I could use your advice on where to stash my savings. I want to save big time in the next year. Right now, I have 5% going into my Roth 401k. I also have 50% of my paycheck going to a High-Yield Savings Account with 4.2% APY. Should I max out my 401k or open an IRA, or maybe explore other investment options? All ears for your advice! Thanks!
Farewell from the author, Hopeful Saver
Response from THE MONEY MINDER:
Hello There,
Congratulations on graduating and landing your first job! It’s great to hear that you are being proactive about managing your finances. Given your current situation, it’s understandable that you’re feeling overwhelmed, but with a realistic and practical approach, you can set yourself up for financial success.
Firstly, it’s excellent that you are taking advantage of your employer’s 401k match. Since your employer matches 100% up to 5%, you are maximizing this benefit by contributing 5% of your paycheck. This is a smart move as it’s essentially free money that will grow over time. Keep in mind that contributing more to your 401k can help you save for retirement and potentially reduce your taxable income.
Regarding your student loan payments and your plan to buy a new car, it’s essential to create a budget that prioritizes these expenses. Make sure you have a clear picture of your monthly income and expenses, including your loan payments and estimated car payments. Consider paying more than the minimum on your student loans if possible, as this can help you pay off the debt faster and save on interest in the long run.
When it comes to savings, it’s good that you have allocated 50% of your paycheck to a High-Yield Savings Account (HYSA) with a 4.2% APY. This is a safe place to keep your emergency fund and short-term savings. In terms of investing, you may want to consider opening an Individual Retirement Account (IRA) in addition to your 401k. An IRA can provide additional tax advantages and flexibility in your investment choices.
In conclusion, it’s essential to stay disciplined with your spending, prioritize your financial goals, and seek guidance from a financial advisor if needed. By setting specific goals, creating a budget, and regularly reviewing and adjusting your financial plan, you can work towards building a strong financial foundation. With time and dedication, you can achieve your savings goals and secure your financial future.
Best of luck on your financial journey!
Farewell from THE MONEY MINDER.
