Author Topic: what to do with raise  (Read 1220 times)

southernhippie

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what to do with raise
« on: July 05, 2016, 06:20:42 AM »
Getting a 6% raise this week.  Should I just increase my 403b contribution by 6%, I'm not close to maxing it out yet?  Invest it?  Put towards mortgage principal?  Or increase my emergency fund?  I only have about 2 months worth of emergency fund in cash.

I am trying to go back to nurse anesthesia school and the earliest I could go back is next fall.  So another idea is to put that savings towards school.  However there is no guarantee that I will ever get in due to it being super competitive.

Mother Fussbudget

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Re: what to do with raise
« Reply #1 on: July 05, 2016, 10:32:43 AM »
When people receive a windfall, I recommend people do these things (in order):

1) Max out your 401K/403b contribution to get the dual benefit of saving pre-tax dollars, and reducing taxable income.
2) Max out your HSA account (must have a HDHP to have an HSA account).
3) Max out a T-IRA or ROTH IRA contribution.
4) Invest in a taxable account.
5) Add $100-to-$200 extra principle payment each month.  OR... calculate how much you would need to pay on the mortgage to pay it off just before you reach your FIRE date.  (IF going into FIRE with no mortgage is a goal for you).

Paying down principle is at the BOTTOM of that list because it's like burying $$ in a jar.  Sure, you're essentially paying into an asset that pays back whatever your interest rate is...  but a house is not a liquid asset (you only see ROI from a house increasing in value by SELLING it). Instead, invest it, and see regular returns on that $$ via stock price increases & dividends.  And always buy low-cost Stock and/or Bond ETF's such as the one's offered at Vanguard/Fidelity. 

Jack

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Re: what to do with raise
« Reply #2 on: July 05, 2016, 10:35:18 AM »
Put it in your 403b.

southernhippie

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Re: what to do with raise
« Reply #3 on: July 05, 2016, 11:48:39 AM »
I already maxed my ira.  So i just increased my 403b contribution the same percentage as my raise.  I am hoping this year I can hit the max on contribution to my 403b.  I have slacked in the past, but no more now.

Thanks for the input