Hi Money Minder,
I’m in a bit of a pickle and could really use some advice from you. My name is Financially Challenged, and I’ve been on a bit of a rollercoaster journey with my finances. Let me give you the lowdown.
I started off in my early 20s making peanuts – under $20k a year – and slowly worked my way up to $45k by the time I hit 30. I saved a bit here and there, 10% to retirement in a company 401k, whenever I had a job that offered it. Nothing major, but it was something. Then, at 31, I landed a gig making $75k, which quickly shot up to $100k with remote work in a moderately priced area.
But here’s the kicker – I don’t trust this job to last forever. Life’s unpredictable, and I’m no stranger to seeing loved ones lose their stable jobs in tough times. So, as soon as my salary shot up, I started maxing out my 401k and Roth IRA contributions every year. I know I’m not a superstar at work – just a stroke of luck. So, when this gig ends (which it will at some point), I’ll probably be back in the $60-70k range unless lightning strikes twice.
This year, I bought my second home – a $200k one. The first was with my ex and cost $175k. I only put down 5% on the new place at 6.35% interest, hoping my $30k savings would cushion any blows. But boy, did I hit a snag! The new house needed everything from new floors to sewage repairs, leaving me with just $1,000 in savings. I danced on a tightrope for a while, paycheck to repair bills, but I’m starting to see the light at the end of the tunnel.
My Roth IRA contributions from way back make up a sizable chunk of my current $200k stash. And maxing out my contributions in the last few years has helped too. My Roth IRA cash is now my emergency fund – $19k – because the house ate up everything else. But I’m not regretting buying it. It may have its quirks, but it’s home.
Now, I’m on a mission to beef up my savings again until I have a solid six-month emergency fund in cash. Then, I’ll stash away extra for unforeseen home repairs and a future car replacement. I’m not sitting pretty, but I’m stable and understand the fragility of financial security.
Advice isn’t my forte, but if you find yourself in a similar spot, I urge you to max out your retirement savings. It’s a weight off your shoulders to know you’re secure down the line. Thanks a bunch for listening!
Warm regards,
Financially Challenged
Response from THE MONEY MINDER:
Hello There,
I want to start by acknowledging the strides you’ve made in your financial journey so far. Your dedication to saving and investing, especially in your retirement accounts, is commendable. It’s clear that you’ve been proactive in securing your financial future, and that’s something to be proud of.
However, I also want to recognize the challenges you’re currently facing, particularly with the recent expenses related to your new home. It can be unsettling to see your emergency fund depleted and to be living paycheck to paycheck again. But the fact that you’ve managed to handle these unforeseen costs without going into credit card debt is a testament to your financial discipline.
Given your current situation, it’s essential to focus on rebuilding your savings and preparing for future emergencies. Your plan to aim for a six-month emergency fund in cash is a wise one. Having that financial cushion will provide you with greater peace of mind and make you more resilient to any unexpected expenses that may arise.
In addition to replenishing your emergency fund, setting aside funds specifically for home repairs and a future vehicle replacement is a practical approach. By allocating money to these specific categories, you can better anticipate and cover future expenses related to your home and vehicle, reducing the likelihood of financial strain when these needs arise.
Continuing to prioritize your retirement savings, even during times of financial uncertainty, is crucial. Your long-term financial security greatly depends on the contributions you make now, and your proactive approach to maximizing your retirement accounts will pay off in the future.
Remember, financial stability can be fragile, but with strategic planning and diligent savings habits, you can navigate through life’s uncertainties more confidently. Stay focused on your goals, continue to adapt as needed, and you’ll be better prepared to handle whatever comes your way.
Best of luck as you work towards rebuilding your savings and strengthening your financial position.
Farewell,
THE MONEY MINDER
