Okay, I’m out of debt, now what?
I’m roughly following Dave Ramsey’s plan with a slight modification. I suspended my contributions to my company’s 401k plan while hammering hard on my debt. Technically the next thing I have to do is build a “3 to 6 months of expenses” emergency fund. In my case this would mean 6k to 12k. I’m shooting for 10k by the end of the year. Where I deviate from Dave’s plan is that I’ll be investing in the 401k up to my company’s match until that 10k is built. It’s just too painful to let more time pass without those company dollars working for me.
After the 10k is in the bank, the plan is to invest 6% (the company match amount) of my income into the standard 401k which I’m doing now, and another 9% into the company’s new Roth 401k. I also plan on putting another couple of percent into mutual funds. But I might put that couple of percent into a straight savings account instead to fund a future house purchase. At my current salary, I won’t hit the yearly dollar limit on contributions to the 401ks.
I’m wondering if it would be beneficial to put a little less in the 401ks, say 10% total, and plop 5% into a Roth IRA, which gives me a little better selection of funds to choose from. Anyone playing around with this that would like to leave a comment?
I should be able to swing the 10k in savings by the end of the year (i.e. 10 remaining months) even with the 401k contribution of 6% as long as I have no big ticket purchases, i.e. photo or computer gear. This might make me sad. But I’m also expecting a raise and a bonus in about a month that might give me a little leeway. Also, if a couple of people who shall remain nameless can repay some outstanding loans this year, I’ll be 40% to the goal from that alone. Once the 10k is in the bank, I’ll probably sit down with a financial planner and look at the investing side of things.