Chance to Hit 100k Net Worth by Year End

[LivingTheory]

Let me preface with this: we're extremely lucky/fortunate/blessed to have the stable financial footing that we have.  Part of the reason why I save and invest is because I feel like the gravy train will be gone tomorrow.  (I'm working on this, trying to strike a livable balance between social and saver, but it's not coming easy.)

SO #1                                 23 years old
SO #2                                 25 years old

Combined Gross Income    $75,000
Annual Expenses               $26,000

Retirement                         $23,500
Brokerage                          $5,700
Employee Stock                 $10,300
HSA                                    $2,300
Cash                                  $40,000

Assets                  $81,800

Student Loans                  $0
Other Debts                      $0

Liabilities              $0

Net Worth       $81,800

We started the year at $62,000, suffered a loss of $6,600 in company stock (it was free, 401(k) match comes by way of firm equity), and finished our family's second degree in 12 months.  Now we're both college graduates and excited to save for home ownership.

Given our savings rate, there is a chance that we could reach $100,000 by the end of December.  Some wind in our investment sails would push us over the top for sure, but we may be able to do it on contributions alone.  Since we need to add roughly $18,000 over the next ~7 months (15 paychecks), we need to maintain a $2,600/month savings rate.  This is lofty yet doable.  I can't believe I'm already on the doorstep of my "when I hit 30 years old..." goal!

I'm looking for any advice from those who have been here before, I don't want to mess up this wonderful opportunity.  Being unable to provide for my SO/future offspring terrifies me; I have some risk aversion issues when it comes to income due to watching my parents struggle unnecessarily.  Please let me know if I should provide a budget, portfolio breakdown, etc. to better assist the discussion.

Thank you!

[Gin1984]

Quick questions, do both of you of you make over $26,000 or is the income just one person?  What makes you feel like "the gravy train" will end?  Is there a reason you have so much in employee stock?  It looks like you are putting in enough for one 401k and one IRA is that correct?  Is there a reason you are not using both people's IRAs before taxable?  And why so much cash?

[LivingTheory]

• I make $48,000, SO makes $27,000.  This will increase to $48,000 and $47,000 in a few months.
• There's no rational explanation for this feeling that the rug will be pulled out from under us, I just saw a high income earner lose his earning potential pretty rapidly when growing up.  Job security is not an issue for either one of our professions, it's just an irrational fear that evolved from my experiences and natural tendency toward saving.
• The employee stock is mostly past gains and matched funds from 401(k) contributions.  I've contributed less than $2,000 over the five years at the company.  The reason being that the funds have a very unfortunate exit strategy - as in, there isn't one until you leave.
• Our income has only become substantial in the last two or three years [45k->55k->75k] so we have contributed to my 401(k) up until the company match, the SO doesn't have access to one.  Last year, we maxed both IRA's and are getting ready to do so this year as well.
• The taxable balance is a $2,200 gift from my relative that has grown.  It's something that I should probably transfer to a retirement fund (IRA or put into savings and have an equal amount of payroll deductions go into the 401(k)) but I just haven't because I feel I'd be hurting their feelings.  That sounds stupid when I type it out, especially since the fees are way higher than I'd like, but our relationship has been strained and I guess it's stayed here for emotional reasons.
• The cash is 30-40% emergency fund and 60-70% savings for a down payment.  We want to relocate to another city in 2-3 years and purchase a home.

[Gin1984]

Ok, so here is what I would do.  Start maxing out both you HSA and your 401k.  Do try to max out IRAs for both of you as well but those are secondary.  Could you consider the taxable account part of your EF (even if you only count 50% of it to account for losses) and then move part of the cash to trying to max out those accounts?  I understand family issues, so I get leaving it there.
How much are you paying in taxes, because if I am reading this correctly you should have enough to max out both your HSA and 401k and put some in the IRAs.

[boarder42]

i would get ALL that cash invested its losing money sitting.  If an emergency comes up it doesnt take long to sell off you shares of VTI or whatever you choose and get it back to your bank account.  if you dont have a CC get one and it will give you a month to make that transition of money. 

[boarder42]

to put it in perspective assuming 3.2% inflation your 40k will be worth 38720 by this time next year in today's dollar values.  you will have lost 1280 dollars ... so in "saving" for a house you're costing yourself buying power every year keeping it in cash. 

[Gin1984]

i would get ALL that cash invested its losing money sitting.  If an emergency comes up it doesnt take long to sell off you shares of VTI or whatever you choose and get it back to your bank account.  if you dont have a CC get one and it will give you a month to make that transition of money.

I very much disagree with that.  You are risking a lot by following that advice.  People did that and had to sell when the market had drop 40%.

[TrulyStashin]

Relax!

Seriously, you're in great shape and the point of having a 'stash is to eliminate the need to worry about money.   Invest your energy in getting over your irrational fears so you can enjoy the mental freedom that your savings has made possible.

[boarder42]

that 40k he has is for "rainy day" / buying a home.. one is predictable the other is not.  but IMO childless with a good job.  No need to have anywhere near cash like that sitting around.  all money should be invested.  just my opinion.  i dont understand the irrational fear of but what if the market tanks this year.  well it will rebound.  if it doesnt and continues to tank forever you have more problems than the fact that it was invested.  Like anarchy and societal fallout.  so second best investment for that would be guns assuming your 40% fear mongering happens and is sustained.  Guns keep up with inflation are easy to resell and will protect you incase of total market collapse.  boom safety ... haha

[rmendpara]

Let me preface with this: we're extremely lucky/fortunate/blessed to have the stable financial footing that we have.  Part of the reason why I save and invest is because I feel like the gravy train will be gone tomorrow.  (I'm working on this, trying to strike a livable balance between social and saver, but it's not coming easy.)

SO #1                                 23 years old
SO #2                                 25 years old

Combined Gross Income    $75,000
Annual Expenses               $26,000

Retirement                         $23,500
Brokerage                          $5,700
Employee Stock                 $10,300
HSA                                    $2,300
Cash                                  $40,000

Assets                  $81,800

Student Loans                  $0
Other Debts                      $0

Liabilities              $0

Net Worth       $81,800

We started the year at $62,000, suffered a loss of $6,600 in company stock (it was free, 401(k) match comes by way of firm equity), and finished our family's second degree in 12 months.  Now we're both college graduates and excited to save for home ownership.

Given our savings rate, there is a chance that we could reach $100,000 by the end of December.  Some wind in our investment sails would push us over the top for sure, but we may be able to do it on contributions alone.  Since we need to add roughly $18,000 over the next ~7 months (15 paychecks), we need to maintain a $2,600/month savings rate.  This is lofty yet doable.  I can't believe I'm already on the doorstep of my "when I hit 30 years old..." goal!

I'm looking for any advice from those who have been here before, I don't want to mess up this wonderful opportunity.  Being unable to provide for my SO/future offspring terrifies me; I have some risk aversion issues when it comes to income due to watching my parents struggle unnecessarily.  Please let me know if I should provide a budget, portfolio breakdown, etc. to better assist the discussion.

Thank you!

You seem to be very conservative (financially) and like to have big buffers. Nothing wrong with that! Being cautious is a good thing, but don't be too cautious. You have to take calculated risks to reach the best outcome.

#1: I would say shoot for a 12-month fund in liquid savings... so around ~$26k in cash savings sitting around for a rainy day. This is not ideal, but if it helps you sleep better at night, then it's the right decision.

#2: Set up a separate savings account for a house down payment, and come up with a target. Find out how much you need to spend on a house in your desired area, and then multiply that by 20%, and then divide that number by the number of approximate months between when you expect to buy and today. Put that amount into your house savings account. Problem solved!

Any cash that is not going toward #1 or #2 should be invested, ideally in regular amounts each month/pay period. Since your income is not extravagant, a 401k is your friend, and will be the easiest way to consistently invest without getting too emotional about market swings.

As far as the emotional side, I was with you last summer. I had a NW ~$90k in June, quit a job in July, moved in October to start a new job, and the NW has exploded since then (combination of a big run up in the market and big pay increase) to ~$150k today and on track for $175k by year end.

I am 25, male, single, and know exactly how good it felt to see my account on Personal Capital say $100,000.00. It was glorious!

Keep your emergency savings at $26k, find out your # to hit for the house down payment, and invest the rest (401k, Roth/Trad. IRA, taxable investments, in that order).

You'll be hundred-thousand-aires before you know it!

[hexdexorex]

I agree with the 12 month cash reserve. Otherwise put it all in the market. Right now I think large cap PEs are pretty low in comparison to small....so I would just weight towards SP500 - VOO

Did you mention wanting a house? I would look at your local market...and if your job is relatively stable etc and get he smallest house possible for your family...or future family. Personally I live in SF and have the money for a house but renting makes a lot more sense (at least in my current situation). That being said if the market you are in is fairly priced I would lock in one soon. Interest rates will probably be much higher in the future than now (know one knows the exact timing).

Caution is great, and right now there isn't a huge reason to rush with that extra 14 k and put it somewhere fast make sure you jump on opportunities when they present themselves. I missed a chance to buy a condo a couple years back in Miami that has since doubled because of my lack of interest in being a landlord

I am 5 years ahead of you and can tell you now every step you make is worth it.