How to take A-levels from home?

How much money can I invest out of my take home pay?

• Right now I am spending about 47% of my take home pay? I can only putting about 1000 $ a month in my 401 K because I don't want to spend more than 50% of what I make. Is that a good choice? I am investing about 25% of my take home in indexed funds and the rest is kept for the rainy day.  Some people have advised me to maximize my 401K and invest whatever is left over of my take home pay is left over in indexed funds. The company matches about 6% of my salary. Any advice would be gratefully appreciated. Thanks,

• Answer:

  It's great you can save so much.  You will achieve financial security much sooner than most. There is no sense in spending money just to spend money. First, ensure you have an adequate rainy day fund, which it seems you have.  Now the surplus savings can be invested long term. Consider investing enough in your 401k to take advantage of the 6% match as this is free money and turbo charges the return on these savings.  Since you can save so much, it is better to have some savings in an after tax account or a Roth IRA.  This gives you options when you retire as you can pull money from a tax free account or taxable 401k.  This gives you flexibility in determining your taxable income at retirement.  Your taxable income level impacts how your Social Security is taxed and how your deductions are treated.   The money in the after tax account can be easily accessed to changes in your lifestyle.  For example, you may want to start a family at some point and purchase a large house.  This money helps with that.  Or you may want to take a sabbatical from working and you can use the after tax money to more tax-effectively enjoy some free time. The after tax money can also be used to invest in non-traditional investments like starting a business, various real estate holdings, direct energy investments and so on. You are in a good place, financially speaking.  You can take advantage of your 401k and invest significantly in after tax investments to give you both financial security and financial flexibility.