401k vs. Cash Saving as an Analyst
Finishing my first year and looking for perspective on investment allocation. Currently save around 18% of my base salary in HY savings and put 8% towards my 401k, which is all S&P and has a nice return. On track to have $100k liquid after my analyst years, so I can invest in a start up or real estate. Would appreciate any recommendations on how to improve my finances.
When considering the balance between contributing to a 401k and maintaining cash savings, it's crucial to evaluate both your short-term and long-term financial goals. Here's a breakdown to help you optimize your investment allocation:
401k Contributions:
High-Yield Savings:
Balancing Act:
Increase 401k Savings: If you have sufficient liquidity for your short-term goals and an adequate emergency fund, consider increasing your 401k contributions to take full advantage of tax deferral and potential compounding growth.
Diversification: Beyond just stocks and savings, consider diversifying into other asset classes like bonds or real estate investment trusts (REITs) within your 401k to spread risk.
Review Regularly: Financial planning is not a set-it-and-forget-it activity. Regularly review your investments, savings rate, and financial goals to adjust as your career progresses and your financial situation evolves.
By carefully balancing your contributions to both your 401k and high-yield savings, you can effectively prepare for both your immediate and future financial needs.
Sources: How much have you saved?, How much have you saved?, How Would You Invest $1 Million Today?, The Last "what should I do with my money?" Thread (hopefully), Managing Your Money - Building a Personal Financial Model
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