Ever feel like you’re playing financial Tetris, trying to figure out where each dollar should land? You’re not alone!
Rachel and Brian are in their mid-thirties to early forties, earning an impressive $200,000+ annually. They’ve done many things right – paying off student loan debt, building up an emergency fund, contributing to their 401(k)s, and even building up their home equity.
But here’s the catch: less than 10% of their net worth is liquid. They’re in a great position, but they need to build financial flexibility by boosting their liquid assets and diversifying their savings strategy.
What We Told Them
- Bump That Savings Rate
While 10% savings is a solid start, we’re pushing them toward a 20% target. With their income, this is achievable and will position them for long-term security and growth. - Balance Liquid vs. Retirement Assets
Rachel and Brian have most of their money tied up in 401(k)s and home equity, which is great for retirement—but what if they need cash before then? The goal: grow their liquid term score (emergency fund and accessible investments) to at least a 1.0, ideally a 2.0. - Maximize the Match, Then Diversify
We encouraged them to contribute up to the 401(k) match but not more than that right now. Instead, funnel additional savings into an after-tax brokerage account for flexibility. This might not be the right tax strategy, but emotionally it will feel better for them to have savings they can access over time. - Don’t Overload on Company Stock
Yes, Rachel can buy company stock at a discount, but overloading on it concentrates risk. A diversified portfolio is safer in the long run.
Your Takeaways
Whether you’re earning $50K or $500K, the principles are the same:
- Save at least 10% – 20% of your income. If you are unable to save 10%, start with 5% and work your way up.
- Balance liquid and retirement savings to give yourself more flexibility and peace of mind.
- Diversify your savings to avoid being overly dependent on one asset class.
Building a strong financial foundation is as much about peace of mind as it is about wealth-building.
Need Help Figuring It Out?
Rachel and Brian got clarity through coaching—why not you? Book a one-on-one session with one of our financial coaches today and get a personalized roadmap to financial freedom. Head to the app or schedule a call now.
