On one hand, the lower prices make my monthly budget a bit looser which means I can shuffle more into my current emergency savings goal. On the other, I don't drive very much because I live within walking distance of my office, so I'm only in the car once a week or so to head up to the next city over for cheaper groceries, etc. So, I only fill up the tank about once a month or so. But, if it stays this way through the holidays (forlorn hope, I suspect), it'll make a difference in my holiday travel, since I'll be going to my parents' house, which is about 140 miles round trip, several times over the 6 weeks between Thanksgiving and New Years. I can usually make the round trip on a little less than half a tank, but I'll be doing it more than usual.
If gas gets really low, say the $1.20 range, I'd want to get a bunch of friends, form a cooperative, buy a gas station, and bid for 10,000 gallons on the commodities market. Have it delivered for to the "coop gas station". I don't know the details of how that would work. But, that's what I would want to do. Anything to hedge against another swing up to $4. If the economy keeps going the way it's going now we'll eventually see hyperinflation and $4, 5, or 6 gas again.
There are at least three good reasons to fund your 401(k) even when there's no match:
Tax deferal. You don't have to pay income tax on the money contributed to the 401(k). Also, investment earnings within the 401(k) are tax deferred until you withdraw the money
Forced savings. The "pay yourself first" notion is a powerful one. Some people can live frugally, accumulate money in their checking account, and then invest it. Most people, though, will save a lot more money if they arrange for the money to go straight to some investment account without passing through their checking account first.
Low cost. This varies from company to company, but many companies offer a good selection of low-cost investment options in their 401(k).
I actually wrote a post specifically on the topic of deciding between a 401(k), an IRA, and just plain ol' regular saving and investing called When NOT to put money in your 401(k).
What a thoughtful post! I don't know if I was as systematic when I was trying to make that decision when I was in debt. I just thought, if the company is going to GIVE ME MONEY for saving my own money, then that's a pretty good deal and I need to take it.
At my first company with a 401k, I got 50% match on 3% of my salary (maybe it was 6%, don't remember exactly), so I just made it a point to at least put in that 3%!
But, this is exactly the kind of information I was looking for then when I was trying to figure out if I could "afford" to do it. Thanks!
I'm one who has seen the recent drop to $1.67 a gallon and I'm thrilled. But I'm still trying to drive less, consolidate trips, hyper-mile, etc. I don't see any reason not to, now that I'm in the habit of it. Not to mention that I don't expect the prices to stay this low for long.
Even though I don't drive a ton to begin with, I'm with Ann as far as putting extra gas money each month towards paying down my debt. Any extra pennies at the end of each month go towards that goal.
What's frustrating to me, and I hope this changes soon, is that food prices, etc are not going down with the price of gas. I guess corporate decision makers are enjoying the sudden extra profits?
I'm trying to keep to a limited amount of driving. It was a priority that moved up a notch when gas prices soared. It's still a priority, but I'm one of those saddled with a mate who is considerably less conservation- and frugal-minded than I am. For the sake of domestic harmony, I can't be too shrill about this. But it's gotten to the point that I see frivolous driving as downright immoral. I just try to bunch up my errands as much as possible.
I may try to talk him into a car-free challenge, and see how long we can go without driving anywhere. We live in a semi-rural area with no public transportation. So it would be a real challenge.
Hey! I just found your site via 9rules. Nice post. Two comments for you: 1) I like the 'about the author' box under your post, 2) when you tab down your comment form it does not flow correctly.
We have a fuel efficient car, but my husband has a 70 mile round trip commute. We also buy gas for our college-age son (he's doing a City Year during a gap year). We're probably save about $100/month or so with the new prices; the savings will go toward paying down debt.
I didn't actually change anything about my driving/fuel consumption when prices were up around $4. My car is relatively fuel efficient. I'm not interested in a hybrid, and you honestly would not be able to convince me to take public transportation or carpool.
The biggest issue I saw with the rising fuel prices was not the hit at the pump for me, but rather the increase of the price of goods and services (which I don't see going down correspondingly). What I *have* changed is how carefully I shop and where I shop.
@ Aunt Jenny--That's an interesting insight--things aren't so bad that we aren't shopping, but we have realized that we need to make each dollar count. Sounds like you're doing that in your business--pricing so that people see the deal while still making a profit. Would you price higher if the economy weren't struggling?
@Carl--This seems like something you believe pretty strongly. I'd love to hear more on why.
Maybe I'm being dim, but in what situations does it make sense to fund the 401(k) before debt payment if you have NO corporate match?
My husband has a good job, but it's a small company and they don't provide any matching funds. We have a small (1 month of expenses) emergency fund, and no debt other than our mortgage and home equity line. I'm a student, so currently my income is zero, and obviously I don't have a match, either.
We're trying to decide what ratio of our savings should go to: bulking up the emergency fund; fully funding our Roth IRAs; paying down the loans against the house (currently at 5.25% mortgage and 4.25% home equity line). Thoughts?
Great explanation, thanks. Luckily I don't have to make that choice quite yet, as my 401(k) is an 80% match and my educational debt is locked in <4%.
As Josh points out, the time value of money and compounding is another important factor-- even as a student, I contributed to my Roth when possible, and last year contributed enough to my 401(k) in order to get the full match, even though I had to save quite aggressively to do so. The small discomforts I had to put up with by being a poor student are far outweighed by the security that money will give me in 40 years.
We just interviewed philosopher and psychologist Ken Wilber for my podcast and he went into the historical and evolutionary reasons gender differences have evolved in humans.
Beautiful range of responses to this very tender subject.
I know I have always resonated with the more "manly" aspects of life and I am almost positive it was not all socially programmed. There seems to be deep biological roots to behavior with layers of culture and nature over that.
I had a good experience with RBC Insurance when I had to stay in Melbourne one extra night because of a cyclone grounding flights into Darwin. I was reimbursed for the extra cost of accommodation by simply supplying receipts when I got back. I could have handled the extra cost but the entire insurance policy basically paid for itself right then.
Congratulations, Saraj. Though it might not seem like much now, every little bit certainly helps. Over time, I'm sure you'll be even happier with your decision. Check out http://financialtales.com for similar stories or to submit your own.
I encourage you all to read Ayn Rand's "Atlas Shrugged". Excellent novel and oh so scary how our economy and society are starting to mirror the storyline in this book
I restarted my business just this year and it has been doing very well fortunately. I think the reason is that I have reasonably priced products. People seem to still have money to spend, however they are being very careful with it and are absolutely looking for good values.
These are good points but I want to make sure one thing is clear. This may only make sense in the short term while times are tough. There is no more powerful tool to make money than time. When you are deciding whether or not to pull your 401k funding go ahead and put the amount of money you will be losing into a 401k calculator (tons on Google). You will be surprised how much money a small amount now can become by the time you retire.
If you are young, even one year of contribution early on can cost you dearly come retirement, considering it would have had 40 or so years to compound. The difference between 1-2 years now is very small. The difference between the 42nd year and the 43rd year is very large. I hope that makes sense. Great tips Phillip.
although i live in a well populated area the libraries here leave something to be desired. instead of having a well stocked main branch they have small branch libraries that carry almost nothing. i have learned that i have to drive to another county's library if i want to find anything that i want to read/watch/listen to. i've actually even joined www.swaptree.com so that i could get some affordable books to read. (you only have to pay for postage on this site).
i also have to agree that i've never found that my library has a better selection than netflix. plus, my library charges a late fee if i don't return the dvd in a week. since this library is in another country i don't always get back there in a week. plus i don't have to use any gas when i get a movie from netflix.
Please keep the comments civil and on-topic. Abusive or inappropriate comments will be removed without warning. By posting here you agree to our terms of use.
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am into making money and making money only!!!! well i got a litle plan ahead with this moonshine, and am thinking about goind with my plan, if i make/get a good still, and make the rigth mash... well this is my questions. how much money would i make, how much mash do i need to make,how big the still needs to be or and how much do i need to charge. thank you for all those moonshiners outthere and god bless
The comment about donkey punching a person is not cool and you should be shame of yourself for even thinking about doing that to a person not to mention involving a donkey. A donkey punch is no laughing matter my friend! Go to bed early pal, it's time for bedtime. How dare you talk about donkey cum pounding facial punching someone in the nads!
On one hand, the lower prices make my monthly budget a bit looser which means I can shuffle more into my current emergency savings goal. On the other, I don't drive very much because I live within walking distance of my office, so I'm only in the car once a week or so to head up to the next city over for cheaper groceries, etc. So, I only fill up the tank about once a month or so. But, if it stays this way through the holidays (forlorn hope, I suspect), it'll make a difference in my holiday travel, since I'll be going to my parents' house, which is about 140 miles round trip, several times over the 6 weeks between Thanksgiving and New Years. I can usually make the round trip on a little less than half a tank, but I'll be doing it more than usual.
If gas gets really low, say the $1.20 range, I'd want to get a bunch of friends, form a cooperative, buy a gas station, and bid for 10,000 gallons on the commodities market. Have it delivered for to the "coop gas station". I don't know the details of how that would work. But, that's what I would want to do. Anything to hedge against another swing up to $4. If the economy keeps going the way it's going now we'll eventually see hyperinflation and $4, 5, or 6 gas again.
There are at least three good reasons to fund your 401(k) even when there's no match:
I actually wrote a post specifically on the topic of deciding between a 401(k), an IRA, and just plain ol' regular saving and investing called When NOT to put money in your 401(k).
What a thoughtful post! I don't know if I was as systematic when I was trying to make that decision when I was in debt. I just thought, if the company is going to GIVE ME MONEY for saving my own money, then that's a pretty good deal and I need to take it.
At my first company with a 401k, I got 50% match on 3% of my salary (maybe it was 6%, don't remember exactly), so I just made it a point to at least put in that 3%!
But, this is exactly the kind of information I was looking for then when I was trying to figure out if I could "afford" to do it. Thanks!
I'm one who has seen the recent drop to $1.67 a gallon and I'm thrilled. But I'm still trying to drive less, consolidate trips, hyper-mile, etc. I don't see any reason not to, now that I'm in the habit of it. Not to mention that I don't expect the prices to stay this low for long.
Even though I don't drive a ton to begin with, I'm with Ann as far as putting extra gas money each month towards paying down my debt. Any extra pennies at the end of each month go towards that goal.
What's frustrating to me, and I hope this changes soon, is that food prices, etc are not going down with the price of gas. I guess corporate decision makers are enjoying the sudden extra profits?
I'm trying to keep to a limited amount of driving. It was a priority that moved up a notch when gas prices soared. It's still a priority, but I'm one of those saddled with a mate who is considerably less conservation- and frugal-minded than I am. For the sake of domestic harmony, I can't be too shrill about this. But it's gotten to the point that I see frivolous driving as downright immoral. I just try to bunch up my errands as much as possible.
I may try to talk him into a car-free challenge, and see how long we can go without driving anywhere. We live in a semi-rural area with no public transportation. So it would be a real challenge.
Hey! I just found your site via 9rules. Nice post. Two comments for you: 1) I like the 'about the author' box under your post, 2) when you tab down your comment form it does not flow correctly.
We have a fuel efficient car, but my husband has a 70 mile round trip commute. We also buy gas for our college-age son (he's doing a City Year during a gap year). We're probably save about $100/month or so with the new prices; the savings will go toward paying down debt.
I didn't actually change anything about my driving/fuel consumption when prices were up around $4. My car is relatively fuel efficient. I'm not interested in a hybrid, and you honestly would not be able to convince me to take public transportation or carpool.
The biggest issue I saw with the rising fuel prices was not the hit at the pump for me, but rather the increase of the price of goods and services (which I don't see going down correspondingly). What I *have* changed is how carefully I shop and where I shop.
@ Aunt Jenny--That's an interesting insight--things aren't so bad that we aren't shopping, but we have realized that we need to make each dollar count. Sounds like you're doing that in your business--pricing so that people see the deal while still making a profit. Would you price higher if the economy weren't struggling?
@Carl--This seems like something you believe pretty strongly. I'd love to hear more on why.
Maybe I'm being dim, but in what situations does it make sense to fund the 401(k) before debt payment if you have NO corporate match?
My husband has a good job, but it's a small company and they don't provide any matching funds. We have a small (1 month of expenses) emergency fund, and no debt other than our mortgage and home equity line. I'm a student, so currently my income is zero, and obviously I don't have a match, either.
We're trying to decide what ratio of our savings should go to: bulking up the emergency fund; fully funding our Roth IRAs; paying down the loans against the house (currently at 5.25% mortgage and 4.25% home equity line). Thoughts?
Great explanation, thanks. Luckily I don't have to make that choice quite yet, as my 401(k) is an 80% match and my educational debt is locked in <4%.
As Josh points out, the time value of money and compounding is another important factor-- even as a student, I contributed to my Roth when possible, and last year contributed enough to my 401(k) in order to get the full match, even though I had to save quite aggressively to do so. The small discomforts I had to put up with by being a poor student are far outweighed by the security that money will give me in 40 years.
We just interviewed philosopher and psychologist Ken Wilber for my podcast and he went into the historical and evolutionary reasons gender differences have evolved in humans.
Interesting stuff: http://is.gd/72vW
Beautiful range of responses to this very tender subject.
I know I have always resonated with the more "manly" aspects of life and I am almost positive it was not all socially programmed. There seems to be deep biological roots to behavior with layers of culture and nature over that.
thanks for the post.
case
I had a good experience with RBC Insurance when I had to stay in Melbourne one extra night because of a cyclone grounding flights into Darwin. I was reimbursed for the extra cost of accommodation by simply supplying receipts when I got back. I could have handled the extra cost but the entire insurance policy basically paid for itself right then.
Congratulations, Saraj. Though it might not seem like much now, every little bit certainly helps. Over time, I'm sure you'll be even happier with your decision. Check out http://financialtales.com for similar stories or to submit your own.
If there was ever a time to start a business, it's now.
I encourage you all to read Ayn Rand's "Atlas Shrugged". Excellent novel and oh so scary how our economy and society are starting to mirror the storyline in this book
I restarted my business just this year and it has been doing very well fortunately. I think the reason is that I have reasonably priced products. People seem to still have money to spend, however they are being very careful with it and are absolutely looking for good values.
These are good points but I want to make sure one thing is clear. This may only make sense in the short term while times are tough. There is no more powerful tool to make money than time. When you are deciding whether or not to pull your 401k funding go ahead and put the amount of money you will be losing into a 401k calculator (tons on Google). You will be surprised how much money a small amount now can become by the time you retire.
If you are young, even one year of contribution early on can cost you dearly come retirement, considering it would have had 40 or so years to compound. The difference between 1-2 years now is very small. The difference between the 42nd year and the 43rd year is very large. I hope that makes sense. Great tips Phillip.
although i live in a well populated area the libraries here leave something to be desired. instead of having a well stocked main branch they have small branch libraries that carry almost nothing. i have learned that i have to drive to another county's library if i want to find anything that i want to read/watch/listen to. i've actually even joined www.swaptree.com so that i could get some affordable books to read. (you only have to pay for postage on this site).
i also have to agree that i've never found that my library has a better selection than netflix. plus, my library charges a late fee if i don't return the dvd in a week. since this library is in another country i don't always get back there in a week. plus i don't have to use any gas when i get a movie from netflix.
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I loved your article. Different and Informative. Thanks a lot!
am into making money and making money only!!!! well i got a litle plan ahead with this moonshine, and am thinking about goind with my plan, if i make/get a good still, and make the rigth mash... well this is my questions. how much money would i make, how much mash do i need to make,how big the still needs to be or and how much do i need to charge. thank you for all those moonshiners outthere and god bless
The comment about donkey punching a person is not cool and you should be shame of yourself for even thinking about doing that to a person not to mention involving a donkey. A donkey punch is no laughing matter my friend! Go to bed early pal, it's time for bedtime. How dare you talk about donkey cum pounding facial punching someone in the nads!