another savings/investment thread ... sorry about it

Well, first we need to wait for FP's standard mantra. After that passes we can begin this discussion.

My advice is to always have an emergency fund of 6 months of your expenses in your savings. Another fund I have is a vacation savings account. I throw a couple hundred in every month for a yearly vacation. That's all you need in a bank savings account. Invest everything else after paying your bills.

Thanks for the input.

What do you invest in? Do you do dollar-cost averaging?

If you don't want to spend your personal tme researching investing, and don't want to pay somebody a lot of money to watch your money, read the Gone Fishin' Portfolio. It's basically a collection of 10 low fee Vanguard funds which distributes your money into US stocks, foreign stocks, bonds, REITs, metals, etc. Each year you rebalance the funds back to the original percentages, and forget about it for another year.

Put your existing money into the funds in the percentages recommended in the book. Throughout the year put all your savings into the account as cash. When it's time to rebalance just do so with the cash value included. I started this two years ago and have never been more carefree about my savings. Not for everybody, but wonderful if you prefer to focus on other things.

My personal investments wrote:

My advice is to always have an emergency fund of 6 months of your expenses in your savings. Another fund I have is a vacation savings account. I throw a couple hundred in every month for a yearly vacation. That's all you need in a bank savings account. Invest everything else after paying your bills.

Here are my levels:

1) $500 in checking account. When money comes it gets higher, but I pay bills immediately and try to keep this balance low to "trick" myself into thinking money is low. I also want to keep this low in case my debit card is lost/stolen and someone goes on a spending spree.

2) Around $3,000 in a "deep savings" operating fund. This is to supplement the $500 if we spend too much or something unexpected comes up.

3) Vacation fund. We aim for $3,000 per year. Money comes in via direct deposit. We save it up, then go spend it.

4) $20,000 emergency fund in CDs. I'm planning to build this up to $30,000, but I won't put that extra $10k in CDs, I'll open a Roth IRA. Since contributions are post-tax, you can take out those contributions penalty-free, just can't touch the interest.

5) Beyond that it's 401k at work. We're pretty aggressive with it, it's at 19% of gross income at the moment. Trying to get to the legal max of $35k (two incomes) but not there yet (that would be closer to 29% savings).

To be honest I should focus on the Roth IRA before increasing the 401k any more. Emergency fund isn't quite big enough plus I need to diversify my tax risk a little.

6) Down the road, if I can manage to max out the 401k's at $35k and Roth IRA's at $11k, the next step would be investing in a taxable account. Not sure what I'll do there (probably index funds), but I do know that when there are losses in taxable investments you can write them off or do some sort of tax trickery. Google tax-loss harvesting for more information. I've read that you may want your riskiest investments in this fund for the tax write-off purposes.

I think in general you want to maximize your tax advantages before touching the taxable accounts.

I'm impressed you're able to put so much into the 401k. That's awesome.

It sounds like I should shift my money around a bit from the responses so far. Don't need as much in savings and could stand to invest more into my roth.

Thanks!

trying to plan ahead wrote:

I'm impressed you're able to put so much into the 401k. That's awesome.

It sounds like I should shift my money around a bit from the responses so far. Don't need as much in savings and could stand to invest more into my roth.

Thanks!

Wait! Wait! Don't go away yet.

No investment thread is complete until FP spews forth his mantra!

Patience, young one. It is coming.