Financial Advice Needed

[kaos2900]

I've started really tracking my expenses and overall financial situation. After a few months I've discovered that I have some extra money each month and I'm not sure what to do with it. A few options are increasing my 401k contribution (I'm currently at 4% and my company will match up to 5% on employee contributions up to 10%), make extra principal payments towards my loans (car/mortgage), or add to my emergency savings fund (I've read you want $10k saved).  Any suggestions?

[Chino]

How old are you?

[TheOutlawXanadu]

My personal approach out of college was to first save up enough for emergencies. I believe the recommendation is that you want something like three months' worth of living expenses. Then, I focused on trying to pay back loans as fast as possible. Just my two cents!

[kaos2900]

How old are you?

I'm 32.

[Chino]

How old are you?

I'm 32.

I'd say put into your 401K plan at least as much as your company will match. Otherwise, you're leaving free money on the table. You're young and can afford it.

[cramx3]

I guess it depends on how much you have each month to put somewhere.  If it's a small amount, I'd say throw it at the car payments to shorten them.  The mortgage could be OK too, depending on how much you owe and interest rate on the loan, but I personally view the mortgage loan as good debt so I don't really look to throw my extra money there.  Throwing it into retirement could be a good idea too.  You mention the 401k from work, but what about your own personal IRA?  Those are tax deductible so you could get a nice refund next year for throwing that money into a new separate retirement fund.  Throwing your own money into a work 401k isn't going to help your employer match it. 

What about planning a vacation with it?  Like if you got enough thrown aside for the unexpected, your retirement funds are looking good, and you don't have any high interest debt then maybe you should enjoy yourself.

[axeman90210]

What Chino said. Make sure you're getting all of dat employer match. Anything else I'd split between building up some savings and and paying off extra loan principle.

[kaos2900]

I guess it depends on how much you have each month to put somewhere.  If it's a small amount, I'd say throw it at the car payments to shorten them.  The mortgage could be OK too, depending on how much you owe and interest rate on the loan, but I personally view the mortgage loan as good debt so I don't really look to throw my extra money there.  Throwing it into retirement could be a good idea too.  You mention the 401k from work, but what about your own personal IRA?  Those are tax deductible so you could get a nice refund next year for throwing that money into a new separate retirement fund.  Throwing your own money into a work 401k isn't going to help your employer match it. 

What about planning a vacation with it?  Like if you got enough thrown aside for the unexpected, your retirement funds are looking good, and you don't have any high interest debt then maybe you should enjoy yourself.

Thanks for the suggestion cramx3! I actually already have a separate account for a vacation fund.

What Chino said. Make sure you're getting all of dat employer match. Anything else I'd split between building up some savings and and paying off extra loan principle.

Thanks Chino and axeman! I can definitely increase my contribution but I can't afford the full 10%.

[axeman90210]

Understandable. I would recommend getting that built up to 10% before worrying about paying extra off loans or anything like that. Getting an employer match is basically getting a guaranteed 100% return on your money, which you absolutely can't beat anywhere else.

[cramx3]

Understandable. I would recommend getting that built up to 10% before worrying about paying extra off loans or anything like that. Getting an employer match is basically getting a guaranteed 100% return on your money, which you absolutely can't beat anywhere else.

Yea true, for some reason I took this as extra money lying around, but if it's extra money in your pay check, you might as well try to maximize this because the employer match is free money.  However, a 4% to 10% jump is pretty big.  Maybe do a small increment now and if you get a raise in the future you can bump it up even more.  After my first raise at this job, that's exactly what I did so I could maximize my employer match, however it was not the same as a 4 to 10% jump.

For me, if the money never reaches my hands, that's probably a good thing as I am more of a spender.  Shoveling money away before it hits my bank account is definitely the better saving option for me. But everyone is different.

[hefdaddy42]

What they all said.  They are smart.

[gmillerdrake]

What they all said.  They are smart.

What Hef said about them all. He's smart to point out how smart they are.

[Stadler]

What they all said.  They are smart.

What Hef said about them all. He's smart to point out how smart they are.

I think gmillerdrake is really the smartest here.  He really said it all.  Smartly. 

[Chino]

What they all said.  They are smart.

What Hef said about them all. He's smart to point out how smart they are.

I think gmillerdrake is really the smartest here.  He really said it all.  Smartly.

I like to think I'm a semi-smart individual, but whenever I read Stadler's posts, I feel really stupid.

[hefdaddy42]

What they all said.  They are smart.

What Hef said about them all. He's smart to point out how smart they are.

I think gmillerdrake is really the smartest here.  He really said it all.  Smartly.

I like to think I'm a semi-smart individual, but whenever I read Stadler's posts, I feel really stupid.

Chino fell off a ledge once.

[vtgrad]

I was waiting on Barto to say something...

60% of the people in this world are stupid; you guys are with the other 30%.

To the OP... be liquid my friend.  You're making 401K contributions which is excellent, but if the need should arise, you may not be able to access those funds without paying some type of penalty.  Split the difference; put the money in an investment vehicle you can re-balance and control... be as liquid as you can be.  Use an Index Fund (more than likely, your 401K has holdings in an index fund or a fund-of-funds as part of it's balancing anyway) with low costs that you can move in and out of at will whenever you feel the need to because of moves in the markets or because of your own needs.

[Dublagent66]

60% of the people in this world are stupid; you guys are with the other 30%.

That's only 90%.  What happened to the remaining 10%?  Undecided? 


To the OP.  Savings.  Simple as that.  Throwing extra money at a car or mortgage payment is not an investment.

[cramx3]

Throwing extra money at a car or mortgage payment is not an investment.

You could say the mortgage payment is an investment, but definitely not the car, however a car loan with interest might mean saving money by paying it off.  Depends on the loan though.

[Chino]

60% of the people in this world are stupid; you guys are with the other 30%.

Throwing extra money at a car or mortgage payment is not an investment.

I think I disagree. Maybe "investment" isn't the proper word, but it could definitely be a cost saving measure.

My Mini's payments are up in October and I owe a $6000 balloon payment after month 60. Come October, I plan on just financing that through the dealer at 8% (maybe 7.5%). Had I been diligent and paid the extra $100 a month, I'd own the car outright come October. I wouldn't be paying interest on that additional $6000, and I'd be able to sell the car earlier and with fewer miles (less depreciation) for more than I'll be able to in a year or two.

[kaos2900]

Thanks for the advice everyone! I'm going to keep gradually increasing my 401k contribution until I hit that 10%. Luckily this year I'm up for a bonus and a pay increase and then next year we're planning on buying a new house so my goal right now is save as much as possible while the extra funds are available.

[vtgrad]

60% of the people in this world are stupid; you guys are with the other 30%.

That's only 90%.  What happened to the remaining 10%?  Undecided? 


To the OP.  Savings.  Simple as that.  Throwing extra money at a car or mortgage payment is not an investment.

Actually, that was the point... it was keeping in-line the comments above mine.  Satirical in nature regarding our collective smarts...