I’m having trouble getting started with what I should do with my money. Have I saved enough? What direction do I need to take next?

Submitted by DestinationForever t3_zzhikd in personalfinance

I’m 28 years old and have progressively been more apt understanding my financial future. What recommendations could you make for me?

I have 30k in a checking account 7.5k in my 401k 2.5k in stocks

I want to put maybe 10k in a HYSA and then max out on Roth?

I have an apartment that’s 750 a month, but eventually would like a house in the next couple of years.

Advice?

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Werewolfdad t1_j2bm47j wrote

Start here: https://www.reddit.com/r/personalfinance/wiki/commontopics

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DestinationForever OP t1_j2bmty8 wrote

That emergency fund stuff is tough for me to understand. So is that a HYSA?

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Werewolfdad t1_j2bn0n8 wrote

Yes. What’s hard to understand?

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efla t1_j2bmr1n wrote

Generally the order is:

  • emergency fund (3-6 months of expenses)
  • get any 401k match your employer offers
  • pay off high interest debt (roughly 5% or more)
  • max out Roth IRA
  • increase 401k contribution until you’re contributing at least 15% of your income to retirement
  • save for longer term goals (like that house)

You can see the prime directive in the subreddit wiki for more info.

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DestinationForever OP t1_j2bn1mi wrote

So where do I store my ‘emergency fund’ exactly? Like a HYSA? I’ll match my 401k no problem. I have no debt. Do I really want to put money in a Roth and can I pull that out at anytime?

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efla t1_j2brjtm wrote

Store your emergency fund in a HYSA, yes. You can pull money out of the Roth IRA any time, but earnings are subject to taxes and penalties if you withdraw before you’re 59.5 years old. There are some exceptions to that, such as first time house purchases, but generally it’s just a tax-advantaged retirement savings account.

I haven’t looked too hard into why the roth ira is recommended before increasing 401k contributions, since I’m not there myself yet.

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DestinationForever OP t1_j2budlo wrote

What makes Roth any different from a HYSA besides withdrawal repercussions before the age of 59? Also, with HYSA can you withdraw any amount anytime?

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efla t1_j2bvioc wrote

An IRA is an investment account, a HYSA is a savings account. You’d be hard pressed to even meet inflation in a HYSA, let alone make any real earnings. You put your emergency fund in a HYSA because you don’t want it to be invested. The goal of an emergency fund is not to make money, but to have access to a few month’s expenses in case of an emergency like losing your job. You do want to invest your retirement savings, as you can make a good chunk of money by letting it grow in the market for a few decades. Having that money sit in a HYSA is a ton of missed potential.

You can withdraw from a HYSA any time. It’s just a decent savings account at a bank or credit union.

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efla t1_j2brybp wrote

You can also move some of your emergency fund into I Bonds, which are guaranteed to match inflation, but you cannot touch those for a year. You will want to make sure you do not lock up your entire fund for that period. It’s common to do something like move 10% of your fund into I Bonds each year. I would keep some in a HYSA too just since that’s easier to cash out in an emergency.

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DestinationForever OP t1_j2e4ykh wrote

Have you tried the I Bonds? Or have you known others to? What’s their experience, and isn’t it adjusted inflation like retirement accounts?

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