I’m a 25-year-old software engineer. I just finally saved up my 6-month emergency fund living in Seattle with my partner who makes half of what I make. We currently rent, don’t own a house, and don’t have student loans. We plan to have kids in the next 5 years. For next steps, I’m thinking about saving for a down payment on a house and/or increasing my retirement contributions a bit more (Fidelity suggests I should do that to meet my retirement goals). What do you guys think? Should I start out with these two things first, or prioritize other things first that smooths the path for the rest? TC: 125k YOE: 3 #Finance #personalfinance #savings #investments #financialplanning
If you’re not maxing your 401k, start there. If you know you want to buy a house in a few years, also start saving for the DP — with your household TC it’s going to take a few years.
Thank you! Should I consider withdrawing from Roth IRA or Roth 401(k) to top off savings to meet DP amount?
If you’re not in a super rush to buy a house, I’d recommend against drawing from any of your retirement accounts. You want to only touch that money before retirement as a last resort. At your age, you want the power of compounding over the next 20-30 years to multiply what’s in your retirement. 10k now will be 30k in 20 years and almost 60k in 30. In Seattle you probably want to wait for a promo or two before buying as well if you’re looking at SFH.
2 goals one long term for retirement and one short term for down payment. Long term can be 401k + vanguard index funds(outside of 401k) Short term can be mix of cash/bonds + etfs with dividends. Mind you <=5 years is short term
Thank you for this! I will have to look into Vanguard
Invest in your next girlfriend
This is how I have set up my Financials and it this gives me my peace of mind Biweekly Net Pay(after post tax deductibles): $2300 ********************** Emergency Fund : 100 Investment Fund: 250 Core Savings: 250 Rent and Bills: 980 Family and Friends: 150 Travel: 150 Groceries: 300 Misc(for your pleasure): 120
GJ 👍
Thank you for this breakdown! I appreciate it. How did you decide your investment fund amount?
H00kers and blow
You should do the 401k, at a minimum put in enough to get any matching money. I would encourage you to find a way to max it out. You’ll thank me in 25 years. That said, consider what you need for a down payment and work out how much you need in 5 years. Otherwise, I would max things out. Might be interesting for you and partner to see how cheap you can live for a year. Take vacations, but see if you can do exotic budget travel. Eat out, but have a reasonable limit. Cut out the Starbucks and cigarettes. Save as much as you can.
have you tried living it up in your 20s? highly recommended
Just invest in S&P 500 while you wait for the housing market to completely implode. Double your TC with a job switch and then use the extra to put towards the house down payment- this should fit into your timeline
Aren't those two usually correlated?
Thank you! But if housing market implodes, wouldn’t that negatively impact S&P 500 as well?