I need wise counsel for my situation

[BCompDude]

Ok guys. I really respect all of you on this board who have accumulated much wealth (both financially and in most instances spiritually and relationship wise) and I ask you for your guidance on an issue that has me a little fluxored.

I am currently going to school and want to allocate my money the best way possible. I am on track to meet most of my goals for this year but I definetely want you guys to weigh in on my situation and PLEASE tell me if I'm doing something wrong. I'm a young dumb 22 year old that needs help.

Heres the financial landscape:
Debt: $1650 School loan (Will be payed off when I graduate in November)

Income--Varies because I work as a server but generally average net $1,300

Expenses: $420 Dollars for everything

Where I put my money:
Emergency Fund: $225--->Currently at $3323
Car Fund (For repairs and/or replacement): $150--->Currently at $806
T. Rowe Price 2045 Retirement Fund: $200--->Currently at $900
Roth IRA through Sharebuilder: $250--->Currently at 0 for 06'

Should I just shovel all of my money into my EF until it hits my goal of $10,000 and then refocus on my other accounts? Or is this distribution ok?

[sweeps]

Looks fine to me. Just a few checks..
Are you getting a good rate on your cash accounts (i.e. 4% or higher)?
Did you max out your Roth contribution for 2005? You still have a few months to max it out.

Grats on the low expenses and the diligent savings plan.

[Optsol]

For me, level of emergency funding depends on your needs. Foe example, a family of 5 with a mortgage should have a different # of months than a single person living at home.

Your EF goal of 10k, while noble, seems way too high for me (20x monthly expenses)... I would stop contributing to that immediaitely (in fact I'd shave a little off to 3x expenses). I assume you have no dependents.

As Sweeps said, max out the Roth 1st, then I'd plow the rest into the retirement fund, or start a housing kitty.

g/l

[Fern]

What is the interest rate on the school loan? If it's on the high side, it might pay to put more toward paying that off.

I think you've got enough in the car fund. I'd put $$ now allocated toward that into your retirement fund. It's tax deferred, while your car fund is not. It would also pay to make your 2006 IRA contribution NOW rather than later in the year.

Everything else looks good.

[sweeps]

Oh, be sure to take a look at Form 8880 at tax time. You may be eligible for a credit.

[flash]

Originally Posted by BCompDude

I'm a young dumb 22 year old that needs help.

Should I just shovel all of my money into my EF until it hits my goal of $10,000 and then refocus on my other accounts? Or is this distribution ok?

First, I disagree. For 22, you are SMART and off to a great start.

Second, I'd be careful deciding globally to dump everything into one account without watching the others. It's fine to let the money accumulate in a lesser yield account for awhile, and build it up. At 22 and just starting out, that is fairly wise. But pay attention to all the accounts, and be flexible. In my experience, if you lock yourself into one mindset, you can be blindsided or miss a great opportunity.

[BCompDude]

Originally Posted by Sweepsplayer

Looks fine to me. Just a few checks..
Are you getting a good rate on your cash accounts (i.e. 4% or higher)?
Did you max out your Roth contribution for 2005? You still have a few months to max it out.

Grats on the low expenses and the diligent savings plan.

I have my cash accounts with ING. So 3.8%. And yes, I have maxed out my Roth for 05'.

[BCompDude]

Originally Posted by Fern

What is the interest rate on the school loan? If it's on the high side, it might pay to put more toward paying that off.

I think you've got enough in the car fund. I'd put $$ now allocated toward that into your retirement fund. It's tax deferred, while your car fund is not. It would also pay to make your 2006 IRA contribution NOW rather than later in the year.

Everything else looks good.

I am currently driving a 93 Taurus (my friends make fun of me, but that $3k investment has lasted me three years and going, w/o nary a hiccup) which is a major factor in my expenses being so low--no car payment. I'm just a little worried since its an older car that eventually it will need repairs of some type--or heaven forbid I need to buy a new USED car. But its food for thought.

And I am going to start my ROTH contribution this month--so it'll be fully funded by April of next year with a flat $250 a month.

[BCompDude]

Originally Posted by Sweepsplayer

Looks fine to me. Just a few checks..
Are you getting a good rate on your cash accounts (i.e. 4% or higher)?
Did you max out your Roth contribution for 2005? You still have a few months to max it out.

Grats on the low expenses and the diligent savings plan.

Well, I'll take the grats on the savings plan (thats all me) but the low expenses (while a part of my being diligent about staying away from LTC's such as a car payment etc.) has more to do with my parents.

Also, the EF goal of 10k (although ~7200 would be fine) is based on when I move out in April (or so) of next year. I've scouted apartments, found the average electrical costs with those apartments from the electric company, bought my own food for three months to come up with a reliable amount, and had about 50 people who rent in the area give me their expenses to come up with that number. I can't live at home forever.

[BCompDude]

Originally Posted by flash

First, I disagree. For 22, you are SMART and off to a great start.

Second, I'd be careful deciding globally to dump everything into one account without watching the others. It's fine to let the money accumulate in a lesser yield account for awhile, and build it up. At 22 and just starting out, that is fairly wise. But pay attention to all the accounts, and be flexible. In my experience, if you lock yourself into one mindset, you can be blindsided or miss a great opportunity.

Point well taken, thank you. I think I tend to lock into a mindset, for better or worse, sometimes. And being blindsided is no fun.

Thanks to all of the responses guys.

[sweeps]

Yeah, I don't have a problem with the high EF amount. I mean, it's just accounting, right? Your EF savings, your car maintenance savings, and any other savings (for example, the deposit and 1st month's rent for your apartment) are all cash. You've just separated them logically in your mind.

You're earning good interest on the cash, and putting away 35% of your net income to retirement. That's pretty good. Most 22-year-old's are more concerned with buying sports cars and IPods.

I like the choice of the 2045 retirement fund too (instant diversification).

[flash]

Originally Posted by BCompDude

I am currently driving a 93 Taurus (my friends make fun of me, but that $3k investment has lasted me three years and going, w/o nary a hiccup) which is a major factor in my expenses being so low--no car payment. I'm just a little worried since its an older car that eventually it will need repairs of some type--or heaven forbid I need to buy a new USED car. But its food for thought.

And I am going to start my ROTH contribution this month--so it'll be fully funded by April of next year with a flat $250 a month.

My in-laws are MEGA wealthy, and they have NEVER purchased a NEW new car. Depreciation. The wealthy stay wealthy by being SMART.

I've got a 93 Honda, and no way will I let it go. When we were looking at our latest vehicle, the dealer offered us buku bucks for it, but it's the only car I've seen with a 150,000 mile maintenance plan written by the company. I think the Taurus is up there too!

[Optsol]

Originally Posted by BCompDude

Well, I'll take the grats on the savings plan (thats all me) but the low expenses (while a part of my being diligent about staying away from LTC's such as a car payment etc.) has more to do with my parents.

Also, the EF goal of 10k (although ~7200 would be fine) is based on when I move out in April (or so) of next year. I've scouted apartments, found the average electrical costs with those apartments from the electric company, bought my own food for three months to come up with a reliable amount, and had about 50 people who rent in the area give me their expenses to come up with that number. I can't live at home forever.

All cool, but I would separate out what is for the actual EF, and officially earmark the other funds for their other purposes. I know it's all funny accounting, but the paper boundaries are still helpful in enabling you to maintain the discipline of "no touchy EF"

[Ima saver]

I think you have done great. I too was going to tell you that your EF did not have to be as high as you hoped, but since you are moving out of your parents place, you might want to have an larger EF. You do know that you are on track to be a millionaire, don't you? Congratulatons!

[Snoopy2645]

YOu have done great the friends who are making fun of u driving a 93 taurus probably dont even have a car or if they do they have a payment & probably live at home with their parents still right??

I just had to reply to the taurus because I drive a 99 taurus with over 100k miles on it & my dh makes fun of me but guess what he has nothing he has a truck that he pays 400 a month to drive its a gas hog unlike my taurus & the insurance well thats another thing!!

If your car goes bad u should be able to buy like a 2000 taurus now for about 3k I paid about 3k for mine 2 years ago & guess what its the first car I have had this long & hasnt broke down not once. ANyways back to the point you are doing great for 22 you are really on track!! Dont let anyone tell u different

[locolorenzo24]

Yeah, I drove a 84 volvo wagon for 5 years here, until the transmission went belly-up, and the cost wasn't worth it. drove it 90,000 miles to a total of 270,000. Not worth putting a $1200 transmission into it.

Thank the lord my first estate payment came in the nick of time. I was able to buy a 94 pontiac bonneville with 100K miles for 2800 + 600 in repairs. Not bad for a reliable used car!

[FrugalTexan75]

I personally think having an emergency fund of 10K is reasonable. BUT I do believe it is important to not fund your EF exclusively. All your other accounts need to be funded concurrently.

If you haven't already, I would suggest that you check out Mary Hunt's "Debt Proof Living" book(s). It appears that you don't have much in the way of debt, which is awesome. Her plan might help you get some ideas on how you want to use the money you have to help you in the future.

[debtfreeme]

I believe that even if you have had no problems with the car i would still contribute to the maintenance account so as to be ready in the future should something happen that you need major repairs and/or a new set of wheels. My car is only 4 years old and has 100K on it last week! I ahve been saving for any major problems to happen for a couple years. Always smart to preplan.

Keep saving to the roth this year and your investments in the 401k. I would raise the emergency fund to what ever makes you feel comfortable. Mine is 9 months expenses. I know i could survive for very basic things with my part time job if i was to loose my full one but do what makes you feel comfortable. Raise it when you leave or aim for a year of expenses. Nivce cushion to have.