Author Topic: What to do with my paycheck?  (Read 3480 times)

minimalistgamer

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What to do with my paycheck?
« on: February 03, 2017, 06:48:32 PM »
I am trying to come up with a savings plan for my paycheck. I recently paid off my mortgage, and I want to figure out the best way to put my new found "wealth" to good use.

I am contributing 23% of my paycheck to 401k, which puts me very close to the limit. I have also maximized my Roth IRA contributions.

My take home pay is $3525.39. Now that we do not have a mortgage, we will be able to live on my wife's paycheck. So I am not quite sure how to put my paycheck to good use, considering I have maximized my 401k and Roth IRA.
Here is my networth situation -

Checking - $8,800.41
Checking - $978.12
Checking - $600.00
Savings - $27,084.85
401k - $28,912.50
Roth IRA - $20,285.37
Brokerage - $4,680.47
Cash - $107.00
Overseas - $413.93
Total - $91,862.65

Given all this, what is the best use for my $3500? I don't know what my overall goal in life is. I guess retiring with dignity, not being a burden to my family, are the top goals. I would also like to to $1M.

Any suggestions will be much appreciated.

Thanks.

marty998

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Re: What to do with my paycheck?
« Reply #1 on: February 03, 2017, 06:54:22 PM »
Shares or real estate. Choose your poison.

:/

Aggie1999

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Re: What to do with my paycheck?
« Reply #2 on: February 03, 2017, 08:48:47 PM »
Have you seen if your 401k plan allows after tax contributions and in service withdraws? If they do, max out your 401k to the ~$53k limit.

minimalistgamer

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Re: What to do with my paycheck?
« Reply #3 on: February 03, 2017, 09:42:00 PM »
i will ask my HR, but I have a feeling it does not allow after tax contributions. In that case, I am trying to find the best use for this money.

terran

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Re: What to do with my paycheck?
« Reply #4 on: February 04, 2017, 07:06:18 AM »
Are you asking about account type or investment type?

minimalistgamer

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Re: What to do with my paycheck?
« Reply #5 on: February 04, 2017, 09:21:47 AM »
Are you asking about account type or investment type?

I am asking for opinions on how to much to save in cash, and how much to invest.

For the investment portion, I have a brokerage account, and 100% of it is invested in VTSMX. So, should I continue with this?

starguru

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Re: What to do with my paycheck?
« Reply #6 on: February 04, 2017, 09:23:32 AM »
If your employer allows after tax contributions with in service rollover to Roth I would do that first. 

When I had surplus on my paycheck I set up my broker (Fidelity) to make automated transfers from my checking into a personal investment account,  buying FSTVX. 

If I were u I would do something similar with 3000 of your 3500 paycheck.


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MDM

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Re: What to do with my paycheck?
« Reply #7 on: February 04, 2017, 01:21:04 PM »
Now that we do not have a mortgage, we will be able to live on my wife's paycheck. So I am not quite sure how to put my paycheck to good use, considering I have maximized my 401k and Roth IRA.
It's usually better to look at a couple's combined finances.  E.g., what are your wife's retirement account options, etc.?

minimalistgamer

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Re: What to do with my paycheck?
« Reply #8 on: February 04, 2017, 03:14:15 PM »
Now that we do not have a mortgage, we will be able to live on my wife's paycheck. So I am not quite sure how to put my paycheck to good use, considering I have maximized my 401k and Roth IRA.
It's usually better to look at a couple's combined finances.  E.g., what are your wife's retirement account options, etc.?

My wife's retirement is complicated. She is from Norway. She wants to move there at some point. So we are only contributing her company's match at the moment. We want to have some cash in hand when we move there. I cannot get her to sign up for a Roth IRA because she does not want to deal with it. I know...its silly.

So, I want to make the most out of my $3500 paycheck.

Cycling Stache

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Re: What to do with my paycheck?
« Reply #9 on: February 04, 2017, 04:30:29 PM »
I am trying to come up with a savings plan for my paycheck. I recently paid off my mortgage, and I want to figure out the best way to put my new found "wealth" to good use.

I am contributing 23% of my paycheck to 401k, which puts me very close to the limit. I have also maximized my Roth IRA contributions.

My take home pay is $3525.39. Now that we do not have a mortgage, we will be able to live on my wife's paycheck. So I am not quite sure how to put my paycheck to good use, considering I have maximized my 401k and Roth IRA.
Here is my networth situation -

Checking - $8,800.41
Checking - $978.12
Checking - $600.00
Savings - $27,084.85
401k - $28,912.50
Roth IRA - $20,285.37
Brokerage - $4,680.47
Cash - $107.00
Overseas - $413.93
Total - $91,862.65

Given all this, what is the best use for my $3500? I don't know what my overall goal in life is. I guess retiring with dignity, not being a burden to my family, are the top goals. I would also like to to $1M.

Any suggestions will be much appreciated.

Thanks.

You're very heavy in cash (checking, savings, etc.).  I'm not sure if that's fear of the market (a different issue on which there are many posts), or an emergency fund of some kind.  If the latter, I recommend getting a home equity line of credit (HELOC) and then moving almost all of your cash to the investment of your choice.

That's what I did when I was almost done paying off my mortgage, and it worked great.  I got the HELOC through Bank of America, where it was free so long as I kept it open 2 years.  I set it up as an emergency fund (I've never used it), because the money is instantly available to my bank account.  That allowed me to move all cash to my Vanguard account.  If I need to buy something, I have credit cards that I pay off each month, or a HELOC if I need something more significant.

While it is possible that a HELOC could be revoked, I consider it highly unlikely for a paid-off house where you're looking at the possibility of borrowing $10k for some emergency that you'd then pay off in a few paychecks.  The interest rate is insignificant when you're talking about 2-3 months loans (which is effectively what your emergency fund is). 

I then set up an automatic investment at Vanguard that pulls the amount of money I want to invest from my paycheck every 2 weeks a few days after the paycheck hits my bank account.  If a bigger expense comes up, I just manually cancel the investment for that paycheck.  I've only had to do that a couple of times in the last 2 years.  Occasionally, when some extra builds up in the bank accounts, I make an additional investment.

All of that makes the finances very simple and automated so you're not having to think about where money is and whether to invest.

I also recommend maxing your 401(k) before any non-retirement accounts.  Getting to invest pre-tax is worth the benefit.

My $0.02.  Good luck.

P.S.  Forgot to add that I got this from the MMM post on "Springy Debt," which was the first MMM post I read and which got me hooked on Mustachianism!

minimalistgamer

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Re: What to do with my paycheck?
« Reply #10 on: February 05, 2017, 02:29:58 PM »

You're very heavy in cash (checking, savings, etc.).  I'm not sure if that's fear of the market (a different issue on which there are many posts), or an emergency fund of some kind.  If the latter, I recommend getting a home equity line of credit (HELOC) and then moving almost all of your cash to the investment of your choice.


Thank you very much for your insights. I came up with a financial plan of sorts for my paycheck.

Roth IRA 2017 - $460.00
Home insurance/property tax - $340.00
Investment (taxable) - $2,500.00
Total - $3,300

I intend to maintain $3000 in my primary checking account, and $30,000 in my online savings account, which is giving me 1.05% interest. I want to maintain this cash because we are contemplating a big move in a couple of years, and if that were to actually happen, we are going to need cash in hand.

I will also look into getting a HELOC.

Considering our current situation, maxing out my retirement accounts, and investing $2,500 every month is pretty decent. With this plan, I am going to have some fun money as well, something I haven't had a lot of over the last few years.

Any thoughts?

Cycling Stache

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Re: What to do with my paycheck?
« Reply #11 on: February 06, 2017, 05:05:23 AM »
Yes, if you have money you might need in a couple years, smart to have that in savings.  Your plan looks good.  The HELOC frees up the need to have an emergency fund (and the associated uncertainty with how much should be there), and the automated withdrawals to Vanguard or investment company of your choice ensures that the default is that money goes to investments. 

Just make sure to get a HELOC that has no closing costs for you.  Keeping it open for a couple of years isn't a big deal (which I think is just to keep you from constantly rate shopping), and if you're using it as the equivalent of an emergency fund, slight rate differences don't matter that much. 

One caveat: if your big move is actually to move, then the HELOC might not be a great choice.  You would be terminating your HELOC at that point, and at least for the one I have at Bank of America, you would then be responsible for covering the closing costs of getting the HELOC in the first place, which was like $2,000, if you cancelled within 2 years.  Other lenders may vary, but fyi.

AK

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Re: What to do with my paycheck?
« Reply #12 on: February 06, 2017, 10:05:08 AM »
Check out http://forum.mrmoneymustache.com/investor-alley/investment-order-65299/. It provides a more in-depth answer to your question and there's a really good discussion from different viewpoints.

 

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