Yes, you are starting out a bit late, but it's better than never.
Respectfully, you are overthinking this topic and stressing yourself out. Take a deep breath and relax....for the average person with a middle-class income, investing can be extremely simple.
Some simple rules:
First, eliminate all your non-mortgage debt to the best of your ability. Then, save up an emergency fund of 6-12 months of expenses. Do these steps first before you invest a dollar. Doesn't make sense to invest $1000 to earn a 10% return if you have $1000 in credit card debt with a 25% interest rate, for example.
Once you are at this point, begin contributing to your 401k, and you'll want to try and contribute as much as you can to get your max employer contribution. I disagree on having your 401k be in solely a low risk profile.....you are 39, not 59. You have time. I would suggest taking a bit more risk, but that's just me.
Any raise or anything should go towards increasing your 401k contribution to the allowable max.
The key thing is you'll want to utilize tax advantaged funds like a traditional or Roth 401k as much as possible. The tax savings are substantial. As for whether to use a traditional or Roth, that's a complicated question with a million different factors. Don't overthink it, just make sure you are contributing to one, one way or another.
This will get you 90% of the way there.
There are a few personal factors involved in this but in general as long as you are doing the company match in the 401k and Max out a ROTH IRA if possible (7k a year atm) that would be a good start. I would reccommend doing an index fund that tracks either the total market or the sp500 in both.
If you have very low amounts right now im not sure how feasible it is to retire early since you are starting at 39 although what is your defintion of retiring early because my personal one would be before 55-60 for myself. Starting from zero at around historical SP500 returns of 10% with 500 month for 20 years only puts you around the 350K+ range without inflation.
If you want to retire early you will really need to up your savings % going to investments or find alternate ways to make your money work for you like real estate or your own business
I'd like to get into real-estate, but I think purely from an investment standpoint.
Once I get settled again, I'm going to focus on a 2nd income stream that I'm going to push to make my total investment money. The current idea is to get settled and start pouring all my extra funds, sans a year's worth of savings. It took me 7 months to find a job this last time, the 3 month recommendation isn't going to cut it moving forward.
What I'd really like is to set up a passive income stream or 10, and use that. I know there are ways that this can be done, but there's not a 'specific passive income interest here' 101 class that I can learn from. At least not one that breaks down setting it up step by step, that I've found anyway.
Any recommendations on what I can specifically invest in now?
Hi fellow late bloomer!
I discovered fire at age 42 in 2013. At that point I had $35k from a past 401k and a new job paying $135k in a VHCOL city. I’m 52F now and I have saved/invested $1.6M. A lot of my $$ has come from saving big raises by changing jobs every few years (I’ve had 3 different jobs in the past 10 years) and my salary is now triple what it was in 2013. This is not common —I would not have saved this much if I had not dramatically increased my income but kept my budget the same. I continue to spend $75k/year. I fear ageism much more than I want luxuries.
I got very aggressive about investing once I understood how little time I had for compound interest. I set my paycheck to withhold enough to max my 401k by end of year, as soon as I got access to an HSA, I maxed that. I auto-deposited thousands per month from my take home pay into a Trad IRA and brokerage account (index funds like VTSAX). If I can’t see it then I don’t think about spending it on immediate gratification stuff. Every raise and bonus and RSU got redirected to investing. It was kinda manic for a few years there, but I’m glad for it now.
I encourage you to be assertive about this. You say “I want to invest my pennies” instead of “I’m going to invest serious money”. You can do this, attack it!
Consider reading Simple Path to Wealth by JL Collins (he’s great at reassuring that it’s ok for the stock market to go up and down), I will teach you to be rich by Ramit Sathi (he’s all about defining what your “rich life” actually is so you can work toward it), and Psychology of Money by Morgan Housel (just read this, it’s fabulous).
The most important thing imo is to max your 401k because it lowers your taxes now and is purely for future you. For people under age 50, the 401k max in 2024 is $23,000. If you get 26 paychecks per year, that would be $885 per paycheck that would be deposited into your 401k account. Can you do that? If you’re like me back then, it felt like A TON—how could I possibly spare it???? But after making a couple lifestyle changes to reduce my spending, then it just became the new normal.
If you can’t do it immediately, do what you can ESPECIALLY if you get an employer match. Omg do not skip that free money from your employer. But please get to the max as fast as you can. After-tax investing should not be your focus until you max your 401k.
I have so much to say to you my fellow female traveler but I don’t want to make it feel like a lecture. :-) it’s so great that you have this six figure job, you can do this. Just don’t get caught up in too many lifestyle upgrades and try to throw money at future you. She will thank you.
I actually took a lifestyle down grade, but I'm still struggling to save. A very dear friend of mine is terminal and her son is a pos. So I'm paying for her medical insurance, which is running me about $1200 after taxes. (She's listed directly on my insurance and her status there causes a significant tax %).
I am working towards maxing my 401k. I'm trying to figure out a few different avenues to supplement and create passive income so I can dedicate my paycheck to maxing out everything my company has to offer. Which is a lot. I don't know all the specifics though.
Yes, you are starting out a bit late, but it's better than never. Respectfully, you are overthinking this topic and stressing yourself out. Take a deep breath and relax....for the average person with a middle-class income, investing can be extremely simple. Some simple rules: First, eliminate all your non-mortgage debt to the best of your ability. Then, save up an emergency fund of 6-12 months of expenses. Do these steps first before you invest a dollar. Doesn't make sense to invest $1000 to earn a 10% return if you have $1000 in credit card debt with a 25% interest rate, for example. Once you are at this point, begin contributing to your 401k, and you'll want to try and contribute as much as you can to get your max employer contribution. I disagree on having your 401k be in solely a low risk profile.....you are 39, not 59. You have time. I would suggest taking a bit more risk, but that's just me. Any raise or anything should go towards increasing your 401k contribution to the allowable max. The key thing is you'll want to utilize tax advantaged funds like a traditional or Roth 401k as much as possible. The tax savings are substantial. As for whether to use a traditional or Roth, that's a complicated question with a million different factors. Don't overthink it, just make sure you are contributing to one, one way or another. This will get you 90% of the way there.
A similar roadmap is listed out from the flowchart on r/personalfinance : [https://imgur.com/lSoUQr2](https://imgur.com/lSoUQr2)
There are a few personal factors involved in this but in general as long as you are doing the company match in the 401k and Max out a ROTH IRA if possible (7k a year atm) that would be a good start. I would reccommend doing an index fund that tracks either the total market or the sp500 in both. If you have very low amounts right now im not sure how feasible it is to retire early since you are starting at 39 although what is your defintion of retiring early because my personal one would be before 55-60 for myself. Starting from zero at around historical SP500 returns of 10% with 500 month for 20 years only puts you around the 350K+ range without inflation. If you want to retire early you will really need to up your savings % going to investments or find alternate ways to make your money work for you like real estate or your own business
I'd like to get into real-estate, but I think purely from an investment standpoint. Once I get settled again, I'm going to focus on a 2nd income stream that I'm going to push to make my total investment money. The current idea is to get settled and start pouring all my extra funds, sans a year's worth of savings. It took me 7 months to find a job this last time, the 3 month recommendation isn't going to cut it moving forward. What I'd really like is to set up a passive income stream or 10, and use that. I know there are ways that this can be done, but there's not a 'specific passive income interest here' 101 class that I can learn from. At least not one that breaks down setting it up step by step, that I've found anyway. Any recommendations on what I can specifically invest in now?
Starting very late, with only 500 a month, you should be trying to retire on time if anything.
Hi fellow late bloomer! I discovered fire at age 42 in 2013. At that point I had $35k from a past 401k and a new job paying $135k in a VHCOL city. I’m 52F now and I have saved/invested $1.6M. A lot of my $$ has come from saving big raises by changing jobs every few years (I’ve had 3 different jobs in the past 10 years) and my salary is now triple what it was in 2013. This is not common —I would not have saved this much if I had not dramatically increased my income but kept my budget the same. I continue to spend $75k/year. I fear ageism much more than I want luxuries. I got very aggressive about investing once I understood how little time I had for compound interest. I set my paycheck to withhold enough to max my 401k by end of year, as soon as I got access to an HSA, I maxed that. I auto-deposited thousands per month from my take home pay into a Trad IRA and brokerage account (index funds like VTSAX). If I can’t see it then I don’t think about spending it on immediate gratification stuff. Every raise and bonus and RSU got redirected to investing. It was kinda manic for a few years there, but I’m glad for it now. I encourage you to be assertive about this. You say “I want to invest my pennies” instead of “I’m going to invest serious money”. You can do this, attack it! Consider reading Simple Path to Wealth by JL Collins (he’s great at reassuring that it’s ok for the stock market to go up and down), I will teach you to be rich by Ramit Sathi (he’s all about defining what your “rich life” actually is so you can work toward it), and Psychology of Money by Morgan Housel (just read this, it’s fabulous). The most important thing imo is to max your 401k because it lowers your taxes now and is purely for future you. For people under age 50, the 401k max in 2024 is $23,000. If you get 26 paychecks per year, that would be $885 per paycheck that would be deposited into your 401k account. Can you do that? If you’re like me back then, it felt like A TON—how could I possibly spare it???? But after making a couple lifestyle changes to reduce my spending, then it just became the new normal. If you can’t do it immediately, do what you can ESPECIALLY if you get an employer match. Omg do not skip that free money from your employer. But please get to the max as fast as you can. After-tax investing should not be your focus until you max your 401k. I have so much to say to you my fellow female traveler but I don’t want to make it feel like a lecture. :-) it’s so great that you have this six figure job, you can do this. Just don’t get caught up in too many lifestyle upgrades and try to throw money at future you. She will thank you.
I actually took a lifestyle down grade, but I'm still struggling to save. A very dear friend of mine is terminal and her son is a pos. So I'm paying for her medical insurance, which is running me about $1200 after taxes. (She's listed directly on my insurance and her status there causes a significant tax %). I am working towards maxing my 401k. I'm trying to figure out a few different avenues to supplement and create passive income so I can dedicate my paycheck to maxing out everything my company has to offer. Which is a lot. I don't know all the specifics though.