“My friends and family say I’m rich.” I am 26 years old and make $100,000 a year living in St. Louis where I pay $850 in rent. But I can’t afford to buy a house and I lose money when I invest. Would hiring a financial advisor be a smart move?


Do you need a financial advisor if you are feeling tired with money?

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

I feel like the economy is down and the housing market is struggling so I’m wondering if I’m doing things right? Should I keep renting instead of worrying about saving for a house at this point and just keep making $4,000 monthly loans until they are gone? Most of my friends and family say I’m “rich” because I make six figures, but I don’t feel that way given the debt and money not saved for a house. (Want to hire a financial advisor? You can use this tool to match you 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 professionals what you’re doing right and what you want to change. And then we look at whether it’s a good idea to consider a financial advisor to help you.

But first things first: The reason things may feel tight is because you’re a strong saver, and that’s to be commended. However, it is important to set priorities, especially around your personal goals.

“I would base your home savings rate and how much you can temporarily divert from student loan debt toward a home on how much you think the home will cost,” says Joe Favorito, a certified financial planner at Landmark Wealth Management. So this might mean that if you think it’s going to cost $500,000 to buy the home you want, you might want to put at least 20% down to avoid mortgage insurance, which means you’ll have to save around $100,000 $ emergency fund. That’s about $2,777 per month for three years with no earnings. “Then you want at least an extra six months of emergency funding based on your cost of living when you own a home, factoring in taxes, insurance, utilities and food,” Favorito says. Ultimately, it may be helpful to temporarily redirect some of the student loan money, but as your income increases, you can always pay down additional principal, Favorito says. “Once you secure a down payment, aim for at least 10% of your gross income in retirement accounts on a consistent basis,” says Favorito. (Of course, once your student loan payments resume, you always pay the minimum amount owed.)

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But should you be saving for a home? Well, that depends. Securing a long-term residence can be difficult to prioritize, and a home is not always the best investment, in part because of the cost of carrying it over time. It may also not be the right move for someone who may want to move soon or a person who doesn’t want to deal with maintaining a home. But there are plenty of reasons to buy, too: “While renting is something that can allow you to live on a positive cash flow, if your goal is to get married and raise a family, a house is a much more practical solution,” says. Favorite. “Once you establish a stable mortgage and your income grows over time, you’ll be able to meet 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 ultra-short-term bond funds, not in anything that would cause volatility unless your home purchase is several years down the road. .

And you might want to think of paying off your student loan this way: It’s basically the equivalent of buying an investment with a guaranteed return equal to the interest rate, because each would have about the same impact on your cash flow, says the certified financial planner Eric Figueroa of Hesperian Wealth. “I can’t predict the future, but high and rising inflation, high stock valuations, negative stock market momentum, rising recession risk and rising interest rates all seem to confirm your suspicions that the outlook for stock and bond returns is poor ». Figueroa says. Some professionals say this could mean it might be a better idea to focus on paying off your student loan debt instead of boosting retirement savings beyond what you’re already doing (it’s worth getting after all). That said, this is not a common opinion. Plus, with such a positive cash flow, it might be worth considering refinancing your student loans.

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Plus, while interest rates are still frozen on student loans, this may be the perfect time to keep your regular payment because it will all come out of principal, some experts say. “If you can afford it, that’s the only time you can eat the staple [soley] just making your regular payment, which will accelerate your savings,” says Figueroa.

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

Should you hire a financial advisor to help you?

It can. Professionals say, in your case, a flat fee consultant (some consultants charge a flat annual retainer fee that generally ranges from $2,000 to $7,500) or an hourly fee consultant (hourly rates are around $200-400 an hour often) could be a good bet. These types of advisors could guide you through volatility, present your spending and saving priorities in a coherent way, and develop a financial plan that you could follow. (Want to hire a financial advisor? You can use this tool to match you with an advisor who can meet your needs.)

“An hourly or retainer-based advisor can help you shape your savings plan and implement your strategy on a larger project basis. A fee retention consultant can help you set up your plan and assist you with ongoing monitoring and management,” says Zack Hubbard of Greenspring Advisors. Here’s what an hourly financial advisor can cost, and here’s the question you should ask any advisor you 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 many competing financial demands, although it will cost you. And some find they can do it on their own. Here’s what to ask of a consultant you might want to hire.

  • Questions edited for brevity and clarity

Have a question about your financial advisor or want to hire a new one? Email your questions to picks@marketwatch.com.

Any advice, recommendations or rankings expressed in this article are those of MarketWatch Picks and have not been reviewed or endorsed by our trading partners.

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