move cities at least a few more times before I settle down.

Prevailing wisdom here at MMM is to rent your housing unless if you plan to settle down in an area for a long time.  I bought a house in 2017 when I was 25 years old but my plan is to stay in this area forever.  Owning a house comes with many expected and unexpected expenses.  The last three years has definitely been more expensive for me than renting but it's worth it because I'm working towards my goals of a productive mini-homestead.

What are your goals in life?  It's hard to give advice on which way to go if you don't have a destination in mind.

[MrThatsDifferent]

Congrats, you’re doing great. I would just buy from Vanguard directly. Plenty of info on what to buy and then dollar cost average adding to that from each paycheck. Keep renting and keep with your plans as spending will be low over the next couple years. The only other option could be buying duplexes or multi-homes, if you want that experience? It depends on how much energy you want to devote?

[magnet18]

Similar situation but without inheritance and a year behind.  Between ages 22 and 26 I've quietly herp-derped myself from $60k to just over the 6 figure threshold, while DW made some wild career changes and has rocketed from $30K to $70K.

This year we made the "unreasonable" ask of taking basically the whole month of July off to go backpacking

We've been gunnung for remote work.  Next year, global events permitting, if neither of us is working remote yet we plan to take a gap year to travel the US and then evaluate whether we want to settle down and be normal or go for some alternative perpetual travel lifestyle.


If you're looking to boost the FI path you can investigate house hacking

Dream big.  :)

[Freedomin5]

I second the recommendation to follow the Investment Order.

In addition, you may want to consider beefing up your emergency fund to 1-2 years living expenses, depending on how secure your job is. Normally, six months is enough time to find a new job. However, we are not living in normal times and maybe heading into a recession, if we are not already in one. If you were to lose your job, you don’t want to be dipping into investments to fund your living expenses, especially given how uncertain everything is. As the young, new hire, if anything were to happen to your company, you may be the first to be let go (last in, first out). If you’re job is super secure, then just ignore the previous paragraph.

You may also want to look over your expenses. I know DC is an expensive place, but the numbers you provided suggest that you’re spending over $3000/month (i.e., over $20K EF to fund six months expenses). That’s a lot of money for a single person to be spending.

[Tyler durden]

I wish I bought more real estate at your age. Maybe house hack ?

Congrats on your good fortune and keep up the hard work!

[SEdude]

Given the current pandemic I am grateful to have a job at all but it seems like stocks have been seeing gains that don't accurately reflect what's going on in the economy. Placing the money in a Betterment account and just buying ETF's is another option I was considering. Any thoughts?

I understand your concern with the current markets, and if I had a large amount of cash I would DCA (https://en.wikipedia.org/wiki/Dollar_cost_averaging) over a year or so.

[LightStache]

Yes it seems like your next step is to start investing your taxable funds. Because you don't have a long investing history, I like the idea of DCA'ing in to the market over 12 months so that if there's a big dip before the end of the year you don't panic, sell at a huge loss, and then sit out the next five years of returns. It could be an excellent time to get your feet wet and see how you feel and react when your investments get volatile. I invested for a few years before and during the 2008-2009 crash -- it was a great learning experience for me because I was young and had a smaller portfolio although it felt big at the time!

[Laura33]

First, when do you want to be able to FIRE?  Your achievements to date are awesome and will get you to a comfortable retirement well before 65.  But if you want to FIRE significantly before then, then you will need to invest significant sums in a regular taxable brokerage account as well, because the tax-sheltered limits are just too low to get you there quickle.  See https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ for a big-picture guesstimator.

Second, what do you want your future life to include?  Remember, your FIRE target is 25x your RE expenses.  And that means that hunkering down and saving everything isn't going to work if your plan is to then spend a lot of money traveling, buying property, etc., after you FIRE.  So when you're doing your planning and figuring out how much to save, think about your future lifestyle that you'd like to be able to support -- house, SO, kids, travel, any of that stuff.  That will give you a better sense of how much else you need to be putting aside in Vanguard to reach your end goal (and, yes, Vanguard, not Betterment).

Like I said, you have a great start and a great attitude.  You have built good savings habits, which is the first key step.  Now it's time to start looking ahead and developing a dream of what you want your life to be like and a plan to get there.  You don't have to know everything now, of course, and it's very likely your plans will change along the way.  But you have a better chance of getting where you want to be if you are acting intentionally and according to your plan, and then revising that plan when you need to to suit your changed circumstances.