<batesrt[at]hotmail.com> wrote in message
news:1140532156.065017.3230[at]z14g2000cwz.googlegroups.com...
- quote -

Does your employer offer an ESPP that does not require you to hold the
stock? Assuming a 15% discount and immediate disposal of the stock
(minimizing market risk), you can increase your annual income by 15% x the
percent of your salary you're allowed to contribute.

My wife works for HCA and contributes 10% (the max) of her salary into the
ESPP account. The stock is discounted a minimum of 15%. We sell it
immediately upon being able to purchase it. The result is effectively a 1.5%
boost in salary.

Because the match on a 401k is usually higher, I'd save there first. But
after you've done that, consider how much of your salary you can divert to
the ESPP. After you've sold the stock, you can invest the cash anywhere else
you want, except into your 401k. It's already been paid to you.

The reason I qualify my recommendation with the employer not requiring you
to hold the stock is that holding it exposes you to market risk. Also, you
don't want too much invested in the company where you work. If it goes
south, not only could you lose your job, but your investments, as well.
--
Chris Cowles
Gainesville, FL

batesrt[at]hotmail.com wrote:
- quote -

First thing you should do is build up an "emergency" fund of 3-6 months
living expenses, and keep it in a high rate money market or savings
account that pays at least 4%. I put "emergency" in quotes because
having a pile of cash not only helps out in emergencies, it generally
gives you more options in all financial aspects of your life.

Next I would increase my 401K contributions until I got the max
employer match. No point passing up that money laying on the table.

If you still had money left over I would probably split it between a
Roth IRA and paying down my mortgage. The Roth has good tax advantages
and is relatively flexible. Paying down your mortgage is a guaranteed
tax free rate of return equal to the interest rate you are paying with
some small discount for the loss of the mortgage interest deduction.

Good arguments could be made for different allocations, so I am not
claiming to have the perfect approach. Really, the best thing for you
to do is spend some time educating yourself so you understand the pros
and cons of all these things to the point where you feel you can answer
your own questions with a reasonable degree of confidence. You are
young, and the time spent to acquire a decent understanding of personal
finance will pay you dividends for the rest of your life.

Andy

Batesrt,

I second the thrust of what Jim says, particularly with
regard to first maxing out your employer's match in your
401(k), then contributing to a Roth IRA.

Other things to consider:

Any car or school or other debts? If so, how much, for how
long and at what interest rates?

Do you have an emergency fund of around a year of living
expenses, in case you lose your job or some other accident
befalls you? (Fortunately money market rates are around 4%
now for such emergency funds. Not a bad return at all for
cash lying around.)

Are you married? If so, do you have life insurance?

Do you plan to have kids? If so, have you considered saving
for their education in various tax-advantaged plans?

Do you have your monthly expenses laid out on a spreadsheet?
(If not married, plan to marry someone who also does this.
These days--looking around--I wonder if choosing one's
spouse prudently is among the best hedges against winding up
poor.)

Do you have an idea of how much you need to save for
retirement? If not, then to help you strategize, experiment
with some of the tools linked at
http://home.earthlink.net/~elle_navorski/id4.html . The
'saving for retirement' calculators at
http://www.fincalc.com/ are particularly quick and dirty
(and so accordingly crude), but they get a person thinking.

Is your mortgate a 30- or 15-year fixed rate? Or is it an
ARM? Your rate of 5.5% is a very good rate (historically
speaking) that should seriously tempt you not to pay it off,
IF the 5.5% is for the life of the mortgage. On the other
hand, there are people like me who hate owing money unless
it's a great deal. Few people are willing to guarantee the
return on stocks in the next 30 years will be at least 5.5%.
(I think it will be, but if someone said at least 8%, I'd
really be hesitating to agree.) Generally thinking, if one
thinks the stock and bond markets (allocated per one's
wishes) will return greater than the mortgage rates for the
life of a fixed rate mortgage, then it's financially best
not to pay off a mortgage. The only battle is one of
emotion: Being free of having the lender on your back.

Lastly, be wary of the herd. The savings rate of Americans
today is negative, and at its lowest since the depression.
Personal bankruptcies are occuring at a record rate as well.
Don't be one of these clowns who is looking poverty in the
eye (or being 'owned' by a credit card company for the rest
of his/her life).

Fun, nightstand reading that reinforces these points is _The
Millionaire Next Door_.

jIM wrote:
- quote -

change the order of these two:
- quote -

are you contributing 10% to 401k at present time?

I would consider alternatives in this order:

increase 401k to 10% to maximize the match (that's a 66% return right
there).
open a Roth IRA ($4000 limit per year)
increase mortgage payment by $50 or $100 each month
open a taxable account and invest in it
invest in 401k up to maximum (15-20%?)

Many reasons why... but overall this reduces taxable income some,
establishes a good saving pattern, and removes debt. There are
disadvantages of this as well.

hi, let's pretend i'm making more money than i need to survive, so i'm
wondering what to do with the extra (other than waste on stuff i don't
need!) to invest for my future. keep in mind that i am young and just
bought my first house, but do make more income every month than i need.
i am investing in my 401k etc, but don't know what would be the
smartest of the following three options.........

1) put extra money into my 401k (company matches 66% up to 10% pay,
and can make additional 5-10% return on it from the stock/bond market
it's invested in)

2) put extra money towards the interest on my home (just bought it,
owe $175k at 5.5% mortgage rate)

3) invest the money straight into the stock/bond market at a 5-10%
return

i'm no math wizzard so i can't really decide which would make the most
sense given the criteria above. any help would be great!!!!!!!!!!!
thanks much