'I don’t have a routine of adding to any account': I have money scattered in random accounts and worry about investing. How should I best save and invest my disposable income?

Hi Money Minder, I need some advice on how to handle my finances. I recently moved out on my own after living with my parents and paid off most of my student loans. Right now, I have $20.5K split between two ETFs and $6.5k in a savings account. I also contribute to my 401k to get my company’s match. I don’t have a set savings plan and just put money wherever. I’m thinking of opening an IRA but not sure where to start. Should I be worried about having most of my savings in stocks? Any tips for both short and long-term financial goals? Thanks!

Retired and Happy

Response from THE MONEY MINDER:

Hello There,

Congratulations on paying off most of your student loans and starting your investing journey! It sounds like you are on the right track, but there are some areas where you can make some adjustments to optimize your financial situation. Opening an IRA is a smart move to further diversify your investments and save for retirement. You can choose a reputable financial institution or robo-advisor to open your IRA, ensuring you understand the fees, investment options, and potential tax benefits associated with different providers.

Regarding your current investment portfolio, having a majority of your savings tied up in stocks can be risky, especially if you may need access to that money in the short term. It might be a good idea to reassess your risk tolerance and time horizon to determine if you need to reallocate your assets to a more balanced mix of stocks, bonds, and cash equivalents. This can help mitigate potential losses during market downturns and provide you with more liquidity when needed.

In the short term, focus on building a more structured approach to saving and investing. Set specific goals for each account (e.g., emergency fund, retirement savings, short-term goals) and allocate your disposable income accordingly. Develop a budget to track your expenses and identify areas where you can cut back on non-essentials. Consider setting up automatic transfers to your savings, investment, and IRA accounts to ensure consistent contributions.

In the long term, continue to educate yourself on personal finance and investment strategies to make informed decisions about your money. Consider seeking advice from a financial advisor to develop a comprehensive financial plan tailored to your goals and risk tolerance. Remember that financial planning is a journey, and it’s essential to stay disciplined and patient to achieve your financial goals.

Best of luck with your financial journey!

THE MONEY MINDER