Portion of Bonus into Savings Account - Thoughts?
Mid to late 20s and going to be receiving bonus in next few months. Was planning on spending roughly 20% and saving the rest - no debt to pay thankfully. For the savings , maybe I'm being too passive for a relatively young age, but was considering putting half in my brokerage account heavily invested in equities (40% of bonus) and the remaining 40% in a savings account, paying slightly higher interest than checking. My logic is that I would hate to put such a big chunk of my bonus in at once and then the market takes a nosedive that week and suddenly 5% of my bonus I contributed is gone. I could then take portions of what I have in savings and move it over to my brokerage throughout the year.
Is this silly / too risk averse? Would love to hear opinions.
100% of your bonus that you are saving needs to go into the market.
I think it depends on how liquid your trading account is. If you need to pull money out and it can hit your checking account in less than 24 hours then I think it makes sense to throw it all into your brokerage account. I only see value in having money in your savings so that you have liquidity if you are in a pinch and need cash ASAP. Even then you can have a credit card..
Id definitely put it in the market. Maybe an index fund if you don't know what you're doing. You might want to wait a couple of months to invest as there is suppose to be a drop soon.
The market on average historically returns between 8-9 percent. I'd put some of the money in a roth IRA and then you can put the rest in a Vanguard account.
Depends what you currently have in savings. 6 months worth of salary as an emergency fund is rule of thumb. If you already have that, then do 80% in investments. If you don't then try to fill that emergency fund. I'd say 20% spending and 80% investing/saving is a responsible allocation.
If you plan to go to B-School unsponsored go ahead and put some into a 529 plan or whatever it is. Worst case you can pay for your ex-wife's masters in sociology if you don't use it.
Six months of salary or expenses? I keep hearing expenses, which would be less.
Expenses not salary, you're right. Enough that if you went without any work for 6 months you wouldn't have a problem.
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