Got out of a hole now what

Submitted by Possible_Late t3_126ra76 in personalfinance

I (27m) Finally cleared out debt and was able to aside 25k. My current salary is 155k a year before tax + whatever bonus I get this year was 35k pre tax which was unexpectedly high I don’t think it will be this high again. My take home is 7600 a month. My rent is 1600, I have no car payments (same car since college) although I live in an expensive area.

Firstly, if I want to put aside 100-200k for a down payment is it worth investing to get there? Since the assumption is that these will be shorter term investments and short term the markets not looking great.

Secondly, should I be splitting money between down payment money and general long term investing (outside of 401k which I’m already contributing for company matching).

Thirdly, I’m looking to keep pushing my salary up, my current job at least in the next year doesn’t look like it has a ton of upward movement rn, but the effort is low. I’m torn between trying to freelance and just grind to find a new job. (Current title is senior software dev).

I just feel like I’m still so far away from getting out of the rat race it gets demoralizing.

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KReddit934 t1_jeajzu5 wrote

Congratulations. Take at least a minute to appreciate the progress you've made so far.

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Possible_Late OP t1_jeaotud wrote

Thank you! Trying sort of have tunnel vision at the moment haha

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sir_richard_head t1_jeafkk3 wrote

>Since the assumption is that these will be shorter term investments and short term the markets not looking great.

Set up fixed rate CDs with your local bank/credit union. You should be able to get a rate of 4-5% for a set duration of time. These are safe investments and if you have a fixed rate, would not be subject to a market crash or whatever. If you have a sense of when you may want to start house hunting, you can get a CD that will go until roughly that point in time with a rate locked in. If you aren't sure, you can just perpetually open shorter term CDs.

>Secondly, should I be splitting money between down payment money and general long term investing (outside of 401k which I’m already contributing for company matching)

Your expenses are incredibly low and you have a very high salary. You should be contributing as much as you can to your 401k, not just what your company matches. Take a look at the prime directive in the wiki for where to put money after that. As far as saving goes, get an idea of how much money you will need for a down payment and start budgeting out that amount. You should get a sense of "I need to set aside $x per month for a down payment." After that, invest as much as you can in retirement savings.

>Thirdly, I’m looking to keep pushing my salary up, my current job at least in the next year doesn’t look like it has a ton of upward movement rn

Lookin' is free. It's just always going to be a trade off. Few places have an increase in responsibility or pay without also increasing the stress or hours you spend at work. It's okay to take some time to just be happy if you want. Life is what you make of it. Don't exist just to meet other people's goals and achieve other people's dreams. Set your own markers for success and decide your own path to get there.

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Possible_Late OP t1_jeaoqfs wrote

Thank you I will definitely look into this!

Just want to make sure I understand what you are saying about saving for down payment and investing in a 401k: first save for the down payment then invest what I can in my 401k?

And yea I have no clue what I want so i figured not worrying about money is a good place to start.

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CeruleanSaga t1_jeatyjd wrote

It depends on how aggressively you want to save for a home.

But maxing out retirement early means you have more years of compounded growth. The earlier money gets in there, the more time it has to grow. Just 10 years makes a huge, huge difference for retirement. Getting as much in now - before you have to spend money maintaining a house (and if you want kids in your future, etc) will pay off hugely long term.

It seems to me that you have enough to max 401k, max IRA and save for a house at a pretty good pace. But you'll have to decide the split there.

WRT market - buying at a discount is a good idea, the market being down is good news for a long/mid term outlook.

Again, how much to put in the market depends on your time horizon. If you think you will be buying a house later than 5 years, I'd say put your money there. If less than 5 years, go with HYSA and maybe bonds. (I bonds are still doing quite well but you can only buy $10k per year and other caveats that have been mentioned on this sub many times in the past.)

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drockaflocka t1_jeaueu5 wrote

This depends on your goals and current savings. Are you looking to FIRE? How much do you have saved in retirement/are you on track for your retirement goals? Any other major expenses/purchases in the horizon?

Always split your investing between timelines. Personal rule is to always bucket long term first (retirement), medium term (if applicable), then short term. After all savings goals are accounted for, the leftover money goes towards living/fun expenses.

Considering your income and timeline on a house, short term investing is probably the way to go. CDs are pretty solid rates right now. Tbills are also an option. Last option is an HYSA, which is still pretty solid.

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Admirable_Nothing t1_jebg2ps wrote

If you put away $3k/mo it still will be 3-5 years until you get your down payment nest egg. So you are in that area where equities sometimes work and sometimes don't. If it were me, I think I would keep half of the investment in short term deposits like HYSAs, MM (think VMFXX), CDs or short Treasuries and the other half in some type of low beta ETF. Think SCHD or JEPI. Take a look at r/dividends and read some of their ideas.

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