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Friday, July 18, 2008

401(k) and Debt Reduction Updates

I received my 401(k) statement yesterday. The total of my account at the end of June was $4,526.28, as you can see in the sidebar (on the right hand side).
Beginning Balance was: $3,672.46
Money In: $527.66
Employer Match
(1st Time ever - Jan-June): $390.23
Net Gain/(Loss): ($64.07)

To bad, this will be rolled over in a down market. It would be so much better, if it were in an up market. Then again, maybe the new funds will be down on the day I buy them, and the roll over will work to my advantage. (Right now though, I will be selling low and buying low.)

On that note, the retirement representative came by the store to show me the info on the new "Simple IRA," plan. I ended up electing to put my future contributions in 4 funds. With those elections being at 20-20-20-40. The funds are small caps, to large caps to international, and are mostly growth funds with some moderate risk mixed in. In 15 years, as I get closer to retirement age, I will start moving all my funds to more stable funds, with lot less growth potential. That way, when I retire, I will have the funds to live on throughout my retirement.

One of the fellow employees, walked away because the market is down and he doesn't want to get into it now. Everyone (all the other employees) turned and tried to explain to him the principle of "buy low, sell high." However, this guy thinks he knows everything and that the people "on TV" are saying don't buy. Oh well, I can't be concerned about him, I have to focus on my own retirement, and try to reach my goal of not less then one million dollars, by the time I retire in 20-25 years.

Also yesterday, I received both my last check and my vacation check. I used $100 from the vacation check to pay down my car loan. As you can see (in the right hand sidebar), I now only owe $8,090. Yep, I paid off the extra pennies to get that to exact even dollar amount. At least for one day, before the interest charges started collecting on it again.

As you can tell (in the sidebar), I updated the emergency savings amount. That figure, includes the remainder of that vacation check, as well as the $50 per paycheck (that had been going into my emergency savings). Now, I will have to manually deposit the funds into the emergency fund since the new owners don't currently have direct deposit. Thankfully, both Credit Unions, are right around the corner from each, now that the one with my checking (and bill-pay) has opened a branch downtown.

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go ahead share your thoughts with me now.

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Posted by Kevin Surbaugh at 7/18/2008 06:57:00 PM
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12 comments:

  1. you want it rolling over in a down market! buy low, sell high!!!!!!!!!
    ReplyDelete
  2. anonymous -
    you are partly right. You do want to buy low....but by rolling it over at this time, I am also selling low. Which is what I eluded to in my post. For the last 2 quarters, I have lost money. The only money that I have actually earned on the 401(k) in the past 2 quarters is the money that I put into it. All the funds have been down and lost me money. So since I am selling now (unless the market rises before the actual rollover happens) then I will be losing money. However, it is my hope by putting it all in one very aggressive fund, that I will be able to turn it around and into $1 million within the next 20-years. Realistically though, it will take my other investments to reach that lofty goal. Still though, I want to see that $4,500 turn into a million dollars or as close to as I can, without adding to it.
    ReplyDelete
  3. What type of income tax deferment do you have that you don't seem concerned about paying it off anytime soon. Most people would put this the A List of debts. Is this some type of military deferment? I am just not familiar with a plan where you can just ignore the debt until the collection period is over. Or do you have to renew the status annually, which renews the collection period? Until you get this paid, it will stick in your craw and could keep you down financially. Even if you are not seeking a new job, what are your (new)employers going to think of you if they have to do a wage garnishment on your account with lots of extra paperwork for them.I can feel the love already.
    ReplyDelete
  4. anonymous -
    OK, let me try to explain this one more time. It is NOT a deferment from income taxes. Rather, my back taxes are deferred based on my income. much like student loans are some times deferred because of low or lack of income. In order to do this, you can NOT ignore it as you try to pin on me. Instead you have to call the IRS, and work with them. Explain your financial situation, tell them your income and what you owe and to whom. This includes utilities and all of your bills. If you qualify, they will defer your payments until your situation changes. Deferment does not stop interest from accruing but it does stop the penalties, since you are working with the IRS.

    There will not be any garnishment, again, because I am working with the IRS and am NOT ignoring them.

    If you notice (in the sidebar) I have significantly reduced the IRS debt this year by about $1200.

    I wrote about this back in August of 2007. In that article the term "Not Currently Collectible," was used. I suggest you re-read that article and the subsequent links that goes into further detail.
    ReplyDelete
  5. This post has been chosen to be in the 69th Carnival of Money Stories at Almost Frugal, going live July 22nd, 2008. Don’t forget to link back to the Carnival!
    ReplyDelete
  6. Hello! I know money is tight all around, but I have a challege for you! I challenge you to go to my blog and read it http://strivingtoliveeachdayhisway.blogspot.com/ then prayfully consider sponsering a child through compassion. It will change your life. We have a sponser child named Edelson and he is part of our family, we pray for him daily.

    Let me know if you were able to commit to a child or make a one time donation. Thanks! -Becky

    Kevin I still am praising God you paid off your mortgage and got a raise!!!
    ReplyDelete
  7. I hate to be Debbie Downer here but that 6k you have in 401k will probably only equal one year of salary when you retire.

    ALSO What do you mean buy low and sell high? your 401k is not a stock, your 6k invesment will become 4k next... what are you going to do then? cash in??

    Don't forget we have a democrat coming to the white house... more taxes!!
    ReplyDelete
  8. Anonymous (Debbie) -
    The 4k I currently have in the 401(k) will increase over time. However, as you say, it (by itself) will probably only be about a years salary.

    As for the "buy Low, sell High" statement, it is because a 401(k) is in the stock market. Unless you are so conservative that you only have IRA, CD or money market accounts (which bring almost no interest) for the 401(k), your funds are in Mutual Funds (very rarely individual stocks). Mutual Funds are invested in a number of stocks, so when you own a mutual fund, you are still in the stock market. So, as a previous commenter mentioned the same principle applies.

    I hope this answers your question. If I can clarify my answer further, let me know. Thanks.
    ReplyDelete
  9. My teacher in graduate school at MIT in 1970, Charles Poor Kindleberger, who later wrote "Manias, Panics, and Crashes," first convinced me of the social process that drives much of what goes on in speculative markets. One needs to think antisocially to excel in investing, to resist the patterns of thinking that seem mysteriously to arrive simultaneously in the minds of millions of people around the world.

    People do not trust their own judgment but go along with the crowd, even when they can see truth. In a world populated with such people, there are investing opportunities for people who make the effort and do the work see clearly for themselves.

    Robert Shiller
    Professor of economics, Yale University
    ReplyDelete
  10. You shouldn't be buying sharebuilder. You are wasting money trading such small amounts it's eating into the profit and a large rate. It's just a gimmick. Don't do it, save the money in a regular index fund or better yet pay off debt!

    Good job on talking to the IRS. Why piss them off right? Better to tell them the truth which can really suck than to wait till they screw you royallay.
    ReplyDelete
  11. Thanks LAL, for your comment. You are right, when you say Sharebuilder is a gimmick and in reality is more expensive. I haven't bought any new shares anyplace (other then dividend reinvestment and my 401k plans), instead I have been focusing on my debt retirement.

    Once I start reinvesting again, I will increase my holdings in the individual stocks I have at Sharebuilder (coca-cola, Kroger, Pier 1, etc) but I will be saving up first, so that I can purchase a large enough block, that it will be to my advantage. That however, will be at least a year.

    Becky - Thanks as always for your reply. I used to sponsor a child, but my debts was such, that I ended up having to stop sponsoring Kevin. Yep, ironically, the child was also Kevin. Although, he wrote much more frequently then I did.
    ReplyDelete
  12. LivingalmostlargeJul 23, 2008 02:38 PM
    It's still not a very good option to buy individual stocks. You don't have enough diversity buying them one at a time to get the right portfolio.

    Plus the fees will eat you alive. Hence why mutual funds are better. At a minimum to buy stocks or ETFs you should be plugging in $5k into one stock if not $10k to minimize the trading fees into eating your returns.

    When you invest $100 with sharebuilder @ $4/trade you are paying 4% off the top. ouch.
    ReplyDelete

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