Do you agree or disagree with any part of this flowchart?
tl;dr below are just my details, you can comment your thoughts without reading anything below.
I have a 3 months emergency fund ($5000) but am working on a 6 month slowly. My current monthly expenses are $2200 but I factor in that I could drop this $500 by not eating out, stop buying luxuries, etc.
I contribute to my 401k to maximize my employer match but do not focus down by current $4000 student loan debt. I'm currently paying the minimum and at that rate will pay it off in 6 years with about $600 total in interest payments.
I contribute almost the max to my ROTH IRA at $100/wk or $5200/yr (94% of the $5500 cap)
Now here is where I really deviate from this. I want to skip over any further 401k contributions and jump right to investments and reason being is I need more liquidity in my investments for the unforseen emergencies and even non-emergencies (second home, etc.)
Thoughts?
what happens if you go over your ira cap?
>>1381400
>owe loans
>want to invest
the best investment you could make is being debt free first
>>1381400
I understand your concern about liquidity, but its important to consider the consequences of your allocation strategy. The monies you put in your taxable investment account are, of course, taxable. That means you've got less to invest than if you put those same monies in the 401k.
Let's assume your effective tax rate is 15%. And you've got $10k annually that you could put in either a 401k or a taxable account. Except in the case of the taxable account, it won't be $10k ... it'll be $8.5k thanks to taxes. Next year, same thing. Etc. And while the spread might not seem large at first, now imagine the power of compounding working on those balances over many years. You're giving up potentially hundreds of thousands of future wealth by choosing the taxable account.
Also, isn't it possible that this concern will work itself out in the future anyway? By which I mean, many diligent savers eventually find themselves with too much income to put into tax-advantaged accounts anyway. I don't know what your future wage/salary prospects look like, but if you're eventually going to be forced into using a taxable account in the not-distant future, why intentionally suffer the costs now?
In any event, I applaud your commitment to savings either way. Whatever you choose, I think you're still going to be vastly ahead of your peers.
>>1381460
I agree but wouldn't mediocre market performance on investments be greater than the interest I'll pay? In addition to that the interest is tax deductable.
>>1381564
pay it off or the jews win
bird in the hand is worth two in the bush
>>1381569
Since you put it that way..
I'll pay it off.
