New Year, adjusting financial objectives

**TBH** · 12-31-2010, 04:36 PM

How much do you have to contribute to your retirement plans to get the match?

You may want to reduce your contributions just enough to get the full match, and throw the excess at your debt.

Some people might advocate paying off your credit card before you build your cash savings back up, but that would make me nervous since you are new parents (and congratulations on that!).

You might reduce the amount going to cash savings, say to 5%, in order to pay off the credit card faster. But I really if it were me I'd sleep better with a bigger emergency fund, especially with a new baby in the house.

Seems like you're not too far away from a much more comfortable position. Once the credit card is gone, you can pay off your car loan faster, and then build the emergency fund up at quite a nice rate.

Good luck!

**CalisFinancialGuru** · 12-31-2010, 04:39 PM

congrats on getting that loan paid off! It is always a great feeling to eliminate a debt. I would suggest you definitely continue to aggressively build your emergency fund. Of course continue paying off your CC and car payments and don't stop contributing to your retirement either. It is my personal policy that when a certain area needs more attention, I adjust a higher percentage of my available funds to that purpose but I do not stop contributing completely to any one purpose as this will halt all progress in that area. For example, in your situation my opinion is to divide your available funds as such: 20% to emergency fund, 30% towards retirement funds, 40% towards debt with higher interest rate, 10% towards debt with lower interest rate until other debt is completely paid, then 50%. This is also assuming that this would be in addition to the minimum payment. Hope this helps!

**greenskeeper** · 12-31-2010, 06:11 PM

one way or another you should work towards having an emergency fund of at least 6 months

**kork13** · 12-31-2010, 06:24 PM

Your best course of action is the one you are most comfortable with, because you alone know the full circumstances of your situation.

That said... Personally, I think I'm mostly in agreement with TBH... Focus on taking out the debt, but don't totally quit savings elsewhere.
- Reduce your retirement contributions to whatever still maximizes your employer's match. If none, reduce it to 5%. Once the debt is gone, increase it to at least 10%.
- Reduce the cash savings as well to perhaps 5%. Again, increase it to at least 10% sans debt.
- Funnel everything else possible to the debt--CC first, then car loan. It is by no means a tremendous amount, and once they are paid off, it will be a significant boost to your ability to save for retirement, EF, and other goals.

**snafu** · 01-01-2011, 10:38 PM

Congratulations on new baby and being financially fit enough to allow your wife to be home with the baby for several weeks. I think you're doing well and examining options with this crew is another step forward. I don't think 7% is 'paltry' and the magic of compounding over a great many years is the whole point of retirement savings.

This is a good time to review all spending. What can you do to reduce expenses? Will meal planning bring down the food budget? What can you do to reduce 'phantom' power useage? Do you use a set-back thermostat to reduce heating/AC costs? Cold water wash except bedding and towels preserve colors and lowers useage. Plan car travel to get the most mileage out of every trip. [gas is going up in 2011] It all sounds nit picky but cumulatively it makes a noticeable difference in a year.

**elessar78** · 01-02-2011, 08:56 AM

Snafu, we're on the same wavelength.

Thinking about the adjustable thermostat, but may have missed the boat since we're already halfway through the winter. I may still do it though.

I did research on what things use a lot of energy (dryer, heater, drying dishes) so we've been more conscious of that stuff. I agree that reducing costs is part of the fight, since increasing income takes more work than reducing.

I challenge myself to bring breakfast, lunch, snacks and coffee with me to work every day. It really helps out a lot.

**snafu** · 01-02-2011, 03:50 PM

Taking meals & coffee to work adds up fast as a cost avoidance, way-to-go! January is a great month for a spending detox which means cutting most discretionary spending and wrapping an elastic band around your wallet to make spending a nuisance. Watch for a sale price on a thermostat as there will be future winters.
Can you split the cost of a 'Club' card with a neighbor, friend, relative, work colleague? You get separate cards so you needn't be dependant on each other but you must use the same address. At Costco, an asterisk on the price card identifies the item as reduced, will not be re-ordered. Their prescription prices are often the lowest in the community [14% fee] and housewares/seasonals in the middle section of the store are well priced.

Does anyone use the marshmallow theory? 4 y/o were given a marshmallow and told they could eat it immediately BUT if they waited to eat it until the interviewer returned, they would be given a second marshmallow. The researchers discovered years later that those children who were able to delay gratification, and claim the 2nd marshmallows grew up to have less behavioural problems, higher scores on college exams, better attention spans and superior social relationships.

Are the participants here a one marshmallow type or do they go for two.

**elessar78** · 01-03-2011, 04:20 AM

to answer an earlier question ... we don't have 401(k) matching but we do offer a pension plan

**Hector** · 01-03-2011, 01:58 PM

Originally posted by CalisFinancialGuru View Post

congrats on getting that loan paid off! It is always a great feeling to eliminate a debt. I would suggest you definitely continue to aggressively build your emergency fund. Of course continue paying off your CC and car payments and don't stop contributing to your retirement either. It is my personal policy that when a certain area needs more attention, I adjust a higher percentage of my available funds to that purpose but I do not stop contributing completely to any one purpose as this will halt all progress in that area. For example, in your situation my opinion is to divide your available funds as such: 20% to emergency fund, 30% towards retirement funds, 40% towards debt with higher interest rate, 10% towards debt with lower interest rate until other debt is completely paid, then 50%. This is also assuming that this would be in addition to the minimum payment. Hope this helps!

I dont see a point in assigning 30% towards retirement (without company match) when I am in debt.

**Hector** · 01-03-2011, 02:08 PM

I would
1. Stop 7% contribution towards retirement and divert it to Amex
2. Sell my current car [$7,500(7%)] and would buy a reliable used car worth $5k. whatever money is left, I would assign it to my EF.

**jpg7n16** · 01-03-2011, 02:29 PM

Originally posted by Hector View Post

I dont see a point in assigning 30% towards retirement (without company match) when I am in debt.

I think you misread Calis post - he was saying of available funds only, use 30% to retirement. Not of gross income.

It's a moderate way to attempt to achieve several goals during this stretch. Though I still would likely drop retirement savings altogether if no match - and only begin once I'm out of debt. I personally wouldn't do any retirement savings if I have debt at 7% or higher (which OP is right at).

I also think that without the 401k, you could likely wipe the whole debt out in under a year. Focus on reducing your largest expenses first. Better to stop eating a $50 family night once, than to unplug 1 TV or similar energy device for like 5 months.

The small steps help, but the larger steps help more.

**bjl584** · 01-04-2011, 06:03 AM

I would start by building up the EF. You're going to want at least 6 months expenses saved up before doing anything else. Keep the retirement contribution as is. Once you have a 6 month EF, then start attacking the other debt.

New Year, adjusting financial objectives