Skip to main content

What to do when you're New Money!

So, if you've already figured out what to do with your savings, and you're aware that you should pay yourself first. But the question is what to do when things get busy and you're already on automatic with your money?

Even the best plans need some occasional changes and tweaking. So, make sure that you're taking the opportunity to revamp your freedom fund and expense estimates each year. I find that the best time to do that is tax time.

This year, I reduced my additional increase from 3.0% to 2.0%. Inflation seems to be in check and fortunately, things seem to not be expected to change in the near term. So, I determined that I needed to save approximately an additional thousand dollars in my freedom fund in order to stay current.

Then I did something similar for my emergency fund (or e-fund as some like to call it). Once those two were satisfied, I had to decide what to do with any additional funds that I might have available. One option that many like to use is to finish up contributions to the ROTH. I have not maxed out my retirement accounts and there certainly could be no good argument against doing so.

Furthermore, I still have some student loan debt which could be paid off rather easily. However, I have a debt snowball on this debt and I didn't want to accelerate the payments further. So, instead, I opted for a taxable account invested in mutual funds at Vanguard. I've had good experiences so far and I chose a very low risk account and decided that this would be better long term than leaving it in a bank with a paltry 1.25 or so interest rate.

Along with the minimum to open the account based on that type of fund, I also set up a monthly automatic investment. I like the idea of this being automatic just like my 401k and Roth IRA so that there is no temptation to skip it some months. So far, I'm pleased with the dividends and since it is a relatively lower risk fund, I think that it will easily outpace my ING direct account...and for money that I can afford to take some risk with, that is not too bad.

What do you do when you come into new money at this point?
Would you ever forego retirement contributions with extra money?

Labels

Labels:

Comments

Post a Comment

Popular posts from this blog

On Buying a Lifestyle...with a Fixed-Rate Mortgage

Despite all of the back and forth about sub-prime mortgages and the housing bubble, I am feeling just fine. The reason is that when purchasing, I followed some old advice: Don't expect to flip. In general, I've been told by many people that you shouldn't buy a home unless you plan to hold on to it for 7 years or longer. If the market does well and you decide to sell, fine. But if you want to be sure not to lose money, don't buy something that you only want for a year or two. I've been in my current location for more than 3 years. I like it. And I have no intention of leaving in the short or medium term. It seems to me, that real estate, like any asset class, has its ups and downs. But as a practical point, I don't look at my home as an asset per se. Rather, I consider it to be a fixed expense that I need to survive, much like food and water. Therefore, as long as the payment is reasonable and it functions to keep me warm and sheltered and comfortable, that is a...
Post a Comment
Read more

Do Better With Your Time

Recently, I've been extremely busy with some work commitments. The interesting thing for me is that this increased work activity has really helped crystallize some of my feelings with regard to time. And these ideas are a critical part about my view on personal finance. I'm curious to know if others feel similarly. Time is money. That is, Time, in some way, contains energy. Money, is also energy. In the act of working, I am able to compound and increase the amount of money that I have. I am exchanging my time and effort and thought which are components of my work, for the productivity that I produce. And this production gets me money from my employer. However, the first dollars that I make each day, week, or month are the most valuable. Then the ones that I make at the end are the most valuable. (Forget about taxes for a minute.) The reason is, the first ones help me have a place to live and food to eat. And the last ones are the ones that I can use to really improve my life lo...
3 comments
Read more

Quantitative Easing Round Three

It appears that we have another round of Quantitative Easing in the works. If you've been listening to any of the money shows over the past several months, you'll note that most of the major players were not anticipating that! However, a recent update from the Bernanke indicates that the possibility of Quantitative Easing Round Three (QE3) is a very real one....but not in the near term. This article from International Business Times does a good job of explaining the thought process around a possible QE3 and why the timing is not likely to be now. All that being said, the CPI is up and the price of energy is skyrocketing. It is not an easy thing for people to get to work in cars that are not efficient. However, that is not stopping people from certain segments of the political/media spectrum from announcing dirty secrets about Clean Energy . I find that Google News has a great mix of stories from all over and this story -- the increased energy costs is certainly one to watc...
Post a Comment
Read more