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Financial Gameplan (Didn't want to Hijack the Emergency Fund thread)
Posted on 3/4/15 at 1:29 pm
Posted on 3/4/15 at 1:29 pm
Me and my fiance' are very much on the same page when it comes to finances, thankfully. Currently, we're both trying to build up our emergency fund. We're both contributing $100/ bi-weekly to a roth - I'm contributing to 401k just to get match - temporarily while we build the liquid emergency fund. So a few questions.
Is it (let's say 6 months) expenses or income? Huge difference, and would take about 15 months longer to hit the income figure rather than expenses figure.
Once we hit that goal, probably about 2 years from now, where do we go from there?
Maxing our roths would probably be the first thing, but what else?
Do we:
Add more to liquid savings for things like vehicles, house down payment, etc.
Contribute more to principal on the house to build home equity (which, hopefully, can be used for home down payment)
Or start contributing more to 401k/Other investments?
We're both 25 fwiw. TIA!
Is it (let's say 6 months) expenses or income? Huge difference, and would take about 15 months longer to hit the income figure rather than expenses figure.
Once we hit that goal, probably about 2 years from now, where do we go from there?
Maxing our roths would probably be the first thing, but what else?
Do we:
Add more to liquid savings for things like vehicles, house down payment, etc.
Contribute more to principal on the house to build home equity (which, hopefully, can be used for home down payment)
Or start contributing more to 401k/Other investments?
We're both 25 fwiw. TIA!
This post was edited on 3/4/15 at 1:31 pm
2
Posted on 3/4/15 at 1:34 pm to LSUengineer12
Expenses
Pay off all other debts - house (or save up for house), etc
Then start bank rolling the Roth and other investment plans
At least this is my plan.
Pay off all other debts - house (or save up for house), etc
Then start bank rolling the Roth and other investment plans
At least this is my plan.
Posted on 3/4/15 at 1:45 pm to trident
So you'd pay off the house before maxing your Roth? I feel like that's a lot of time missed in the market..
This post was edited on 3/4/15 at 1:46 pm
Posted on 3/4/15 at 1:52 pm to LSUengineer12
Merge two of your goals.
Max out your Roth now. If your careers are stable now, I would tolerate a little risk by putting it into a bond heavy balanced fund.....growth over time will offset a potential loss of principal even if the market is down when you need it. Make your emergency fund holding in the Roth its own fund.
No matter how conservative your allocation, all the way to "liquid" money market account (which I would not personally recommend, that is a huge opportunity cost IMO on a maybe), you should put it in a Roth.
You can't get that 5500/year limit back.
Keep your eye always on opportunity costs.
Sure you can pay off that car now with the 4% note....at the expense of the market average of 8%.
In many cases, if you are affluent enough to have non-401k investments, being debt free is a situation that people enjoy for psychological reasons. But make no mistake, you didn't attain that peace of mind as a consequence of sound financial choices. It is the result of a choice to buy that security.
If it is worth it to you is a personal choice....but it is very important for people to realize that it is actually costing them something to buy that car in cash.
Max out your Roth now. If your careers are stable now, I would tolerate a little risk by putting it into a bond heavy balanced fund.....growth over time will offset a potential loss of principal even if the market is down when you need it. Make your emergency fund holding in the Roth its own fund.
No matter how conservative your allocation, all the way to "liquid" money market account (which I would not personally recommend, that is a huge opportunity cost IMO on a maybe), you should put it in a Roth.
You can't get that 5500/year limit back.
Keep your eye always on opportunity costs.
Sure you can pay off that car now with the 4% note....at the expense of the market average of 8%.
In many cases, if you are affluent enough to have non-401k investments, being debt free is a situation that people enjoy for psychological reasons. But make no mistake, you didn't attain that peace of mind as a consequence of sound financial choices. It is the result of a choice to buy that security.
If it is worth it to you is a personal choice....but it is very important for people to realize that it is actually costing them something to buy that car in cash.
This post was edited on 3/4/15 at 1:58 pm
Posted on 3/4/15 at 2:03 pm to LSUengineer12
Max the damn Roth now!!!!!!
I still maxed out my Roth while paying off credit card debt, paying off two vehicles, a house and a timeshare.
I still maxed out my Roth while paying off credit card debt, paying off two vehicles, a house and a timeshare.
Posted on 3/4/15 at 2:06 pm to Volvagia
Interesting concept. So contribute the max now, and let it act as the emergency fund? So don't worry too much about expenses in a savings account?
I like this.
ETA: Because all contributions are withdrawable at any time, correct?
I like this.
ETA: Because all contributions are withdrawable at any time, correct?
This post was edited on 3/4/15 at 2:08 pm
Posted on 3/4/15 at 2:08 pm to Fat Bastard
I've always said contribute to retirement even if you're paying off debt! The best thing you have going for you is time when dealing with retirement accounts.
Posted on 3/4/15 at 2:12 pm to bawbarn
Oh yes in some form or fashion. I couldn't buy my dividend paying stocks or real estate at the time due to the majority of my focus paying off other debts but I wasn't going to let that Roth IRA not get maxed out.
Posted on 3/4/15 at 2:33 pm to LSUengineer12
Correct.
As long as you only withdraw contributions, it is tax and penalty free.
You don't even have to fill out a form to the IRS or something to explain yourself in a withdrawal.
Just make sure you know how much you have contributed and not withdraw more than that.
As long as you only withdraw contributions, it is tax and penalty free.
You don't even have to fill out a form to the IRS or something to explain yourself in a withdrawal.
Just make sure you know how much you have contributed and not withdraw more than that.
Posted on 3/4/15 at 2:45 pm to LSUengineer12
quote:
Interesting concept. So contribute the max now, and let it act as the emergency fund? So don't worry too much about expenses in a savings account?
Yes, I personally keep my checking/savings acct around $2k. Pull from the Roth if I absolutely have to.
Posted on 3/4/15 at 2:49 pm to hiltacular
I keep 10k in emergency. Then i would hit Roth. Then heloc. The reserves for real estate etc. plenty ways to do it.
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