Comments on: I Just Doubled My Salary – What Do I Do With The Money? http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/ Financial talk for the rest of us Sat, 16 Feb 2013 01:14:45 +0000 hourly 1 http://wordpress.org/?v=3.5.1 By: DDUCT http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30798 DDUCT Fri, 01 Jun 2007 00:50:23 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30798 @TRENT

Regarding the ROTH IRA your comment is a little misleading. You will lose important tax benefits if you tap into your Roth IRA but you will have immediate access (penalty free with no taxation on distribution since you already were taxed originally) since you are allowed to withdraw (contributions only though) at any point in time for any reason.

]]> By: Tim Priebe http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30678 Tim Priebe Thu, 31 May 2007 15:15:51 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30678 Of course, another option is to keep living at the level you were living, work for 15 years or so and save all the extra income, then retire.

]]> By: Amy Haden http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30650 Amy Haden Thu, 31 May 2007 12:49:38 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30650 I can tell Ralph how I’ve prioritized my saving & maybe it’ll give him some ideas.

When reading this keep in mind that I’m in my early 40′s, don’t have children, have 11 years to go on my mortgage, work for a company with a 401K, and am relatively risk & debt averse.

And I assume Ralph doesn’t have any debts (other than the new mortgage)–

#1. If you work for a company with a 401K and they match some of your contribution, make sure you are putting enough (if not more!) into your 401K to at least get that match.

#2. Emergency saving is a must — in addition to saving for home upkeep, improvement & repairs (sock away 1-3% of the value of your home each year — that way you have the $500 when your hot water heater explodes, and you don’t have to take out a $5,000 home equity loan when your roof needs replacing).

#3. Got kids? Saving for their college educations could be on your list.

#4. From the start, we paid extra principal on our mortgage because I figured it would save us money in the end, and we’d own our house sooner (for an extra full payment every year I figured we’d cut 5-7 years off our original 30 year mortgage). I definitely want to own our house free & clear well before retirement.

We refinanced 4 years ago — 5%/15 years, which lowered our monthly payment & I’ve sort of slacked off on the extra principal payments because I know the house will definitely be paid off before I’m 50 (and also because I was bad & bought a new car).

As for the tax deduction for mortgage interest — after the first 6 years, the interest deduction didn’t matter any more for tax purposes for us — taking the standard deduction has turned out to be greater than itemizing for the past 8 years.

#5. Roth IRA — if you qualify, get one for you and one for your wife & fully fund both of them every year. If you don’t have a retirement savings plan at work (or a traditional pension), this would move to the top of the list.

#6. Charity — I love the fact that Art mentioned donating to your favorite charities! And check to see if the company you work for matches certain charitable contributions.

#7. And if there’s something you’ve always wanted — a vacation to some place special, a car, whatever — you’re in a position to save for that now as well.

]]> By: plonkee http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30598 plonkee Thu, 31 May 2007 08:18:55 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30598 I also think the advice to spend time figuring out goals is the most important thing here. Its a corollary of the answer to every personal finance question, “it depends”. What ‘Ralph’ should do depends on what ‘Ralph’ wants out of life.

Personally, I’d want to ensure a secure retirement, short-term savings for fun stuff like travel, and donating to charity. This may or may not include paying the house off early. But then I’ve no desire to be rich but to retire comfortably instead.

]]> By: Rob in Madrid http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30590 Rob in Madrid Thu, 31 May 2007 06:55:12 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30590 I second Trent, tax deductions don’t make mortgage payments and the stock market doesn’t return 8% a year it loses 25% one year and maybe gains a few years latter 50%. Having no payments is the best return one can get. Just ask all the people who are losing there homes to the subprime mess.

]]> By: Art Dinkin http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30558 Art Dinkin Thu, 31 May 2007 03:24:52 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30558 Best advise given here is to “spend some time figuring out what your goals are”. The best answer is often not defined in numbers. It is what provides the most peace of mind and best nights sleep.

Two other points… 1) no mention of charitable intent. This person should consider what charitable causes (if any) they want to champion… 2) In regards to Trent’s comment, cost basis in a Roth can be withdrawn without penalty or taxes. It is not a good idea, but it is an option all the same.

Art Dinkin

]]> By: Trent http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30522 Trent Thu, 31 May 2007 00:28:09 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30522 Andamom: it depends on values and also how risky your position is. For example, if you throw everything into a 529 or a Roth IRA and then lose your job, you’re going to be in trouble.

]]> By: Andamom http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30469 Andamom Wed, 30 May 2007 20:43:58 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30469 I agree with part of what you said — building up an emergency fund and getting rid of PMI because that is an unnecessary expense. Paying down the mortgage in general though — at 5.5%? What about saving for retirement, your children’s education (if this applies), or finding other investments with returns >5.5%? It does sound goals need to be revisited — but with the larger financial picture in mind.

]]> By: PJA http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30454 PJA Wed, 30 May 2007 19:18:10 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30454 Gotta disagree on paying down the house. The loan after deductions is being given to you at 3%. Paying all that money down (into the walls) just to save 0.5% isn’t that great. Stick it in a mutual fund instead and get 8%. If you have an emergency you don’t need to borrow against your house (and pay someone else 8% to get your money back) to get access to it. And if you don’t have an emergency use the dividends to help pay your mortgage. Over time your investment will eventually pay more and more of the mortgage and still be available for you. In theory. We did this and had an emergency so we are spending the money on that.

In the walls the return is fixed (on getting rid of the interest – no small potatoes to be sure.

]]> By: Ted Valentine http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30446 Ted Valentine Wed, 30 May 2007 18:42:30 +0000 http://www.thesimpledollar.com/2007/05/30/i-just-doubled-my-salary-what-do-i-do-with-the-money/#comment-30446 Wow, 5.5% 30 yr fixed a year ago with nothing down??? How did they get that? You couldn’t get 5.5% on a 15 year fixed a year ago. I’m blown away, unless that part is hypothetical.

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