Reviewed, waiting on raise %.

[Pablo]

First raise coming down the pike. Should I:

a) Not change any settings, and have a bit more take home cash and actually live.
b) Increase the 401K take (currently 12%) just perfectly so the take home remains exactly the same.
c) Split the difference down the middle, 50% of the raise to the 401K, the rest to take home pay.
d) Increase the 401K take even more than the raise.

You make the call.

 

[Al]

Depends on your situation. I maxed out the last 5 years bc kids were out of college and house paid for. If you don't have your house paid for obviously you need to weigh the tax implications. You have the information pabs.. I would just say to put in as much as you can if you are looking at the best financial decision.

Just a balance of living larger now or later.

 

[Pablo]

My preferrence is maxing the savings. Just need a good hard shove once in awhile.

 

[eljefino]

Are you getting any matching funds from your employer? If so max that out!

 

[JHZR2]

I would suggest (c).

I don't know how it works for you, but here as a government engineer, we have a situation where above some salary level, at 14% (max contribution to TSP) or even less, if you make enough $$$, you run the risk of hitting the upper limit of contributions prior to the end of the year. If you hit the limit ($14 or 15k, I think), then you loose the matching contributions for the rest of the year, so essentially throw away money. As a result, those who are smart and above the salary threshhold drop their contributions at the beginning of the year, and then increase it at the end to ensure that they maximize matching contributions and still hit their personal max contribution. If this effects you in a similar way, then you must consider it.

Otherwise, I pick (c) because based upon everything that I read by you on here, you do a heck of a good job of saving and all-around money management. This is a good sign. If Im correct, youve been saving well for a good long time now, and have been adhering to best practices of money management for the same. Chances are you have a nice load of cash or monetary equivalents that will do you well in the future.

By picking (c), you are still increasing your savings allocation further, so are getting the federal tax advantage and are building a larger nest egg, but also will have a few extra bucks to buy yourself an extra widget every now and again, go on a trip (at least a weekend trip!), or at least go out to dinner with your family once or twice extra in the year. You only live once, and you might as well provide yourself a little bit extra enjoyment now, while working hard and doing everything that you do to be deservant of the raise that youll be getting.

Often (at least I know I do, Im at 14% contribution), its easy to get so caught up in the future, that you sacrifice enough to not have all that much enjoyment in the here and now... the key is to strike a good balance to allow you to be more than just reasonably happy now, and yet achieve aggressive goals in the future.

JMH

 

[Pablo]

Yes I put in over the matching amount, so you can say that is matched. We have a pretty goodly matching amount and the matching is immediate, not some future date.

c) is tempting because we live pretty lean, as the wife does not work.

 

[Patman]

Buy a Corvette with the extra cash!

 

[JHZR2]

but if you hit the upper limit of your personal yearly contributions, arent you excluded from further contributions, and matching amounts are, of course, stopped? Thats what some have to worry about...

JMH

 

[MarkC]

Go with c) and let your wife and daughters live a bit larger. But you remain lean.

 

[Pablo]

No JHHZR2, it doesn't work that way in our plan.

 

[JHZR2]

nice!

 

[Quattro Pete]

Raise? What's that?

 

[Al]

Pabs: Just my experience: We lived very lean our whole lives. Had our house paid off a long time ago, bought our cars cash, didn't travel (I will point out that neither of us wanted to travel), etc. So I was able to retire at 55 and we still live frugally.

Probably when we die there will be a bunch of bucks left over. Many will say that we were really stupid bc we didn't 'enjoy' our money and its a big waste. But to us that's the way we were raised and we felt good about the security of being in a position that we didn't need to worry about lack of money.

My point with this message is that perhaps you should, in your mind, decide what is really important in your life. Save/spend according to what you want/need. Money should not be your master its your slave. I honestly can say I don't regret the path I took. Perhaps you should 'fast forward, yourself to a time when you plan on retiring and think that through.

I know this may sound trivial..you have probably done it.

 

[Evil Ron]

Do C). This lets you enjoy the fruits of your labor and you are also increasing your investments. Just be sure to do this consistently with each raise you receive.

 

[vairox]

quote:

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You make the call.

---

go with E....give it to me

quote:

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Go with c) and let your wife and daughters live a bit larger. But you remain lean.

---

bwahahaha.... no way.... maybe the wife, but daughter? i think thats whats wrong with a lot of kids, bust your own hump...pops is tired.

 

[sprintman]

What's 401K take?

 

[Pablo]

The amount, in percentage, of my gross pay that I elect to go to my 401K. If you don't know what a 401K is, it's probably worth some web research, but in a nutshell it's a pretax, tax deferred, company sponsored but independently run, with some level of matching, investment retirement savings plan.

 

[Gary Allan]

quote:

---

Go with c) and let your wife and daughters live a bit larger. But you remain lean.

---

Where are the gremlins, MarkC??? Trust me ..that noble feeling of "sacrifice for the sake of (fill in the blank)" cashes itself out in a whole lot of bitterness when you see your selfless efforts sent down some blackhole of "it's for the (fill in the blank)". "It's for the (fill in the blank)" ..gets a life of its own ..sorta like a (cough-cough) non-profit organization.

Stash the cash ...everyone tightens the belts.

 

[sprintman]

Now thats a mouthfull. Similar to what we call superannuation. When I saw 401K I thought it meant you earned $401,000!

 

[dkryan]

Al:

Adopt me, please.

Sprintman:

Pabs really does make $401,000(US)! That's why his wife is not working.

JHZR2:

I understood the TSP to have a 2006 limit of $15,000 or 15% of your salary, with the $15k being the ceiling. Divide the annual amount you want to contribute each year by your 26 pay periods and use that dollar amount for your TSP deduction each pay period, not a percentage. That way, you're not "over contributing" earlier in the year.

Pablo:

I vote for "C"