“I’m wondering about saving up for that engagement ring my wife always wanted, or an awesome vacation for myself or my parents. Where does that money get pulled from?”: I want to save for short-term goals while also investing for the long term. How can I balance both effectively?

Hey Money Minder,

Yo, so this is my second time posting here in just one week. I’m totally gonna keep bombarding you with questions because I’m serious about getting my $$$ in order while I’m still young.

So, here’s the deal – most peeps on here chat about stashing cash in different accounts for the long haul, like retirement stuff. But what about saving up for that dream engagement ring for the wifey or a sick vacation for myself and my parents? Where should I be pulling that money from?

Right now, my game plan includes having 3 months’ worth of salary chilling in my high-yield savings account, maxing out my military 401k (TSP), and scoring my first share of VOO from Vanguard. Do I need another HYSA just for funsies? haha

Oh, and quick question: if I’m after quick cash, should I be looking into side hustles instead of diving into ETFs and mutual funds?

Thanks a mil, Money Minder!

Later,
Savvy Saver

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the initiative to manage your finances at a young age! It’s great to see your dedication to planning for both the long-term and short-term financial goals. In terms of saving up for specific short-term expenses like an engagement ring or a vacation, it’s important to have a separate savings account designated for these goals. Ideally, you could create a separate High Yield Savings Account (HYSA) specifically for these types of expenses. This way, you can have a clear picture of your progress towards these goals without dipping into your emergency fund or long-term investments.

Regarding your side question about generating money in the short term, side hustles can definitely be a great way to boost your income and save up for those special expenses. Whether it’s freelancing, part-time work, or selling goods/services, side hustles can provide you with additional cash flow to achieve your short-term financial goals. However, when it comes to investing in ETFs and Mutual funds, it’s important to consider your time horizon and risk tolerance. Typically, investing in these instruments is more suited for long-term financial goals due to their potential for growth over time.

In conclusion, having a dedicated savings account for fun expenses like an engagement ring or a vacation is a practical approach to ensure you’re financially prepared for these special occasions. Consider exploring side hustles as a way to boost your income for short-term goals while continuing to focus on your long-term investments. Remember, financial planning is all about balance and prioritizing your goals. All the best from THE MONEY MINDER as you continue on your financial journey!