As a 30-something person, it can be difficult to rebuild life after a divorce, especially if there are several children involved.
But if you move back with your parents and you have no debt and a stable monthly savings target of $3,500, your position is very strong.
Getting home may take a step back mentally and emotionally, but financially, it is a strategic move that can help quickly track your goals, especially if you are ready to invest actively.
This is a breakdown of smart, effective methods that can make $3,500 work.
Before anything else, minimize your retirement donations. If you can access 401(k) through your employer (especially the company matches), make sure you contribute at least the full amount of the match. That's free money, you shouldn't give up.
In addition to 401(k), consider opening a Roth Individual Retirement Account (IRA), Income Limit ($150,000-$165,000 for single and home supervisor taxpayers for the current tax year).
As someone under 50, you can donate up to $7,000 in that year. Roth Iras is tax-free, and qualified withdrawals are tax-free, making it very suitable for long-time young investors.
If your income is too high for the Roth IRA, rest assured - you can still use the "backdoor Roth" strategy.
This involves making non-deductible contributions to traditional IRAs and converting them into Roth IRAs. Each month, consider allocating about $1,500 to your 401(K) and $500 to your Roth IRA until it’s maximized.
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Once the retirement donation limit is met, you can open a taxable brokerage account to invest. This type of investment account is held with a brokerage firm that allows you to purchase stocks, mutual funds, bonds, exchange-traded funds (ETFs) and other products.
The company completes investment transactions according to your requirements. Taxable brokerage accounts are flexible because funds can be used before retirement without penalty (although you will owe taxes).
Consider setting up automatic monthly investments to maintain discipline and benefit from the average of USD costs, a strategy that reduces the impact of volatility by regularly regulating the time you buy over time, so in theory you won’t buy stocks at a consistently high price.
If your child is young and you want to help with their education, you can use one or two ETFs to keep your child simple on your 18th birthday. However, there are some affluent investments that may help you (and through associations, they) earn more income.
For example, the 529 college savings plan is a powerful tool. Donations increase tax exemption and withdrawals for qualified education expenses are also tax-free. Some states even offer tax breaks or donation credit.
Not sure if the university is on the card? Open a guardianship brokerage account (to the Minors Act/Uniform Transfer to Minors Act).
These accounts do not offer the same tax allowance as 529, as only a portion of the proceeds are tax-free (currently up to $1,350). However, they are more flexible and can be used for any purpose once your child becomes an adult.
Although individual priorities and circumstances vary and there are no specific standard numbers, the consultant recommends donating approximately $150 to $350 per month to build a large amount of education funds over time.
This article provides information only and should not be construed as advice. It is without any warranty of any kind.