"John A. Weeks III" <john[at]johnweeks.com> writes:
- quote -

Strongly agreed.

- quote -

This is a misleading statement. You do _not_ get any "effective"
match from the fact of the tax deferral. That money goes right
back out the door when you finally remove the money from the 401k.
You're right inasmuch as it might _temporarily_ appear that you
are getting free money, but you are not. If you put, say, $1000
into the 401k, it might "cost" you only, say, $800 out of pocket -
ie. your spendable income will be reduced by only $800. But that
$200 is not free - it's just put off - when you take that $1000
back out of the 401k, you'll pay that $200 in taxes on it. (Of
course, in the meantime, there's growth, but that's not the point
I'm making here).

The sentiment is right. The terminology, however, is unfortunate.

- quote -

Also agreed. Carrying debt on a car, especially at 6.9%, is
a pretty bad deal. It's not deductible interest and it's a
quickly depreciating asset. Even if the interest were
deductible, it's still pretty high.


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Putting money into a 401k is a great deal even without a match,
because all dividends and capital gains in that account are not
taxable until you withdraw (and then it would be taxed as regular
income at a likely lower tax bracket). So yes, do max out your 401k.

Another great thing you can do is just keep some cash just in case you
lose your job.

i

In article <Xns9467DAFB4161Cshaneeshermanhotmail[at]24.93.43.119> , Shane wrote:
- quote -

I would do a few things, but I am no expert. Take this all with a
grain of salt...

1. Pay off your car loan

Paying off your debt will instantly save you money.

2. Build a 6-month emergency fund

Build a 6-month emergency fund so that you can survive if you lose
your job in the future.

3. Fully fund your 401(k)

The only thing better than one retirement account is more than one
retirement two!

Mike

In article <Xns9467DAFB4161Cshaneeshermanhotmail[at]24.93.43.119> , Shane
<shane_e_sherman[at]hotmail.com> wrote:

- quote -

I would absolutely fund my 401K, even without a match. You see, this
is pre-tax money. That means that you effectively get a 30 cent on
the dollar match from Uncle Sam due to the tax savings. Plus, the
money grows tax deferred, which is like burning nitro in your car
rather than gas--you get a real boost. Next, since the money is
taken off of your paycheck, most folks never even notice that it is
gone, so it is a very painless way of saving money. Finally, since
you are young, you have the power of time on your side. Due to the
miracle of compounding interest, any money you put in in the next
5 years is probably worth more than all the money you can put in
from age 35 on. Once the time passes, you can never really catch up.

As far as the 10K, never, ever leave this kind of money sitting in
a checking account. Open yourself a brokerage account with a money
market fund and check writing access. Keep any extra money that you
have laying around in this money market account earning interest.
Once it is in the money market account, it is easy to move in and
out of various investments. And given the limit many accounts have
on how many and what size checks you write, it keeps you from
dribbing this money away buying dumb things and using the ATM every
day.

Finally, pay off the car. You are going to save 6.9% right up front.
That is better than any garanteed rate of return that I know of today.
With the left over, open a brokerage account. Put $2500 into some
investment, and keep $500 floating around in the money market account
as an emergency fund.

As far as funds go, you are too young for bonds. At your age, you
need to take advantage of the equity market. How about checking
into low cost no-load mutual funds, or exchange traded funds like
Vipers, Diamonds, the 3 Queens, etc. The Russell index has done
very well over the past year.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

I currently have about 10k just sitting in my checking account and I'm
wondering what would be the best way to invest this money. I am 27 years
old and single. I have a Roth IRA that's already maxed out. My company
offers a 401k but they don't match, so I've never bothered putting any
money into it... I would like to use some of this money in a couple years
to buy a house so nothing too long term. I could also use it to pay off my
car(owe about 7k, 6.9%) which is the only debt I have. I was thinking
something like Vanguard Inflation-Protected Securities Fund or a short term
bond fund. Any other suggestions? Would putting money into my 401k be worth
it even without any match? Thanks!

- Shane