Almost 48 and only 40K in 401K

[mcravenufo]

So I have been sticking my head in the sand my entire life about saving and retirement. I've had some troubling times that helped me see that now. I just got out of credit card debt. No car payments but do have a mortgage on a house that does need improvements and upkeep. I have a job that pays well. My 401K only has 40K in it and now I am desperate to get my retirement going. I am looking for suggestions on what important first steps I should take.

[ixtap]

The single most important first step is to understand how much you are spending. Have you done that? If not, consider going through the process of a case study: https://forum.mrmoneymustache.com/case-studies/

Have you read through the investment order?

https://forum.mrmoneymustache.com/investor-alley/investment-order/

[SwordGuy]

"on a house that does need improvements and upkeep"

This might be a sign you haven't changed your mindset yet.   Upkeep, yes, of course.   

"need improvements"   ????

Does it have running water?  Heat?   Air conditioning if your climate requires it?   Other than that, what kind of "improvements" does it need?

If those improvements will save you money and pay for themselves in a year or two, that's one thing.  But if those improvements are just "we want a fancier kitchen", well, that's how you got into the mess you just spent so much effort getting out of.


And go to the case studies part of the forum, read the instructions there, and enter a case study.

[RWD]

Reduce expenses, increase income. Invest your savings. Check out the investment order post. Also the Bogle Heads Wiki is a good resource. Without knowing your current income and expenses it's hard to give more specific advice. Consider writing a case study topic.

It's not too late to obtain a financially secure retirement. You'll probably want to save 50%+ of your net income to do it. Maybe a little more depending on your Social Security expectations and other possible streams of income or windfalls.

[mcravenufo]

Wow. Thank you all. Reading through the investment order and other links now.

SwordGuy, thank you. I get what you're saying.

[Valvore]

Hi @mcravenufo and welcome!

There is lots of good news! Its never too late to start saving, you're ahead with no debt and you have a high paying job! This forum is a wealth of information and definitely explore all you can.

You're asking for first steps. When I help my friends and family start focusing on the future, I usually go this route.

1. Estimate your budget
2. Track your budget (or go back into your bank statements to accurately determine what you're actually spending)
3. Trim the budget to maximize savings potential.
4. Follow investment order


1. Estimate your budget - Categorize your budget in two groups. a) necessary expenses - you must have these to live/survive. Include minimum debt payments. This is worst case scenario, you lose your job, you need to pay these expenses to stay afloat b)unnecessary expenses - All the frills of life. Entertainment, clothing shopping, restaurants, haircuts etc. Things you don't need to live.
2. Track your budget - There are apps that can automate this for you but you need to look at every single transaction because they can be miscategorized. It also helps you see how often your spending and how quickly it adds up.
3. Trim the budget to maximize savings - Freak out because you realize you spend way too much on food each month (lol). and cut waaaay back. This seems like a hard step, but when you're more mindful of your purchases, it really helps you save. $9 for lunch? No way! $77 at target for junk I don't need? Fuhgetta bout it.
4. Follow investment order below



WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.           
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - your earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra.