January 29, 2023
Chicago 12, Melborne City, USA

‘My aim is to have a net worth of at least $100,000’: I’m 29 and live with my mom in a rented mobile home. I have a $25K emergency fund and $26K in a Roth IRA. What do I do next?


I’m financially sound as a single 29 year old who unfortunately still has roommates with my mom. We split everything up in the middle and I stay with her mainly because living your own life in my town is very expensive, and it helps to relieve a lot of financial stress on my mother and me.

Honestly, we live in a mobile home – including washers and dryers – and the rent is significantly cheaper and we have more space and actual parking spots than the typical apartments in my area. I have no car loans, no credit cards and no student loans.

I have an emergency fund of $ 25,000 in a high-yield savings account. I have $ 26,000 in Roth IRA (my employer does not offer any retirement benefits), $ 6,000 in my Robo-Advisor investment account, $ 4,000 in a savings account and $ 1,300 in my checking.

I prefer to pay for my car in two years and save a hefty emergency fund because you don’t really know what could happen and I don’t plan on learning the hard way. But now that those goals have been met I don’t really know what to save for the next one.

My goal is to have a net worth of at least $ 100,000 because I always read a good number on how to meet it, and I’m worried because I’m lagging behind in retirement funds, so I opened a Robo-Advisor account specifically for retirement purposes.

‘Bringing a decent down payment for a home in California would probably save me an eternity. However, the rent continues to rise.

But what next? I know people say I should save for a home in California, but I don’t see that as real. I never dreamed of owning a home so I never expected that.

Since I have no boyfriend, fianc, husband or kids, I know I have a little more freedom but to be honest, Quentin, what am I saving for? The 4,000 in my savings account is fun money, but no matter what I take out, I replace it so that it never runs out.

Once I reach that goal of having a net worth of $ 100,000, I don’t know what to save for next. A house? Bringing a decent down payment for a home in California will probably save me an eternity. However, the rent is also increasing.

I plan to work for a county that offers higher salaries, a potential pension and benefits, especially a retirement plan, so I hope to still live under my money, leaving more cash left. But I don’t know what to do with it.

Mobile Home Girl

Dear debt free girl,

The figure of $ 100,000 is a round, if arbitrary one. But I believe it helps to have something to shoot, so I have no problem with that. It marks a six-digit threshold and shows what is possible. “If I could save $ 100,000, I could do a lot more.” The media and financial-planning community refer to this eye-popping combination because it can inspire savers’ confidence and enjoy paying more attention to their spending, savings and investments.

The absence of the expectation you mentioned in your letter is like a small invisible rope made by hand in Lilliput which keeps us stuck. We rarely feel like they’re pulling at us because we don’t always know they’re there. We wake up every morning and go through our lives, not feeling very comfortable in the belief that that job is not for us, or that bachelor’s degree or even that house.

But you have high expectations from what you told me about setting up your own Roth IRA, emergency funds and high-yield savings account. Owning your own home is out of your reach at the moment, but I believe that if you continue to do what you are doing, it could be your journey: thinking ahead, saving, and slowly moving to a job that pays well and, ideally, a 401 with an employer. (k) Match.

Larry Pawn, a financial planner based in Redwood City, California, is very optimistic about you. “You are only 29 years old and have a lot of life to live! Congratulations on what you have achieved so far. I have been practicing for 36 years and I have yet to meet someone who has saved so much money. You’re doing great with your short-term savings and emergency funds. “

“I think a medium allocation can make sense for your investment account. That way, you’re not taking too much risk by being aggressive or being conservative enough, “he said.” If the new job offers HSA Qualified Medical Plan, take advantage of HSA (Heath Savings Account). This is a great way to save money for your future medical needs on a tax-free basis. “

The high cost of living

Living in California isn’t easy because of the cost of living and rising home prices, and it’s not easy to see what other people have – and what they don’t. Inequality has increased in the state over the last decade. California’s economy has surpassed most states, but according to a nonprofit California Public Policy Institute in San Francisco, the level of income inequality has surpassed all but five states.

“Households at the top of the income distribution in California have 12.3 times lower household income – $ 262,000 vs. $ 21,000, for the 90th and 10th percentile, 2018 – measured before the tax and protection net program,” PPIC said in a report released last year. “Inequality exists across the state. The policies of the present government have significantly narrowed the gap between rich and poor. “

This is important because (a) the gap needs to be closed to help more people achieve a higher quality of life, (b) you are not alone and (c) when you may have less than the richest people in your state, you still have more than many people . You have already achieved a lot, and your ability to save helps you toward that downpayment. Many New Yorkers and Angelinos have burned rent, knowing you’re living with your mom. (Plus, he won’t last forever.)

I’m David K. I asked a director of Global Consultancy JS in Golbahar, Los Angeles, California about your situation. “Unfortunately, he’s having a terrible time hanging on to cash. I would first suggest a bond with the US Treasury that is currently adjusting for inflation. The minimum holding period is 5 years, but it makes sense in its position. I will diversify its holdings with some of those bonds. “

A cautionary note about bonds: Bond prices fall as interest rates rise and they usually work poorly in such an environment. As Marketwatch columnist Philip van Dorn writes: “If you hold a bond and plan to hold it until it matures, the fall in market value does not change the fact that you will get a face value when it matures.”

With inflation hovering at a 40-year high, Van Doron says it could take a long time before interest rates rise and bonds fall against the market price. “If you buy a bond at a discount (less than the face value), you will have a profit when it matures,” he added. “On the contrary, if you pay a premium for your bonds. Daily price fluctuations do not affect payout at maturity. You will continue to receive interest until the bond matures. “

For 25,000, Golbahar offers six months in a 3 or 6 month CD or high-yield interest bearing account and a brokerage or other investment account to earn more over time. When you have a downpayment, Golbahar says a rental property – something you can keep as a deposit and manage for passive income – can help you reach your goal of owning a home quickly.

If you have a bad tenant, renting a property comes with responsibilities, income tax and headaches. The advantage for you is that at some point in the future when you are in a more secure financial position, it may allow you to buy in an area where you can afford it and theoretically reap the rewards of increasing the value of the property. Over time but when the time comes you can equally focus on buying a studio or one-bedroom in an up-and-coming neighborhood.

The miracle of compound interest

Most people did not reach their maximum earning power at 29. In fact, they did not come close. In your 20s, make full payments to your retirement account, repay student loans, make sure you have an emergency fund for 3 to 6 months of expenses, and track your monthly expenses. You’re doing all that – from behind your own – and possibly even outperforming your income relative.

You don’t know what’s around the corner. The economy is growing exponentially and you may find yourself in a position to step on the property ladder in California or elsewhere – 5 or 10 years from now. Your life will only get bigger and there will be new experiences. You may end up living in California, or you may not. There is a lot ahead of you, and you are preparing for that unknown.

For your leisure investment, don’t underestimate the miracle of compound interest. You make money on your initial investment and you make money on your return on investment. It benefits from reinvested interest. It does take time, but there is something about it – something that unfortunately many people do not have, and those who are thinking about home ownership and leisure – time.

The older you get, the more years you will have behind you and the faster the ride will be. It is also wise to use some of the money you have spent traveling and visiting other parts of the country and finally other parts of the world. It will inspire and change you. Keep up the good content. It will be worth it. You will notice that I have also changed your sobriety. You have no debt. In 2022, this is no small feat.

See Manist Private Facebook Group, where we find the answer to the problem of money fork in life. Readers are writing to me with all kinds of hesitations. Post your question, tell me what you want to know more about, or check out the latest Manist columns.

The semantist regrets that he cannot answer the question individually.

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