Am I on the right track finanically?

Question

Have a 401k plan at work,

Opening a savings account at a credit union. What purpose will this serve other than to save for emergencies?

When I have enough money, I will open a cd.
How much do I need, $1000?

Im getting toward monitoring my credit reports monthly.....

Having a checking account for 3 years I pay bills with.

Going to use savings in that account to place extra money in for backup.

Anything else i need?

BTW, im 27 and live alone.

Irish, it doesn't go against you,.

If a lender or other potential lender, like a mortgage company or credit card company check it, that's an inquiry. I know those lower your score based on the type of place that views it and the frequency of it "being pulled."

Checking it yourself, on the contrary, does NOTHING to your report.

Answer 1

Two Points for me to mention.
1. Contribute the maximum amount to your 401k plan at work.
2. Don't check your credit once per month. Everytime you check it goes against you believe it or not. Only check when suspicious of something.

Answer 2

Get a credit card with that credit union and maybe one or two other Visa or M/C's cards in the coming years. Pay them off each month for sure. Diversify you retirement savings into Roth IRA's and other safe long term investments, too. Never get married (ha,ha). Make sure your car insurance is appropriate...talk to your agent. Also, have a short term disability insurance that covers your major monthly expenses when you get hurt. If you have a job that has a union or offers legal liability insurance, get it. Most importantly, budget yourself each month and limit the amount of money you use for entertainment and eating out.

Don't worry so much about your credit score now, your still young. Place more emphasis on making proper major financial choices. Being single you do not need to buy a house because you may want to change jobs and move to a different city periodically to further a career, so just make sure your rent is economical for you. Don't even consider a house until you are settled into a good career and have 25% down payment. Most young people get stuck into a nowhere job and city because of a house.

Answer 3

You are doing well, here's a few things to consider...

1) if you go to annualcreditreport.com - you can check each of the 3 credit reporting agencies for free 1 time a year. I check one company every 4 months. Experian in Jan, Trans Union in May, the other in Sept. It's much easier than every month - that's overkill

2) you don't have any credit card or other high interest debt do you? If so pay this off before adding more to your 401k and emergency funds over $1000

3) try to build up the emergency fund to 4-6 months living expenses.

4) build up your 401k to the employer match. Then open up a Roth IRA - work towards the max of both, but it may take you several years to do this - that's ok - wealth isn't built overnight
Currently the max for 401k is $15,500/yr and for Roth is $4k/ yr, in 08 it will be $5k. Build towards these maxes.

You sound like a Dave Ramsey kind of guy. You might want to head over to your public library and pick up a copy of the Total Money MAkeover - it sounds like you'd like him.

Answer 4

You are absolutely on the right track. Contribute the max to your 401K. Check your report annually instead of monthly. I believe you can opt out if you don't want future offers of credit from certain companies. Be sure to pay bills on time. Allow savings accounts to draw interest by not making withdrawals. Banks have =different criteria for Cd's so check with a few to see what best suits your needs. other than that, you're doing a great job. KEEP UP THE GOOD WORK!

Answer 5

Here are three rules to having more money.

1. Spend less
2. Earn more
3. Pay less taxes. (I'll leave an explanation to the end, it'll explain why this one is so important)

All of us know #1. I won't preach to you. #2 is difficult. #3 is probably the easiest way to keep more of your money.

You need to actively look to ways to pay less taxes. This can easily net you hundreds to thousands per year.

Forget a CD or savings account. They are giving you 1% interest on money they are loaning out at 10-15% The historic rates suck and there are no tax benefits.

Get a money market instead. The rates are higher and you can have access to the money in a day. Vanguard has great rates and low fees. This is only if you need emergency cash.

Now, for a longer term plan, here is the order in which i would put my money.

401K: put in the maximum you can possibly stand. If you cannot do that, add $50 additional dollars every enrollment date. You won't even notice the extra money rolling out since you will have adjusted.

Fund an IRA: This will give you a great chance at good returns (stock market is historically 10%) and you'll have tax benefits.

Fund a Roth IRA: This will have no immediate tax benefits, but once you have funded it, you'll never pay taxes when you withdraw it.

iBonds:
If you want lower risk, purchase ibonds. Inflation insured bonds. You can buy them online.

Mutual Fund: Put any remaining money in a Vanguard S&P 500 account.


TAXES!!!!!

Okay. Here is why you need to think about tax considerations. You are likely paying at least the 28% tax rate. So for every $100 you earn, at least $25 is going out the door. Sucks huh.

So things like 401K, IRA, RothIRA allow you to either put that money in pre-tax (401K) or get money back at the end of the year because you already paid taxes and they are crediting you back (IRA) or later you'll never pay taxes when you withdraw (Roth)

So for every $1000 you put away in a non-taxable account, figure you are getting $200 back. Now, you might not get it now. You might have to wait until retirement, but that is $200 if your money that can grow.

EMERGENCY: This is easier. Instead of hording cash. Think of things you might need in an emergency. Some of these you cannot keep ahead of time in case of financial emergency. (car problems) But you can plan ahead.

Car Emergency: think of how you would get ot work. Is there a bus station? Can you bike? Car pool? Think about these before you get an apartment or house and it can help.

Medical: build your medical savings account and in hardship this can be used.

Food: Easy to purchase staples and save ahead for financial hardship. This is just smart to have on hand for any kind of emergency.

These are simple what ifs. It doesnt take long to plan and often requires no purchase. Just having a plan in action will save you money in the long term.

Also, consider a second fun job. Maybe something that gives you access to things you like to purchase or is just a fun social setting. You make money and meet other people and get paid.

Answer 6

You're on the right track. Be sure that you put at least as much into your employer's 401(k) as they match. Mine matches 4%, but I put in 20%; I'm a lot closer to retirement than you are. Also, look into opening an investment account with a brokerage firm. You can start with as little as $100, and you will be surprised at how it grows if you keep investing.

Answer 7

Unless your bills are only $150 a month, $1000 in liquid (easy accessible, no penalty to withdraw it) savings is not enough.

To be safe financial experts recommend you have 6 months living expenses in savings you can access without losing your butt in penalties.

What happens if you get laid off? What happens if you get in a car accident or get cancer and can't work for 3 months?

Up your liquid savings, but the rest you are doing just fine with.

Good luck.

Answer 8

You are missing a couple of things, IRA's and investing in stocks/options. Trading on the stock market isnt that hard once you learn the basics, a good website is investopedia.com.

Answer 9

ur on the right track..just dont check ur credit report that often it is held againist u in a way...
rest do ur best plan for rest do ur part leave rest on God!

Answer 10

sounds good i was on rigth track too until terrorists posing as social workers destroyed my career