Saving During the Holiday (funds, pay, rate, vehicle)

[Mr_250]

Does anyone find it difficult to save money during the holiday season? I have been an avid saver since about 16 and have saved enough money to the point that I bought a house, rehabbed it and bought 2 cars (of course, still with monthly payments). I am 27years old.

I feel like I hit a plateau of money in my savings account and it is a struggle to get passed it.

Basically next year this is my idea of savings money. Please let me know if you have any suggestions. I've been pulling my hair out over this.

• Currently savings utilizing 401k plan with employer (will continue to contribute 6% weekly). I have and old IRA plan that I will roll into my current plan 401K (about $25k, plus my current 401k)
• Noticed that the 401k provider will offers a ROTH account. I will set up a ROTH account and save an additional $50 per week (after tax, automatically).
• I have a savings account (passbook) that I will contribute $50 per week as well.
• My goal is to have about $5k in cash on hand at any given time (I have about $10k now, about half will be going to my ROTH account).

I'm just looking for suggestions because I feel like I flat lined and hoping this would be able to get me kick started again.

Thank you in advance.

[cm5878]

Yes, very tough to do. But the New Year is only 2 weeks away, so full steam ahead!

[shaner23]

Hi,

Although this might not be your case, I'd just like to point out that buying a house and two cars doesn't necessarily signify saving money. It's possible to buy either of these with little money down.

Now on to my advice. For the 401k rollover, instead of rolling it into your current company's 401k, I would rollover to an IRA instead. That way you aren't tied to the company with that money, and you have endless choices of mutual funds you can invest in.

Given your age, it's probably safe to say you aren't yet at the pinnacle of your earning power. I'm assuming you are under the income limits for the Roth 401k and Roth IRA. I would switch your 6% 401k contributions to the Roth option. I say this because you are still in a relatively low tax bracket and should take advantage of the tax free earnings as much as possible. Leave the tax deferred contributions for when you are in a higher tax bracket and can no longer contribute to Roth options due to income limits. Your company will still match your contributions with a pretax contribution, so you won't miss out there. I would also look into opening a Roth IRA and maxing out the contributions every year.

As far as that $10k you have on hand. Don't throw it into a retirement account. Put it into an interest bearing savings account and label it as an emergency fund. Try to keep 6 months worth of expenses in there for the use on emergencies only. It's good to have a base amount of liquidity in low/no risk accounts. It also gives you piece of mind when investing in mutual funds in the market since you won't be as likely to be emotionally affected by drops in the market.

To increase your monthly savings, you need to analyze your spending by tracking every cent spent. Then come up with a budget reflecting your spending and see where you can slowly start to cut back? Maybe you're spending $500 a month eating out and realize you can do more grocery shopping and cook for yourself. Maybe the car payments are crushing your income and it would be wise to sell one, especially if you have payments on both of them.

Good luck.

[Mike From NIU]

It also seems like you are asking two different questions. One is "is it hard to save during the holidays?" and the second is "does my savings plan for next year look okay?"

I think the savings plan looks fine, as long as you aren't suddenly cutting your other budgets so far as to deprive yourself some other needs. I would agree that you should consider your current tax rate in determining whether to go for traditional or Roth 401k.

However, to answer your other question. If you are able to save regularly throughout the year, I see no problems with hitting plateau(s) once or twice per year because of certain events, be they holidays, vacations, special events, etc. As long as you aren't spending all of your previous savings, a month or two of $0 saved will not significantly affect your long-term financial position. Saving is good; however, it can become a god in its own right and cause individuals to lose sight of priorities.

[Mr_250]

Now on to my advice. For the 401k rollover, instead of rolling it into your current company's 401k, I would rollover to an IRA instead. That way you aren't tied to the company with that money, and you have endless choices of mutual funds you can invest in.

I think it currently in a IRA, but I am not contributing to it. Granted, it is making money, still I feel like I could do more with it. Your suggestion of money that isn't tied to the current employer is valid. I need to look into that.

Given your age, it's probably safe to say you aren't yet at the pinnacle of your earning power. I'm assuming you are under the income limits for the Roth 401k and Roth IRA. I would switch your 6% 401k contributions to the Roth option. I say this because you are still in a relatively low tax bracket and should take advantage of the tax free earnings as much as possible. Leave the tax deferred contributions for when you are in a higher tax bracket and can no longer contribute to Roth options due to income limits. Your company will still match your contributions with a pretax contribution, so you won't miss out there. I would also look into opening a Roth IRA and maxing out the contributions every year.

I really like this suggestion. I WILL look into that. I'll have to run the numbers.

As far as that $10k you have on hand. Don't throw it into a retirement account. Put it into an interest bearing savings account and label it as an emergency fund. Try to keep 6 months worth of expenses in there for the use on emergencies only. It's good to have a base amount of liquidity in low/no risk accounts. It also gives you piece of mind when investing in mutual funds in the market since you won't be as likely to be emotionally affected by drops in the market.

I have been meaning to switch a portion of this money over, I think to Ally bank.

To increase your monthly savings, you need to analyze your spending by tracking every cent spent. Then come up with a budget reflecting your spending and see where you can slowly start to cut back? Maybe you're spending $500 a month eating out and realize you can do more grocery shopping and cook for yourself. Maybe the car payments are crushing your income and it would be wise to sell one, especially if you have payments on both of them.

My goal is saving $100 per week. My GF and I eat out once and I keep track (written down, excel sheet, whole nine yards) of all my expenses. One of my cars is paid off (paid cash) and I have a "cool" vehicle I make payments on which are very low because I put a large down payment.


Thank you for your help.

[Sunbather]

We don't spend hardly any extra around the holidays. We budget each month and pretty much stick to that no matter the time of year.

[shaner23]

Mr_250, it sounds like you are on the right track. If you are able to save $100 per week on top of your 401k contributions, that is not bad at all. Of course there will be some people that are saving way more than you, but don't let that discourage you. I am in a not too different situation than you and am 26, and I wouldn't feel worried in your situation.

My biggest priority was to pay off all my non mortgage debt asap. I never had a car payment, so it was mostly $40k+ in student loans. Ever since I paid those off, I've boosted my savings tremendously. I would look in a plan for paying off your car so you can free up more cashflow. And as you achieve raises at work, try to limit your lifestyle inflation and bank the extra dough, which really helps.

[Parsec]

You said the money in your savings account has plateau'd which sounds like you're spending everything you earn. Do you mean your savings rate has plateau'd? If that's the case, then I think that's fine. You can only cut expenses so much - the only way to get rich is to earn more money.