Budgeting

[dancerjodi]

I was thinking of budgeting earlier today, and coincidentally came across a mention of this site http://betterbudgeting.com/ in Self Magazine (I canceled the subscription incidentally, and this is my last issue - I had it at the office to flip through while a particularly big query was churning). Its pretty neat, and I like their Black Belt Budgeting concept.

The article in Self (the August issue) also mentioned that to prep for retirement, one should have 12 times their annual salary in reserve (at the time of retirement I'm assuming, probably based on living 12 or so years past age 65, adding that income to benefits that one would gain through SS, assuming its still around then). They suggest that the best way to do this is to invest 12% of your salary via 401k or otherwise. That's neat in concept I guess, but Brian and I need to get out of our high interest debt before tacking something like that.

It was a cool article, and worth checking out if you have access to. They suggest things for people of each decade (in their 30's, 40's and 50's) to do and have guidelines for investing for your child's college education, scaling back spending, and other useful tidbits.

Comments

[julishka.livejournal.com]

i figured my 401k contribution to not affect my take home pay. since it's all pre-tax, when you make the contribution, it's possible it'll change your tax bracket. it'll reduce your taxable income, so it might all work out the same. (i think i'm at 10%.)

and once it's done, you just get used to it.

if you leave your company, you can roll the current amount into another plan or IRA penalty free. if you take the money out, however, there are taxes/penalties/fees which might eat into 20% of the value.

[sajuka.livejournal.com]

This may get into financial games too much, but I've been told it is best to contribute whatever your employer will match, and then send any other savings elsewhere (assuming the alternative has an equal risk/reward factor). Because you'll have to pay taxes on withdrawals from your 401k after you retire, a lot of my coworkers vocally prefer other investments (I'm not sure they're putting their money where their mouth is though). I think I finally decided the gamble is whether you will be paying higher taxes at 65 than you are now.

I honestly contribute my match (5%) and and any spare money we've been throwing in Orange Savings accounts. We're at a point in our lives where other investments (um... down payment on house) are going to come up in the reasonably short-term (years instead of decades), so I didn't want to be risking our savings on the stock market. (Yay for deflating housing market!)

[developer.livejournal.com]

That is what I've been hearing recently as well. The benefit of the 401K though is that it happens automaticly to your paycheck as opposed to a secondary transfer [1]. It makes it easier to just set it and forget it. And it is just throwing money away to not be meeting your companies match.

The roth IRA is very popular though because you pay taxes on the money before you put it in, then the tax is interest free if you withdraw the money after 59.5 or whatever. The really nice thing is that you can withdraw the principal at any time without any penalty, unlike a 401k. If you decide to withdraw the interest early though it will be subject to a penalty.

An interesting thing that few companies have offered is the roth-401K. Acts like the roth ira but can be contributed to (and matched?) like the 401k. Pretty cool.

Personally I can't get in on my new company's 401K for another month or something, so I plan to finally open a roth ira, maybe a stock index fund, and then just save the rest since I too am in theory looking for a house or schooling in the near future. Once I can use the 401k agian I will hit the match on that and try to keep sticking something in the roth ira.

[1] If you company allows multiple account direct deposit I suppose you could have it direct money to a roth and a savings as well as a checking account.