Inventory of objectives for Financial Health

**Slug** · 04-07-2011, 12:56 PM

This is good thinking. Could you tell us a little about your 401k options and share a monthly budget with us?

**Hector** · 04-07-2011, 01:03 PM

Congratulations on paying off CC and reducing your monthly spending.

I think 1 year of emergency money is too much unless your work situation is not stable. If your job is relatively stable, 6-8 months should be enough.

If I were you, I wont worry about taking mortgage. Funding retirement would be my priority specially @ 40.

**Radiance** · 04-07-2011, 01:18 PM

Thank you both
1) I am making adjustments to my budget, especially now that I moved, will post soon
2) I want one year because I want to start a side business and when it is making 80% of what I do now I want to quit and that is always a risk, I believe. It will take a while to build though
3) I am paying for rent more of what a mortgage would be. rent is off the roof these days here, and there are hardly places available!... are you sure retirement goes first... just challenging you back

**Hector** · 04-07-2011, 01:33 PM

It great that you have a plan for starting a side business. Good luck with that

It makes sense to have 1 yr of EF in your situation.

I don't know situation in Miami, but I am in northern cal and I wont even think about taking mortgage if I would have nothing saved up at 40. You didnt mention time period that you will need to save 20k. Lets say if you are able to do it in a couple you years at 42, then you take 30 yr mortgage, you will have to keep paying it till 72. I read/saw so many times that people only consider mortgage payment and not other expenses before taking mortgage and are stuck with that mortgage and they wont have anything left to invest. Taking mortgage on primary home isnt about investment, its more about lifestyle.

If I were you, I would focus on investing as soon as I hit enough EF.

**Radiance** · 04-07-2011, 06:25 PM

It will take me about 3-5 years to get the 20k.
I think Ill create my 1 yr EF, Ill save my 20k and re-evaluate then
So many things can happen. extra 20k in the bank cannot harm, right?

So it seems I need to work on retirement money next. yes?

Since I dont have an EF, this I think are things I should be doing for now:
Enroll to the 401k, I need to research how to select the investments, I know nothing, nada about this stuff at the moment. I know EF comes first, but i should take advantage of my employers matching with the 401k, right?
Open an IRA? Again, I need to educate myself first. I will only have the 401k while I hold my job. When my business (when and not if) takes off, I am on my own.
Am i missing anything?

**Hector** · 04-08-2011, 08:36 AM

It’s great that you are open to re-evaluate your plan.

Employer’s match is free money. I would not waste any time and will enroll in 401k to get employer’s match today. Contribute just enough to get employer’s match in 401k unless you have desired funds to choose from. Invest rest in IRA (max 5000/year) as you will have option to select desirable funds there.

About choosing funds, educating yourself is the best way to go. I prefer low cost investing. If I dont know much about investing, I would keep money in money market or in target retirement fund till I educate myself, but I wont put in any fund with high fees (load fees and expense ratio)

A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Completely Revised and Updated) by Burton G. Malkiel is a great book.

Inventory of objectives for Financial Health