Ok i have 6 months of income saved, now what?

Question

Do I use the money that I have saved to invest? Or.........
Do I only use future savings to invest?

OK forgot to put in some details before.
My money is in a money market account, I am debt free (aside from my house) and I am contributing the max to my 401k (which is matched)

Answer 1

I personally think that you should keep this 6 months of income as very liquid assets. Since you have it saved in money market funds, just keep it there. Use your future savings to invest.

The next step you should move to is to find a investment tool that matches your risk appetite and study it.

I am sure you are continuing to save more money. What I did was that I use a small part of the savings, like 10% to purchase books on the investment tool I am looking at. (The first investment tools I looked at was mutual funds or unit trusts) After studying for a while, I went ahead to put my money into mutual funds. This is where the actual experience comes.

Later on you can move on to other investment tools like bonds and stocks to increase your investment skills, to make money work harder for you. Always continue to improve your financial literacy and jump into the pool.

Hope the information helps!

Answer 2

So you don't owe any debts? No credit card, auto loan, student loan, and etc. debts? If so you are doing awesome. The six month income saved is suggested by most financial experts to be "Emergency Fund". In case when you lost your job or cannot work, the this savings support to help you thru paying your rents/mortgage, food, utilities while you get back on your feet. So I would suggest you to deposit this savings into a very liquid and high interest yield savings account. If you actually still owe debts, you need to pay then off first before you start saving up for this "emergency fund". Investing is really after those first two stages of pay off debts and have emergency fund saved up.

Answer 3

Ask yourself if there is a possibilty that you will need that money in the short term. If yes the put the money in a savings account. If no put it in CD's that expire every six months or so. This way if you need it you do not have to wait long to get it without penalty. All of you future earnings should be invested but currently the market is very volitile so invest in low risk items.

Answer 4

Keep the 6 months of income in something liquid where you can quickly access it if needed - savings account or money market fund.
Invest with anything over that - mutual funds are the best place to begin.

Answer 5

Once you have 3-6 months of money saved up in a bank or a money market account, you should invest the rest in a diversified mix of stocks, bonds, and money market funds. You want to buy a diversified portfolio of stocks as individual stocks are too risky. Most folks have a dificult time buying a properly balanced portfoilio of stocks on their own. They will misbalance their portfolio by buying all small stocks or all growth stocks, or some other misbalanced assortment of stocks. Unless you know what you are doing, it is best to buy mutual funds. I like Vanguard.com, other people like Fidelity, TIAA-CREF, and DFA. Buy no-load, low cost funds. If you are like most people you will invest part of your money aggressively in stock funds, and part conservatively in money market funds and bond funds. Vanguard.com has an on-line questionnaire which will give you an idea of how to do "Asset Allocation," determining how much to put in each type of fund.

If your company offers a 401K plan at work, try to invest the most you can. The money grows tax free, and some companies will match your contribution. Investing in a mutual fund IRA is also a good idea. If you have children, you may want to consider a 529 plan or other college savings plan that grows tax free.

I like index funds. Because of their broad diversification, you are less likely to have a dramatic drop in value. They also have the lowest expenses. For stock funds, I would suggest putting ~70-80% of your money in the Vanguard Total Stock Market Index Fund. and ~20-30% in a foreign stock index fund. However, there are many different opinions out there on what the best mutual funds are. Read the links below and form your own opinion.

Buying a house instead of renting will save you a lot of money in the long run. You don't have to pay rent and you build equity in your house instead. Buying rental property can also be a good investment. However, being a landlord can be hard work, and many people are not good at it. If you don't know how to handle deadbeat renters, you can have trouble.

If you have high-interest debt, like credit cards, it is best to pay this off first before trying most of the investment ideas above.

Believing advice you get on Yahoo answers can be risky, so read these websites for further information. If you find it too confusing, contact a professional financial advisor. They will charge you significant commissions, however.

Sources:

http://www.vanguard.com/VGApp/hnw/planningeducation
http://www.fool.com/school.htm
http://sec.gov/investor/pubs/assetallocation.htm
http://www.diehards.org/readsites.htm
http://finance.yahoo.com/education/begin_investing
http://finance.yahoo.com/funds/basics

Asset Allocation Calculators
(Determining how much to put in stocks and how much into bonds and money markets is a personal decision depending on your financial status. These Asset Allocation questionaires give you a rough idea how to do this. I like Vanguard best, but try some of the other sites as well.)
https://flagship.vanguard.com/VGApp/hnw/FundsInvQuestionnaire?cbdInitTransUrl=https%3A//flagship.vanguard.com/VGApp/hnw/planningeducation/education
https://ais2.tiaa-cref.org/cgi-bin/WebObjects.exe/DTAssetAlcEval
http://www.ifa.com/SurveyNET/index.aspx

Web forum: http://www.diehards.org/
(Many investment web forums are overrun by scam artists. This one seems the most legitimate site.)


529 plans: http://www.savingforcollege.com

Answer 6

Only use the future savings to invest. You should keep the 6 months of income on hand just in case, God forbid, something happens to your job. You need those funds to be readily available.

Answer 7

I would keep this money in a high-interest savings account (ie INGDirect, HSBCDirect, etc.) Savings accounts are great for a first step as you can never lose your principal and the money is liquid if you ever need it.