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‘My friends and family say I’m rich.’ I’m 26 years old and earn $100,000 a year living in St. Louis, where I had to pay $850 in rent. But I can’t afford to buy a house and am losing money on my investment. Is hiring a financial advisor a smart move?


Do you need a financial advisor if you feel overwhelmed with money?

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Question: I’m a 26 year old pharmacist making about $100,000 a year – take home about $5600 a month – living in St. Louis. I contribute 4% to my employer of 401l(k), which is the maximum match amount. I currently have about $25,000 in a savings account for emergency funds. My rent is $850/month which I split with my girlfriend, and I have no car payments or credit card debt. But I graduated with $148,000 in student loans at an average interest rate of about 5-6% (though still in the interest-free period). I have been paying $4,000 per month since graduating so the current total is down to $113,000. I wanted to start saving to pay for a house upfront, so I recently reduced my student loan payment to $2,000/month and put $1,000/month into my first account. taxable investment and $500/month into Roth IRA since mid-March 2022. But with the recent stock market troubles, I’ve lost some money.

I feel the economy is slowing down and the housing market is in trouble so I’m wondering if I’m doing the right thing? Should I keep renting instead of worrying about saving to buy a home at this point and just keep lending $4,000 monthly until they run out? Most of my friends and family say I’m “rich” because I make six figures, but I don’t feel that way because of all the debt and no savings to buy a house. (Looking to hire a financial advisor? You can use this tool in conjunction with an advisor who can meet your needs.)

Answer: It sounds like you’re feeling stressed about money and questioning your decisions, so we asked financial advisors and money experts what you’re doing right and what you might want. change something. And then we dive into whether you should consider a financial advisor to help you.

First things first, though: The reason things can feel tough is because you’re a strong saver and for that, you deserve praise. However, it’s important to prioritize, especially around your personal goals.

“I would use your savings rate to buy a home, and how much you can temporarily shift from your birth loan debt,” says Joe Favorito, certified financial planner at Landmark Wealth Management. members into a home, based on how much you think the house will cost.” So that means if you believe it will cost $500,000 to buy the home you want, you might want to take at least 20% off to avoid mortgage insurance, which means you need to save around $100,000. la and above Emergency Fund. That’s about $2,777 per month for three years with no income. “After that, you want at least six more months of emergency funds based on your cost of living when you own a home, including taxes, insurance, utilities, and food,” says Favorito. In the end, it can be costly to redirect some of the student loan money temporarily, but as your income grows, you can always pay more principal, Favorito says. “Once you’ve secured your down payment, target at least 10 percent of your gross income into a retirement account,” says Favorito. (Of course, as student loan payments continue, always pay the minimum amount due.)

Have questions about your financial advisor or want to hire someone new? Email your question to [email protected].

But should you even save for a house? Yes, that depends. It can be difficult to prioritize securing a permanent place to stay, and a home isn’t always the best investment, in part because of the cost that carries over time. It also might not be the right move for someone who might want to move house soon or someone who doesn’t want to deal with maintaining a home. But there are also plenty of reasons to buy: “While renting is something that can allow you to live with positive cash flow, if your goal is to get married and raise a family, a home is a great solution. much more practical method,” said. Favorito. “Once you’ve got a fixed mortgage and your income grows over time, you’ll be able to catch up with some of your other savings and debt-reduction goals.” That said, any money saved for a home should be invested in cash-like investments like money markets, CDs, or short-term bond funds, not into anything else. Nothing can create volatility, unless your home purchase is a number of years later.

And you might want to look at making your student loan payments like this: It’s basically the equivalent of buying an investment with a guaranteed return on interest, because they both have an impact. The same goes for your cash flow, says certified financial planner Eric Figueroa of Hesperian Wealth. “I can’t predict the future, but high and rising inflation, high stock market valuations, negative stock market dynamics, increased recession risk, and rising interest rates together seem to define Accept your suspicions that the outlook for stock and bond returns is poor,” Figueroa said. Some experts say this may mean you should focus on paying down your student loan debt rather than ramping up your retirement savings beyond what you already do (the game is worth it, after all). to receive). That said, it’s not a popular opinion. Furthermore, with such positive cash flow, it may be worth considering refinancing your student loans.

Looking to hire a financial advisor? You can use this tool in conjunction with an advisor who can meet your needs.

Furthermore, while interest rates remain frozen on student loans, this could be the perfect time to maintain your regular payments as all of this will be paid out of cash. original, some experts said. “If you can afford it, this is the only time you can eat the principal. [soley] Just by making regular payments, Figueroa says, this will speed up your savings.

It’s also important to understand that when you invest in the markets, you will incur losses at some point, and at your age your retirement account should be growth oriented. “This means a widely diversified distribution, at least 70% on the stock market. Don’t let market volatility scare you off as it involves long-term investments in things like your 401(k) and Roth IRA, the market is very unpredictable in the short-term, but statistically it is. pretty consistent over the long term,” says Favorito. And while it’s hard to do, Figueroa says do your best to ignore the performance of your Roth IRAs until you need it decades from now. “Just keep investing in long-term assets regularly over time. You don’t need money anytime soon, so put it to work,” Figueroa says.

Should you hire a financial advisor to help you?

Probably. Experts say that, in your case, either a flat fee advisor (some advisors charge a flat annual fee usually between $2,000 and $7,500) or an hourly fee advisor (the rate is set at $2,000 to $7,500) hourly rates are usually around $200 to $400 an hour) can be a good bet. These types of advisors can guide you through volatility, present your spending and savings priorities consistently, and develop a financial plan that you can follow. (Looking to hire a financial advisor? You can use this tool in conjunction with an advisor who can meet your needs.)

“An hourly or hourly advisor can help you set up savings plans and execute your strategy on a more project-based basis. A retention advisor can help you set up your plan and support ongoing monitoring and management, says Zack Hubbard of Greenspring Advisors. This is how much does an hourly financial advisor cost, and here This is a question you should ask any advisor you might want to hire.

Ultimately, it’s up to you. Some investors love the help of a professional, especially during times of market volatility or when they have competing financial needs, even though it will cost you. And some find that they can do it alone. This is what to ask an advisor you may want to hire.

  • Questions edited for brevity and clarity

Have questions about your financial advisor or want to hire someone new? Email your question to [email protected].

The advice, recommendations or ratings presented in this article are those of MarketWatch Picks and have not been reviewed or endorsed by our trading partners.

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