Review and suggest on my situation.....

[pmes17]

Well let me introduce myself im a 22 year old single male who rapidly converted from a spender to a saver. I went from making 10K as a spender to making 55k as a saver, and a carrer change sparked it. In November 2006 it all changed I started working at power plant in the opertions group when i was 20. I started out making around 20$ an hour and saving almost 1000$ every check. I screwed up and didnt contribute to my 401K until january 1st of 2008. I saved close to 20K in 13 months, leased a car and got a credit card to build credit. As of the current housing crisis I took advantage of the situation. I bought a new condo as of april 4th at huge discount, and got a 30 year fixed mortage @6.25%. I bought a 156K condo at 132.5K with furnishings 1500 sq ft and paid 10% and loaned 119K. I now ask for advice where to go from here. I have no retirement ideas as of yet but im want to be prepared. Now ill descibre the invesment side.
I currently contribute 10% of my check to my princiapl 401K and 5% to my roth 401K. my employer contributes 100% for the 1st 500$, 50% for the 2nd 500$, and 10% for every next 1000$. I have my 401K divided in 45% international equity, 26% small/med US equity, 17% large US equity and 11% in balanced assets( which i have stopped contributing to) so the current allocations go into the 3 above. with a 50,25,25 ratio respecitvley. so far im close to 5K in my 401K and 1.5K in my roth 401K.
I currently have YTD of 27K earrings gross. I currently get 3.00$ in raises a year on my wage putting me @ 23.44 now. and topping out at 30$. ill be at this job untill my time and qualifications allow me to change to a supervisor job. so ill break down my monthly income and expenditures.

APPROX depends on months and OT
gross pay 5000 net after 401k and taxes 2810
mortagae 1065
car 377.25
after food,gas, insurance, utilites and other misc items i have 1000 or 800 every month extra any suggestions to my plan? Am I on the right track? I try to pay 100$ extra on the mortagage. Suggestions welcome thanks for reading and thanks for the response.

[smileydog]

pmes17,

Sounds like you have really turned a corner in securing your future. I would recommend that you make sure you have 3-6 months emergency funds that you are not tempted to raid unless real emergeny and when that is done I would max out my 401k. I understand the desire to pay down the mortgae but I would do that as a last stage after everything else is done.

[pmes17]

buying the condo and homewares kinda exhuasted my savings account, amd im working to build it back up. thanks for the advice

[W2R]

Quote:

Originally Posted by smileydog pmes17, Sounds like you have really turned a corner in securing your future. I would recommend that you make sure you have 3-6 months emergency funds that you are not tempted to raid unless real emergeny and when that is done I would max out my 401k. I understand the desire to pay down the mortgae but I would do that as a last stage after everything else is done.

Good advice - - max out your retirement funds and get an emergency fund together.

But then if paying down your house is something you would really like to do, definitely do it! It is wonderful to have a paid off house, because you don't have that mortgage payment and that frees up a lot of money for investments or other things. I wish I had done that before age 54!!

[Hillbilly]

Quote:

Originally Posted by pmes17 I saved close to 20K in 13 months, leased a car and got a credit card to build credit.

IMHO, for the long term, look at changing the word "leased" in the above quote to "I paid cash for". Also, keep those credit cards paid off. Otherwise, keep up the good work...

Hillbilly

[aaronc879]

Why are you leasing a car. Financially speaking, that is almost never a good idea. Take full advantage of the company match then put extra towards the mortgage. Good luck and congratulations on getting such an early start on both a good job and savings.

[pmes17]

lease is a bad idea i did it to start buliding credit, i have a debt of 600$ on my credit card @ 0% so that will be paid. Soon as my lease is up ill be buying a car, Its better if you do the repairs rather than pay to drive and have nothing at the end of the lease

[MooreBonds]

Quote:

Originally Posted by pmes17 after food,gas, insurance, utilites and other misc items i have 1000 or 800 every month extra any suggestions to my plan? Am I on the right track? I try to pay 100$ extra on the mortagage. Suggestions welcome thanks for reading and thanks for the response.

Welcome pmes17! You're definitely off to a great start. Also, great job on diversifying into both a traditional 401(k) and ROTH 401(k).

Regarding that wonderful monthly excess - one question I have is: are you currently paying PMI (Private Mortgage insurance) on your mortgage? You said you put 10% down, but that your condo was 'worth more' than what you paid for it..what % equity do you have in your condo according to your mortgage statement? If you're paying PMI, how much is it? If it's enough, you might be better off plowing enough extra principal payments on that to erase your PMI (could be a very high return on that investment, depending on the amount). Also, do you deduct your mortgage interest off of your taxes, or are your deductions not higher than your standard deduction? If you don't deduct your interest, then you could pay off more of your mortgage...but if you do deduct it, you might want to put most of that extra cash into investments.

Or, somewhat similar to the other suggestions, I'd recommend splitting your monthly excess 50/50 between a savings account for true emergencies only and one of your IRAs. You could open up a ROTH IRA (you can contribute to both 401(k)s with your employer and still put up to $5,000/year into your ROTH IRA).

Another question: does your employer give you the match in both your traditional 401(k) and ROTH 401(k), or is the match only given on contributions to your trad 401(k)? Also, what are the expense ratios of the funds in your ROTH 401(k)? If there's no company match to your ROTH 401(k), and if the fund choices have high expense ratios, you might be better off just doing a ROTH IRA and your traditional 401(k)..but again, we need more info.

And it's good that you are aware of the downfalls of leasing - definitely don't want to make that decision again.

[Milton]

I agree with Hillbilly and Aaron: buying a car is almost always preferable to leasing. And credit cards need to be handled with caution, lest they tempt you out of a LBYM lifestyle. Pay off the $600 debt ASAP.

Are you still concerned about "building credit", or was that in the past? You now own a condo and already have the financing in place, so you shouldn't need any more loans, at least not in the foreseeable future. And if you keep making your mortgage payments, that should do as much to your rating as making credit card or car lease payments would.

[Enter User Name Here]

Quote:

Originally Posted by pmes17 lease is a bad idea i did it to start buliding credit, i have a debt of 600$ on my credit card @ 0% so that will be paid. Soon as my lease is up ill be buying a car, Its better if you do the repairs rather than pay to drive and have nothing at the end of the lease

Nothing wrong with using 0% credit cards unless you are like a lot of people and dont have the money at the end of the offer

[Coach]

pmes17, you are doing great! You've gotten some good advice here, and I don't have anything to add to it. But I did want to congratulate you for taking charge of your own future. Well done!

Coach