Just got a raise - where should I funnel it?

[emnah94]

I just got a $3k/year raise and I'm wondering where I should put the extra money. Here's a breakdown of my finances:

• $1k/month in emergency savings
• $11k student loan at 5% interest
• No CC debt
• Currently maxing out ROTH IRA contribution
• No match from company 401k, so not contributing

Should I use it toward paying off my student loan or contribute to my 401k despite no match? I'll be getting married next Spring - should I put it into a savings account for the wedding? We don't want to rack up debt for it...

Advice?

[anonymous_saver]

How much do you have in your emergency savings so far? How many months worth of emergencies would that account for?

Do you own a home already?

If I were you, I would maybe start your 401(k) contributions at maybe 1-2% so you wouldn't notice much difference in your take home pay to start (more would be better of course, but you have to start somewhere!). Then I would start another account to save for your wedding with the remaining money. Maybe you could even lower your emergency savings a bit per month to add more money to go towards the wedding fund.

After the wedding, then you could increase your 401(k) contributions and start saving for a home (if you don't already have one).

By the way, since your interest rate is pretty decent on your school loans, I would start the 401(k) contributions before paying off the student loan.

What is your take home pay and monthly expenses, maybe we could think of a reasonable way for you to free up more money.

[jIM_Ohio]

how much is saved for retirement? IMO the debt is OK to have and you need to overfund retirement at this point.

4k a year is not much towards retirement.

[Fern]

401ks are very valuable as a retirement saving vehicle even without the company match. Where else can you stash money without having to pay taxes on it?

[jukebox9988]

You could build up your savings some more to 1,500k/month, or just start contributing to your 401(k). But I think no matching from your employer is pretty unlucky.

But then again, all contributions are tax-deductible. If you want a tax break, build the 401k. If you want more savings, build that up some more.

You're in good shape already, so don't worry about making the wrong choice. As long as you save your raise, you are golden.

[TBH]

I think the OP is saying he has a balance of $1000 in his E fund, not that he's putting $1000 in every month.

If it were me, I'd start contributing 1% to your 401k just to get in the habit (and increase that as soon as you can) and I'd start socking money into a liquid savings account for your wedding. If you don't need it all for your wedding, add it to your E fund. You have a good start on an E fund but I'd try to inch it up a little higher.

You have a good start. Keep up the good work.

[project15]

a $3k raise is really only about $150 a month extra after taxes (at least it was for me). I'd put it toward the wedding. By then, you'll have about $1500 which can cover the reception.

[PrincessPerky]

my theory on raises is that you should do somehting for soon, something for future and something for now.

so some to retirement (future) some for wedding (soon) some for fun (take your fiance out to dinner, or a movie, or a park, or whatever floats the boat)

As to the exact amount, that is up to you two, and how much you want to spend on the wedding.

[MonkeyMama]

Hmmm, I think it depends. If your 401k is crappy is the only reason I Would avoid it. (PArticularly if you are in a low tax bracket).

On the other hand if you are in a higher tax bracket, I would utilize the tax savings (unless they were horrid investment choices or something).

The thing is if you contribute a chunk to your 401k you can keep more of your income in general.

If your current budget is not too tight or you are happy I am generally in the camp of save it all. Save it for the wedding and/or 401k. The philosophy of automatic savings... But it really depends on your current satisfaction, and shorter and long-term goals, which are unclear.

Seriously though you may be able to put in $400/month in your 401k and with tax savings have the same take-home as before your raise. Depends on many factors, but something to consider. $10k/year or so to retirement would be no small beans, and you can use future raises for more fun are shorter-term goals. Then again if you expect the wedding to cost a lot, why not save it and then divert the money to the 401k after the wedding? Or do 1/2 & 1/2.

[jamai]

put it towards the student loan, its always better to pay off the debt first!

[Tree0164]

I would start investing in your 401k since you have already maxed out your Roth.