“I feel a bit lost with what to do financially.”: With a high income and savings, how should I invest towards my future goals of a larger home and starting a family?

Hi Money Minder,

I’m a 29-year-old making around $110,000. Right now, I’ve got about $85,000 chilling in my company’s 401K (all in a target date fund). I’m putting 11% of my paycheck into my 401K, and my company matches 9%. Plus, I’ve got $65,000 sitting pretty in my HYSA. No credit card debt, but I do have a $250,000 mortgage with my husband.

I’m feeling like I’ve got too much cash hanging out in my savings, but we’re thinking about upgrading to a bigger home in the next 2-4 years and starting a family.

So, here’s the big question: should I start investing some of my savings in index funds through brokerage accounts, or should I just up my monthly contribution to my 401K? I’m feeling a little lost when it comes to my finances.

Thanks in advance for your help!

Response from THE MONEY MINDER:

Hello There,

Congratulations on your diligent savings habits and financial stability so far! It’s great to see that you are thinking ahead about your future financial goals, especially with regards to potentially buying a larger home and starting a family in the next few years.

Given your current financial situation, it seems like you have a solid foundation with your 401K contributions, emergency savings, and lack of credit card debt. As you mentioned feeling like you have too much cash in your savings, it could be a good idea to consider investing some of that money into index funds via brokerage accounts.

However, before deciding to invest that money, it’s essential to consider a few factors. Firstly, make sure you have enough saved in your emergency fund to cover 3-6 months of living expenses. Then, assess your timeline for potentially buying a larger home in 2-4 years. Depending on your risk tolerance and time horizon, you could consider investing a portion of your savings in a diversified portfolio of index funds.

In addition to investing in brokerage accounts, continuing to contribute more to your 401K is also a good idea, especially with your company match. By maximizing your 401K contributions, you are taking advantage of tax-advantaged retirement savings, which can help grow your wealth over the long term.

Lastly, it might be beneficial to sit down with a financial advisor to discuss your specific financial goals, risk tolerance, and investment options. They can provide personalized guidance based on your unique situation and help create a financial plan that aligns with your future goals.

Remember, it’s essential to find a balance between saving for your future goals and enjoying your present life. By making informed financial decisions and planning ahead, you are setting yourself up for long-term financial success.

Best of luck on your financial journey!
THE MONEY MINDER