Free $1600, what to do?

[ACanthony]

Hello- My name is Anthony. I was fortunate enough to win a poker tournament online last week and the Poker Site (yes it is legit) is sending me a check for $1600 that should arrive this week. I am very finicky with my money and am just trying to decide exactly where to allocate this $1600. I appreciate your advise as to where I should stick this money. Here's my situation:

Age: 24 years old, making a measley $35k a year. Don't have too much bills though, and am able to save about $400-700 a month
$7300 in a ROTH IRA at Vanguard and can contribute $1300 more in 2008
$1100 in my company 401k
$8600 in a Evergreen Omega Mutual Fund, this is a large cap fund I believe (I should probably know this shouldn't I)
$2800 in an ING savings account

Just a $100 or 2 in my checking.
minimal student loans. I believe my loans are down to $2000, and it's basically little interest and I'm in no hurry to pay it off.

Option 1: Stick the whole thing in my ROTH so I'm done for my contributions in 2008 and put the remaining $300 in my ING (I've been contributing pretty consistently to my ROTH so I should have no trouble reaching the MAX if I don't chose this option)

Option 2: Stick the whole thing in my ING. This ING account is basically towards my house fund which I plan on buying in oh, say about 5 years (The Evergreen Omega Mutual fund is for this purpose as well).

Option 3: Take the $1600 and also take out $1400 of my ING account and open up a taxable account at Vanguard (min. for Vanguard is $3,000 with the exception of the STAR fund which is $1k).

Which option would you lean towards and why? I'm very finicky with my money and like to see it go to good use. I'm trying to retire early and enjoy life to the fullest. I appreciate the help. Right now I'm leaning towards option #3. Thanks again! -Anthony

 

[bbbamI]

I would put it in the savings account. Just in case you lose your job, you'll have a little extra money to live on until you find another one.

 

[REWahoo]

I second that suggestion. Put the money in a savings account and use it as a starting point to build an emergency account equal to at least 3 months of your living expenses. Once that's done, then get back to us for more recommendations...

 

[Razor]

I third it. It's nice to have a little cushion.

 

[harley]

You didn't mention credit card debt. If you have any, pay it off. Otherwise I'm with the rest.

 

[ACanthony]

Hey everyone, thanks for the suggestions (luckily to my delight the check was in the mail today and am depositing it first thing tomorrow). I like the idea of putting it into my ING as an emergency account. However, I already have $2800 in there. I have minimal bills ($350 in rent a month + 125 in utilities + $300 for food/beer/entertainment). My dad picks up my car insurance for various reasons. Wouldn't $2800 be enough for an emergency fund? I have no kids, wife, etc. I have a very stable job and have a good education and would have other jobs lined in in case of a worst case scenario. $2800 would for sure cover me for ATLEAST 4 months. Thanks for the suggestions (In reply to previous message, I am fortunate not to have CC debt).

 

[brianinsf]

Given you age and spending levels I would go with funding the Roth. Might as well make time work for you and keep the money out of what you see as available for spending. Not having access to it would make me less likely to spend it on the really sweet 55" LDC TV that I don't need but might thing not having would create an emergency in my life

 

[bbbamI]

Emergency funds don't just cover food and rent....your vehicle may need a major repair, you could get injured or become ill...just a few of life's little surprises. I believe you will also owe income tax on your winnings (unless the tax has been taken out already).

 

[Bestwifeever]

Where do you pull the $ from to do the poker playing? Maybe replenish that fund with these winnings (and maybe you can deduct your losses now that you have won something--not sure but I always heard that).

 

[Frugality_of_Apathy]

As long as it's gambling money you should use it for gambling just make sure you don't start running a deficit. Maybe you can RE next year.

 

[RonBoyd]

I'm very finicky with my money

making a measley $35k a year.

$8600 in a Evergreen Omega Mutual Fund, this is a large cap fund I believe (I should probably know this shouldn't I)

Just a $100 or 2 in my checking.

I believe my loans are down to $2000, and it's basically little interest and I'm in no hurry to pay it off.

I'm very finicky with my money

Main Entry: fin·icky Pronunciation: \ˈfi-ni-kē\ Function: adjective Etymology: alteration of finicking Date: circa 1825 1 : extremely or excessively particular, exacting, or meticulous in taste or standards <a finicky eater> 2 : requiring much care, precision, or attentive effort <a finicky recipe>
— fin·ick·i·ness noun

 

[popowich]

I'd use $1300 to max out my 2008 IRA contribution, and leave $300 on the site. This is coming from an online poker player of many years. BTW, some words of wisdom to go along with your good fortune. I used to own a poker forum and have seen many people lose a lot of money. Don't blow your money playing higher limits! You're here, so that's a really good sign in itself. Be happy with your win (congrats again!), save most of it, I think it's OK to leave some of it on the site if you need it to continue playing the limits you are comfortable playing, and sleep better knowing that you took most of it and made a wise investment decision.

-Raymond

 

[Kronk]

In an OMG emergency, contributions to Roth IRAs can be withdrawn without tax and without penalties. I don't know what the rules are for someone who contributes, withdraws a contribution, and then wants to put that money back in. Still, the money is there if needed. Personally, in that situation, I'd probably go with fully funding the Roth.

 

[ACanthony]

Raymond- When I withdrew the $1600 I still left myself with $350 on PokerStars. Although I aspire to one day play poker not necessarily fulltime but enough to the point that I can make a great side living out of it, being 24 years old and having almost $2,000 in a poker account seemed a little foolish to me. Thanks for the advise.

 

[Urchina]

1. Put 25% ($400) in a savings account to cover the taxes on the winnings (I'm assuming you've got a 25% marginal tax bracket here, that's a little high but better to not be caught short).

2. Stash the remaining $1200 in your Roth. Compounding interest is your friend, but it's really your friend if you give it lots and lots of time.

3. Next month, finish off your Roth contributions for the year with $100 of your savings.

 

[Razor]

Raymond- When I withdrew the $1600 I still left myself with $350 on PokerStars. Although I aspire to one day play poker not necessarily fulltime but enough to the point that I can make a great side living out of it, being 24 years old and having almost $2,000 in a poker account seemed a little foolish to me. Thanks for the advise.

If you are that good and actually think you can make a side living, why not take all your winnings and take a shot at making some real money playing poker. You may be able to retire sooner than you think. Turn that $1600 into a fortune. You've got nothing to lose.