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!