- December 5, 2023
- Posted by: legaleseblogger
- Category: Related News
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Investment and Savings Strategy for Short and Long-Term Financial Goals
Over the past several years, I have strategically allocated approximately 25% of my net income to both retirement and taxable accounts. These investments have primarily been in a total market fund, and I have managed to accumulate a significant amount of wealth in both my retirement accounts and taxable accounts. At the same time, I have also been able to save around $120,000 in a high-yield savings account by consistently saving and keeping my expenses low.
Moving forward, I am faced with the decision of what to do with my savings and investments. I currently have a mortgage of $200,000 with an interest rate of 3.5%, and I am uncertain about how long I will stay in my current residence. I am also considering the possibility of upgrading to another property at some point in the future and have contemplated the idea of renting out my current place or selling it to use the equity.
In exploring my options, I have come up with two potential strategies for managing my finances. The first option involves keeping $100,000 in a high-yield savings account as a combination of an emergency fund, allocation for future expenses or properties, engagement, vacations, cash allocation for investments, and discretionary spending. Any amount beyond this would be invested in equities, likely resulting in a considerably higher percentage of my income being invested compared to the current 25%.
On the other hand, the second option entails investing $100,000 into a taxable account by the end of the year, leaving me with roughly $20,000 in a high-yield savings account (equivalent to about 6 months of expenses). It is possible for me to gradually rebuild this savings to approximately $50,000 if I temporarily pause my investments after reaching the $100,000 mark.
The AI Legalese Decoder can assist in this situation by analyzing the implications of each option, projecting potential returns, and identifying any legal or financial risks associated with various investment decisions. By leveraging AI technology, I can gain valuable insights into the potential outcomes of my financial choices and make more informed decisions for both the short and long term. Additionally, the AI Legalese Decoder can help assess the legal implications of renting out my property, purchasing a new home, or investing in a side business, providing me with the necessary information to navigate these scenarios effectively.
With option 1, I would maintain a fixed amount of $100,000+ in a high-yield savings account while consistently investing any surplus income in taxable accounts. On the other hand, option 2 involves a lump sum investment of $100,000, depleting my savings to around $20,000 initially, with a plan to rebuild and maintain a $50,000 balance in the high-yield savings account.
My main concern with option 2 is the possibility that I may want to make significant financial commitments, such as purchasing a new property or starting a side business, within the next two years. The AI Legalese Decoder can help me assess the potential impact of these decisions on my financial portfolio, enabling me to make the most prudent choice for my future financial security. By leveraging this innovative technology, I can gain a comprehensive understanding of the legal and financial implications of each option, empowering me to make well-informed decisions to achieve my short and long-term financial goals.
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Keep about 30-45k in the HYSA for your emergency and invest the remainder.
Option 1, the description is vague. if keeping 100k in a HYSA for all your expenses that will get depleted eventually, so where is the rest of your income going?
Your two options seem to be the opposites of two extremes. I would take about 50-60k in your HYSA and invest it in a taxable account. Going forward, You want to first, pay your bills (discretionary spending). Second pay yourself (discretionary spending) this is your “Fun money”. The remainder gets invested in taxable investments.dollar cost average this percentage of your earnings into this account.
Make sure your emergency fund stays around 3-6 months of your non-discretionary bills.
The flexibility will be in your fun money account. The amount you put towards your taxable investments should remain around the same each month DO NO skimp on this if cash is tight. You skimp on the fun stuff.
If it is in 2-3 years to move to a bigger home, go scenario 2 and next year split the same way: maximize the 401k + savings. In 2-3 years you will have again 100k in savings.
I’d buy $10,000 a month in VTI until you reach the level of savings you want. As you are currently employed and generating income, your emergency fund max should probably be no more than $25K or so. In the meantime, the savings is still earning 5% or so.
If you want a different house, sell the current house and use the proceeds for the down payment for the next one. On the whole, houses are crappy investments, and if you are investing you will do better in stocks (VTI) than having the headaches of a rental property.
Absolutely do not pay off the 3.5% mortgage.
Ok so if Im understanding you.
Option 1. use your future income to start investing
Option 2. Use about 80k to invest a chunk now the. It have to put anything in after that as you are building back up the HYSA.
My suggestion is to do a bit of both. Use 50-60k to seed an investment account. Then take a percentage of your income each month and put it into the investment account and another portion into your HYSA.
#1. To take 100k.and invest at the current market peaks might be great or may be a disaster. To get a guaranteed 5% 0 risk is the smart play atm.