As Nora points out, you still get the tax deferral with a 401(k) contribution, even if the match is poor. If there were no match, I'd put the 401(k) roughly equal with the Roth IRA, depending on your tax situation. It's not too hard to figure out what you'd save in taxes by putting the money in the 401(k), so do a quick calculation and see.
Also, remember that many people who don't plan to stay in a job for 4 years nevertheless find themselves there after all. I wouldn't completely discount the match, unless your plans to leave are quite definite
@FlatGreg--thanks much for the observation on withdrawing the original contribution to a Roth. That makes it a great place to put money for any kind of long-term goal, not just retirement.
Outstanding article. That's some thorough writing (and thinking)!
One other time when you should pay down debt instead of investing in your 401(k) is if you're thinking of buying a house. Lenders look carefully at your debt to income ratio, and it affects both your interest rate and the amount you can borrow.
If you're thinking about buying a house in the future, it might (temporarily) be a smart idea to start paying down any high interest debt or debt with high utilization ratios. You'll increase your credit score, improve your debt to income ratio, and potentially save yourself a lot of money over the long-term with a better interest rate.
I'll be blogging about it on www.healthcarehacks.com if you want to check it out. It's just in the works now but you can read a little more of my story there.
Sounds like a great idea for next year's promo commercials - You could have different clips of homeless people who are hooked on the game. One could be rifling through the garbage can out front hoping for a discarded gamepiece or two, maybe another one is mugging some kid for his BigMac? Or how about the Homeless Family standing at the counter when Dad orders ONE Toasted sandwich (for the allimportant GAMEPIECES) instead of four valupics so everybody can eat. WOW!
Better yet, you could end the commercial with some idiot homeless retard sitting under an overpass typing furiously into his laptop. His brain is so wasted away from eating too much Mcdonalds "food" that HE'S ACTUALLY DEFENDING THE MONOPOLY GAME AGAINST CRITICISM.
Why doesn't he sell the computer and get a clue, or go to a soup kitchen for a real meal and save his money for a lottery ticket?
GOOD LUCK!
Agreed that it is best to focus on what you can control. Tax planning/deferment/avoidance is possible for the employed, beginning with 401(k) plans and cafeteria plans (if available). Roth accounts and 529 accounts don't offer immediate tax benefits but can offer tax avoidance when you access the funds for retirement and educational purposes. I'll be posting about tax strategies when I get that chapter. However, I will tell you that you are ahead of the curve in regard to taxes, just by knowing that tax preparation is different than tax planning. Thanks for reading and stay tuned...
Go out and make a living like everyone else does, leave the prizes for me and the other 1,500,000 homeless people who save up their weeks worth of collecting change just to buy that big mac, get lucky and win our tickets out of our cardboard boxes. Do you hear us bitching and moaning about the odds of winning this game? **** no! We're just thankful we get to have a little fun gambling with our only meal of the week!
The tap water around here tastes horrid, so I buy water so that I don't turn to pop or something instead, I buy the cheapest stuff tho. Even if it's just filtered tap water, it's not the local tap water, and it tastes ok. I'm willing to pay for that.
The tap water around here tastes horrid, so I buy water so that I don't turn to pop or something instead, I buy the cheapest stuff tho. Even if it's just filtered tap water, it's not the local tap water, and it tastes ok. I'm willing to pay for that.
Even though I own a cell phone, I found myself contemplating the deeper meaning of Nora's statement: "in the day and age where everybody seems to need to be available for calls all the time."
One of the reasons I am a reluctant cell phone user is that I hate the obligation I feel to answer the darn thing whenever it rings. Sometimes I want to be inaccessible, but having my cell number seems to give callers the impression that I am available anytime they want to bend my ear.
how much suger and water would in a pot 7.1 inces in length and 3.5 inces from top to botom and would i be able to make it on the stove and do u put it right in the distil and if not the can u explain how u would go about frementing itplzz give me a email but try to name it some thing difrent cuse im trying to keep it under raps with my dad.
Another plus for the Roth IRA is your original contributions can be withdrawn at any point with no penalty. A lot of people forget this fact when deciding whether or not to contribute.
What a great system David! You seem to address all the crucial points for good financial management within a relationship: having something individual for gifts and other indulgences, paying for the bills with equality, and communicating and monitoring your investments and cash flow lots.
I do the parking meter thing too, Amy! Thank you for sharing about your treatments too - all our thoughts will be with you.
Another tip that can change somebody's day is this: when you're in the drive-thru buying a cup of java, consider paying for the person behind you. The idea is when they get to the window, their coffee is already paid for, and hopefuly they'll pay it forward and pay for the next person too! If not, at least you made their day.
Great post as usual, Philip! Diversification is the key, and having your entire portfolio in a 401k can be risky for all the reasons you mentioned here.
@Sara: my humble thoughts are that if you were to make the contribution to the 401k anyway, then go ahead. But if that money according to Philip's list might be better used elsewhere, and you're not getting the company match, then maybe you're on the right track with your thinking.
The one advantage of contributing through an employer (company match or not), is the immediate tax relief. If I'm not mistaken (at least it works this way in Canada), your contribution would come off your gross pay, and you effectively get your tax refund right away. $100 contributed through work off your gross pay leaves you with more on your net paystub and in your pocket than if you contributed $100 from your net pay and waited for the refund to come.
Not to step on your toes, Philip - just my two frugal cents. Thoughts?
Many people are bringing up great points about cell phones and questionning the need for them.
Amen!
If it works out to have just a land line and not the cell phone, it's still an excellent frugal decision to make. My point was simply to eliminate one or the other. And in the day and age where everybody seems to need to be available for calls all the time, cell phones are the easy choice.
My own needs are for a cell phone simply because I don't currently have anywhere to hang my hat long enough to get a land line. My cell is also key for emergencies, not the least of which are running into car trouble on the side of the road in an unsafe area, or even being accosted on foot. It is a safety thing for me.
But Guest, you also make some great observations about the dangers of using and carrying cell phones with the UHF bands. I wonder when (or if) the technology will change to a safer format...
One reason i'm not taking advantage of my company's 401k plan is that their match is pretty low, and what they do match I have to be "fully vested" (employed for the full 4 years) in order to take with me. I'm not planning to be at the company this long, so it seemed like a very small return in the end. Any thoughts?
Your article is excellent, Sarah. Having perspective and keeping it is hard when you are desperately unhappy in a job, or in life. I've had a job for almost 2 years that I intensely dislike, ok, I hate it!! It's paying my rent, keeping my family clothed and fed and I have fantastic insurance. I am trying my best to focus on what I DO like about it, but it's so hard. I have yet another meeting on Monday with my boss about yet another issue. I have NEVER , in the almost 30 years I've been working, gotten in so much trouble at 1 job!! I usually like my supervisor and my boss, but when I get called into my manager's office, all I can do is drag my feet on my walk over, feeling like there's a bull's-eye painted on my back that everyone can see!! I have a job I hate b/c I screwed up a wonderful career by making very poor decisions and by not thinking of the consequences of some of my behavior. I have a chance to get back into the field that I love and that I believe is the best work I could be doing and I won't screw it up if given another chance. No pearls of wisdom from me today, just work smart and find the career/profession that excites and energizes you and get a job that allows you to use your creative ptotential! Good luck to us all!!
As cell phones conquer consumer minds and markets, researcher Carolanne Patton notes that "the brain reaches peak absorption in the UHF bands, right where cellular telecommunications operate." British military scientists have discovered that cellphone transmissions disrupt the brain sites for memory and learning, causing forgetfulness and sudden confusion.
Other studies show that electromagnetic signals from cellular phones reduce the ability to concentrate, calculate and coordinate complicated activities such as driving a car. Startled by $4 billion a year in extra claims among cellphone-wielding drivers, North American insurers did a double-take that found simply juggling `cell phones is not causing a 600% increase in accidents over other drivers busy shaving, applying makeup, tuning radios, taming pets, making out, pouring coffee, retrieving dropped cigarettes, talking and gesturing to passengers, or actually steering the vehicle.
Instead of just another dangerous distraction, tests conducted by the U.S. Department of Energy found that using a cell phone severely impairs memory and reaction times. "Hands-free" mobile speaker-phones cause even more crashes because they typically emit 10-times more brainwave interference than handheld units.
You can't make 100% pure alcohol by distilling--some water will always get in. There are other processes to make extremely pure alcohol for laboratory use, but some of those make the product unsafe to drink. (Plus you need to worry about whether the liquid mightn't be something other than ethanol.)
Pure alcohol might be useful for other stuff--burning as fuel, maybe--but not for drinking. Just don't.
hey, just wondering what to do with what I have. I already have %100 pure alcohol but where to go from here? what can I do with this? Any suggestions on mixing or further use? It would be helpful,please reply! Shankz
After automatic deductions for thinkgs like employer health insurance and 401k contributions, my wife and I "skim" an allowance off the top of each paycheck into our personal bank accounts - and deposit the remainer into our joint account. We both skim the same amount from each paycheck, and this creates a feeling of equality.
The joint account pays the mortgage, insurance, buys food, etc. We keep the joint at a balance equal to about one month of our cash "burn rate".
If the joint account gets "fat" we trim some excess into our joint investment account (pretty much a quarterly activity) which we invest accordance with our mutual investment objectives (vacation fund, emergency repair fund, Christmas fund, and long term invetment fund). When it gets lean (and we both watch it) we reduce our "variable cost" expenses (entertainment, lavish dinners, eating out, etc).
The seperate "allowance" accounts are great for buying gifts for each other, having a guilt-free night out with friends, and other "indulgances".
Everybody will find a system that's comfortable for them.
As Nora points out, you still get the tax deferral with a 401(k) contribution, even if the match is poor. If there were no match, I'd put the 401(k) roughly equal with the Roth IRA, depending on your tax situation. It's not too hard to figure out what you'd save in taxes by putting the money in the 401(k), so do a quick calculation and see.
Also, remember that many people who don't plan to stay in a job for 4 years nevertheless find themselves there after all. I wouldn't completely discount the match, unless your plans to leave are quite definite
@FlatGreg--thanks much for the observation on withdrawing the original contribution to a Roth. That makes it a great place to put money for any kind of long-term goal, not just retirement.
Philip,
Outstanding article. That's some thorough writing (and thinking)!
One other time when you should pay down debt instead of investing in your 401(k) is if you're thinking of buying a house. Lenders look carefully at your debt to income ratio, and it affects both your interest rate and the amount you can borrow.
If you're thinking about buying a house in the future, it might (temporarily) be a smart idea to start paying down any high interest debt or debt with high utilization ratios. You'll increase your credit score, improve your debt to income ratio, and potentially save yourself a lot of money over the long-term with a better interest rate.
Thanks for the article!
Jon
I'll be blogging about it on www.healthcarehacks.com if you want to check it out. It's just in the works now but you can read a little more of my story there.
Great idea about the drive-thru coffee!
Sounds like a great idea for next year's promo commercials - You could have different clips of homeless people who are hooked on the game. One could be rifling through the garbage can out front hoping for a discarded gamepiece or two, maybe another one is mugging some kid for his BigMac? Or how about the Homeless Family standing at the counter when Dad orders ONE Toasted sandwich (for the allimportant GAMEPIECES) instead of four valupics so everybody can eat. WOW!
Better yet, you could end the commercial with some idiot homeless retard sitting under an overpass typing furiously into his laptop. His brain is so wasted away from eating too much Mcdonalds "food" that HE'S ACTUALLY DEFENDING THE MONOPOLY GAME AGAINST CRITICISM.
Why doesn't he sell the computer and get a clue, or go to a soup kitchen for a real meal and save his money for a lottery ticket?
GOOD LUCK!
Agreed that it is best to focus on what you can control. Tax planning/deferment/avoidance is possible for the employed, beginning with 401(k) plans and cafeteria plans (if available). Roth accounts and 529 accounts don't offer immediate tax benefits but can offer tax avoidance when you access the funds for retirement and educational purposes. I'll be posting about tax strategies when I get that chapter. However, I will tell you that you are ahead of the curve in regard to taxes, just by knowing that tax preparation is different than tax planning. Thanks for reading and stay tuned...
Go out and make a living like everyone else does, leave the prizes for me and the other 1,500,000 homeless people who save up their weeks worth of collecting change just to buy that big mac, get lucky and win our tickets out of our cardboard boxes. Do you hear us bitching and moaning about the odds of winning this game? **** no! We're just thankful we get to have a little fun gambling with our only meal of the week!
Might want to read what Snopes says about toxins in plastic bottles:
http://www.snopes.com/medical/toxins/petbottles.asp
(as in... not true)
The tap water around here tastes horrid, so I buy water so that I don't turn to pop or something instead, I buy the cheapest stuff tho. Even if it's just filtered tap water, it's not the local tap water, and it tastes ok. I'm willing to pay for that.
Might want to read what Snopes says about toxins in plastic bottles:
http://www.snopes.com/medical/toxins/petbottles.asp
(as in... not true)
The tap water around here tastes horrid, so I buy water so that I don't turn to pop or something instead, I buy the cheapest stuff tho. Even if it's just filtered tap water, it's not the local tap water, and it tastes ok. I'm willing to pay for that.
Even though I own a cell phone, I found myself contemplating the deeper meaning of Nora's statement: "in the day and age where everybody seems to need to be available for calls all the time."
One of the reasons I am a reluctant cell phone user is that I hate the obligation I feel to answer the darn thing whenever it rings. Sometimes I want to be inaccessible, but having my cell number seems to give callers the impression that I am available anytime they want to bend my ear.
how much suger and water would in a pot 7.1 inces in length and 3.5 inces from top to botom and would i be able to make it on the stove and do u put it right in the distil and if not the can u explain how u would go about frementing itplzz give me a email but try to name it some thing difrent cuse im trying to keep it under raps with my dad.
Another plus for the Roth IRA is your original contributions can be withdrawn at any point with no penalty. A lot of people forget this fact when deciding whether or not to contribute.
Great post, linked!
What a great system David! You seem to address all the crucial points for good financial management within a relationship: having something individual for gifts and other indulgences, paying for the bills with equality, and communicating and monitoring your investments and cash flow lots.
Thank you for sharing!
I do the parking meter thing too, Amy! Thank you for sharing about your treatments too - all our thoughts will be with you.
Another tip that can change somebody's day is this: when you're in the drive-thru buying a cup of java, consider paying for the person behind you. The idea is when they get to the window, their coffee is already paid for, and hopefuly they'll pay it forward and pay for the next person too! If not, at least you made their day.
Great post as usual, Philip!
Diversification is the key, and having your entire portfolio in a 401k can be risky for all the reasons you mentioned here.
@Sara: my humble thoughts are that if you were to make the contribution to the 401k anyway, then go ahead. But if that money according to Philip's list might be better used elsewhere, and you're not getting the company match, then maybe you're on the right track with your thinking.
The one advantage of contributing through an employer (company match or not), is the immediate tax relief. If I'm not mistaken (at least it works this way in Canada), your contribution would come off your gross pay, and you effectively get your tax refund right away. $100 contributed through work off your gross pay leaves you with more on your net paystub and in your pocket than if you contributed $100 from your net pay and waited for the refund to come.
Not to step on your toes, Philip - just my two frugal cents. Thoughts?
Many people are bringing up great points about cell phones and questionning the need for them.
Amen!
If it works out to have just a land line and not the cell phone, it's still an excellent frugal decision to make. My point was simply to eliminate one or the other. And in the day and age where everybody seems to need to be available for calls all the time, cell phones are the easy choice.
My own needs are for a cell phone simply because I don't currently have anywhere to hang my hat long enough to get a land line. My cell is also key for emergencies, not the least of which are running into car trouble on the side of the road in an unsafe area, or even being accosted on foot. It is a safety thing for me.
But Guest, you also make some great observations about the dangers of using and carrying cell phones with the UHF bands. I wonder when (or if) the technology will change to a safer format...
One reason i'm not taking advantage of my company's 401k plan is that their match is pretty low, and what they do match I have to be "fully vested" (employed for the full 4 years) in order to take with me. I'm not planning to be at the company this long, so it seemed like a very small return in the end. Any thoughts?
Your article is excellent, Sarah. Having perspective and keeping it is hard when you are desperately unhappy in a job, or in life. I've had a job for almost 2 years that I intensely dislike, ok, I hate it!! It's paying my rent, keeping my family clothed and fed and I have fantastic insurance. I am trying my best to focus on what I DO like about it, but it's so hard. I have yet another meeting on Monday with my boss about yet another issue. I have NEVER , in the almost 30 years I've been working, gotten in so much trouble at 1 job!! I usually like my supervisor and my boss, but when I get called into my manager's office, all I can do is drag my feet on my walk over, feeling like there's a bull's-eye painted on my back that everyone can see!! I have a job I hate b/c I screwed up a wonderful career by making very poor decisions and by not thinking of the consequences of some of my behavior. I have a chance to get back into the field that I love and that I believe is the best work I could be doing and I won't screw it up if given another chance. No pearls of wisdom from me today, just work smart and find the career/profession that excites and energizes you and get a job that allows you to use your creative ptotential! Good luck to us all!!
I used to be a homeless rodeo clown but now I am a world class magician !
paul,
good work, keep it up
thank stumbler jamesb333
bob
As cell phones conquer consumer minds and markets, researcher Carolanne Patton notes that "the brain reaches peak absorption in the UHF bands, right where cellular telecommunications operate." British military scientists have discovered that cellphone transmissions disrupt the brain sites for memory and learning, causing forgetfulness and sudden confusion.
Other studies show that electromagnetic signals from cellular phones reduce the ability to concentrate, calculate and coordinate complicated activities such as driving a car. Startled by $4 billion a year in extra claims among cellphone-wielding drivers, North American insurers did a double-take that found simply juggling `cell phones is not causing a 600% increase in accidents over other drivers busy shaving, applying makeup, tuning radios, taming pets, making out, pouring coffee, retrieving dropped cigarettes, talking and gesturing to passengers, or actually steering the vehicle.
Instead of just another dangerous distraction, tests conducted by the U.S. Department of Energy found that using a cell phone severely impairs memory and reaction times. "Hands-free" mobile speaker-phones cause even more crashes because they typically emit 10-times more brainwave interference than handheld units.
full text at: http://www.newmediaexplorer.org/chris/2005/02/15/grave_cell_phone_danger...
Excellent post, demonstrating the way we need to look at and evaluate all important financial decisions.
Keep the asskicking posts coming!
You can't make 100% pure alcohol by distilling--some water will always get in. There are other processes to make extremely pure alcohol for laboratory use, but some of those make the product unsafe to drink. (Plus you need to worry about whether the liquid mightn't be something other than ethanol.)
Pure alcohol might be useful for other stuff--burning as fuel, maybe--but not for drinking. Just don't.
hey, just wondering what to do with what I have. I already have %100 pure alcohol but where to go from here? what can I do with this? Any suggestions on mixing or further use? It would be helpful,please reply! Shankz
After automatic deductions for thinkgs like employer health insurance and 401k contributions, my wife and I "skim" an allowance off the top of each paycheck into our personal bank accounts - and deposit the remainer into our joint account. We both skim the same amount from each paycheck, and this creates a feeling of equality.
The joint account pays the mortgage, insurance, buys food, etc. We keep the joint at a balance equal to about one month of our cash "burn rate".
If the joint account gets "fat" we trim some excess into our joint investment account (pretty much a quarterly activity) which we invest accordance with our mutual investment objectives (vacation fund, emergency repair fund, Christmas fund, and long term invetment fund). When it gets lean (and we both watch it) we reduce our "variable cost" expenses (entertainment, lavish dinners, eating out, etc).
The seperate "allowance" accounts are great for buying gifts for each other, having a guilt-free night out with friends, and other "indulgances".
Everybody will find a system that's comfortable for them.