Interesting article from Slate today on why taxation on savings and investments discourage people from saving. My 401k has earned 9% over the 2 years that I’ve been investing in it, giving me a 3% gain after inflation. This is completely my fault as I wasn’t really managing my allocations properly, and now that I corrected them, it’s been performing much better over the last few months. But one of the points of the article is that in order to really realize gains from your savings or investments, you’re going to have to invest a lot of time and energy. I don’t agree that it’s better to spend 10k today than to get 9.5k when I’m retired however. Even if you’ve just got money parked in a savings account at 1% being eaten away at 2% a year by inflation, it’s better to have some standard of living when you retire than to never have the option to retire at all, which is where 30% of Americans are headed.
I finally got my 401k set up in Quicken, which was no small feat. I’d love to have online access to it, but currently my 401k management company only supports the PC version of Quicken. Supposedly, the new 2007 quicken mac has much better 401k support, but only 4 of their online ready 401k companies actually support Mac.
I’ve considered moving over to Moneydance, but they have less online support than Quicken, and their app is just ugly. They do allow for child and parent accounts, which is fantastic, but not enough to move me over.
I did find out that my bank supports online use through Quicken, so I set that up. Was that an easy and fun process? No. Not at all. It was in fact a lot like pulling teeth. But it’s working now, and that’s awesome.
I’ve been doing the Dave Ramsey thing for a while, but I’ve just recently moved over to the envelope system for budgeting. Most of my bills get auto drafted from my bank account, and I’ve been using a debit card to pay for groceries and eating out. While it can be nice to have a record of every transaction, it’s a level of detail I just don’t need, and entering in every $1.58 transaction was becoming burdensome. It was also hard to tell when I was coming close to hitting my budget limit. I’d have to run a report whenever I wanted to check. So I’ve switched to cash only for eating out and groceries. I pull money out each paycheck to fund the next 2 weeks, and it’s been working out really well. Less time spent in Quicken, and it’s easy to know when I’m nearing my limits.
In general, I’ve more or less switched from a monthly budget to a paycheck budget. I laid out all the bills that happen from the 1st to the 15th, and from the 15th to the 30th, and plan the money from each check accordingly. Pretty much anything left over from bills and food in the budget is popped into the emergency fund right when I get the paycheck to reduce the temptation to spend it on other stuff. I’m trying to get the emergency fund stocked up as soon as possible so I can bring my retirement contributions up to 15%.
I’m currently investing 6% in the 401k with a company match. I was planning on investing the other 9% into the company Roth 401k, but may change that to 6% Roth IRA, 3% Roth 401k, in order to have a better choice of securities. That allocation will max out the Roth IRA, but won’t max out the 401k yearly limits.
From there, it really comes down to bringing up my income. I’m on a pretty good track at work, but I’d love to start bringing in more income from photography sales.