Hi Money Minder,
Hey there! I’ve been stressing out lately because I feel like I’m falling behind on my savings. I started working two years ago when I was 28, and now at 30, I’m starting to panic about not saving enough for the future. I’m pretty clueless when it comes to money stuff, so I’ve gathered some info from here and there, but I could really use some extra advice.
My income is 87k. I live in a pricey area where rent is $1200, and my monthly bills add up to around $1500 more. I also have $11k in student loans that I pay $500 towards each month. I’ve started putting $500 a month into a High-Yield Savings Account, but it’s only at $2k so far. That’s all I have saved up for emergencies.
I’m really unsure about my retirement savings. Right now, I’m putting 7% into my Roth and 7% pre-tax. I’ve got about 42k saved up, but apparently, the goal is to have a year’s salary saved by 30, and I’m nowhere close to that!
It’s also on my mind that I want to own a home by the time I’m 40, but trying to save up for retirement and only having $2000 stashed away is making me feel like I’ll never reach that goal.
Any suggestions on how I can better manage my finances? Thanks a bunch!
- Savings Seeker
Response from THE MONEY MINDER:
Hello There,
It’s understandable to feel anxious about your savings, especially when it comes to being on track for retirement and other financial goals. First of all, I want to commend you for being proactive about seeking advice and trying to improve your financial situation. You are already ahead of many people by taking these steps.
Given your current financial picture, there are a few practical steps that you can take to better allocate your finances. It’s positive that you are contributing to both a Roth and pre-tax retirement account, but you may want to consider increasing your contributions gradually over time as your income allows. Aim to save at least 15% of your income for retirement, which may mean reevaluating your budget to see if there are areas where you can cut back.
In terms of your emergency savings, having $2,000 is a good start, but ideally, you want to have 3-6 months’ worth of living expenses saved up in an emergency fund. Considering that you live in a high-cost-of-living area, it might be prudent to focus on increasing this fund before aggressively saving for a home.
Regarding your goal of owning a home by the time you’re 40, it’s important to prioritize your retirement savings first. Remember that there are various ways to finance a home purchase, but retirement savings cannot be borrowed against. As you continue to increase your income and savings rate, you will be in a better position to save for a down payment on a future home.
In summary, I recommend focusing on increasing your retirement contributions, building up your emergency savings, and then shifting your focus to other financial goals like homeownership. It’s a gradual process, but with consistency and discipline, you can make progress towards securing your financial future. If you have further questions or need more guidance, feel free to reach out for more personalized advice.
Farewell from THE MONEY MINDER.
