206 replies to this topic

[ChipShot]

There is a lot of great advice here but everyone should step back and remember that life is uncertain and that you should not deny yourself everything in the name of saving. Live life and enjoy it and if that means splurging once in a while, don't hesitate to do it within reason.

Well said, FB. When I'm on my death bed some day, I'll have ZERO regrets. And I certainly won't think "man, I should have worked harder and denied myself some of life's simple pleasures".

[mylo]

Since it has not been brought up in this thread at all (from what I can see), also consider the tax implications of what you do, whether it's selling a stock that you've owned for 11 months (after 12 months, it's a long-term capital gain), a home you've owned for 20 months (I believe it's 2 years and less than $250k in appreciation is tax-exempt?) or accepting a trip (I'm supposed to be in Vegas right now through work, but, after seeing that about $2500 would be added to my taxable income, not including paying for my wife's plane tickets, extra for entertainment not included in my employers' program and over $300 for a babysitter for the weekend, it didn't seem like such a good deal... financially).

"lived in at least 2 years out of the last 5", and it's $250k/pp, so $500k for a married couple. And you can only do it every N years, where I think N is 2.

Bummer about your vegas trip

[mylo]

Well said, FB. When I'm on my death bed some day, I'll have ZERO regrets. And I certainly won't think "man, I should have worked harder and denied myself some of life's simple pleasures".

"Man, I shoulda had more (good) Sushi!"

[bishmasterb]

a home you've owned for 20 months (I believe it's 2 years and less than $250k in appreciation is tax-exempt?)

Yes. Any home you've owned and lived in for two of the last five years can be sold tax free on up to $250K single, $500K married, of profit.

But you can only do this once every two years, with some exceptions (moving for a job is one).

Also, a 401k issue. Make sure that you don't go over the $15,500 annual limit too early in the year and miss the company match. I

Also, the maximum individual limit for 401k contributions this year is $44,500 ($15,500 employee and $29,000 employer). If you have a solo 401k or own your own business, make sure you take advantage of this if you can. If you have employees, you'll have to put them through testing of course (they can be excluded if they haven't been there long enough, aren't 18, or haven't worked 1000+ hours during the year) but sometimes matching contributions or doing profit sharing can be cheaper than paying income or corporate tax on those dollars.

[brown]

One piece of advice that I heard regarding the 401(k) is that you should only contribute up until you max out the company match. With my company, that's pretty low (50% match up until the company contributes 2% of my salary). Anything over that should be put it into an IRA. With an IRA, you have many more investing options than most 401(k) plans, which generally give you a handful of funds to choose from.

[mylo]

Except IRA contribution limits are much lower:

IRA Contribution Limits

YEAR AGE 49 & BELOW AGE 50 & ABOVE
2002-2004 $3,000 $3,500
2005 $4,000 $4,500
2006-2007 $4,000 $5,000
2008 $5,000 $6,000

At your 2%, even if you're under 50, you've still got some more cash to throw into the 401k

[folsombound]

Yes. Any home you've owned and lived in for two of the last five years can be sold tax free on up to $250K single, $500K married, of profit.

But you can only do this once every two years, with some exceptions (moving for a job is one).
Also, the maximum individual limit for 401k contributions this year is $44,500 ($15,500 employee and $29,000 employer). If you have a solo 401k or own your own business, make sure you take advantage of this if you can. If you have employees, you'll have to put them through testing of course (they can be excluded if they haven't been there long enough, aren't 18, or haven't worked 1000+ hours during the year) but sometimes matching contributions or doing profit sharing can be cheaper than paying income or corporate tax on those dollars.

If you are over 50 years of age and in a 401K you can "make up" and contribute an additional $5000 per year for a total of $20,500 this year. It stays the same next year as the Gov't has decided not to increase the allowable contribution for 2008.

[Nylaan]

One piece of advice that I heard regarding the 401(k) is that you should only contribute up until you max out the company match. With my company, that's pretty low (50% match up until the company contributes 2% of my salary). Anything over that should be put it into an IRA. With an IRA, you have many more investing options than most 401(k) plans, which generally give you a handful of funds to choose from.

I do both! (Like I said, single )

I choose a Roth IRA which, while now isn't as attactive as it used to be, maxing it out over 40 years will give me a solid amount of tax-free retirement dollars that will offer flexibility. If I want/need to make a big purchase, no need to go to the 401K bucket and take a big tax hit.

If you are lower income but still do a good job saving a money, a Roth IRA is an excellent option. The tax break isn't much worth it and the tax-free growth over a long time (presuming you are young) will do you a world of good. The one mistake I made was not learning about it in college because I certainly had enough money lying around to make a few modest contributions.

[DalOwnerX3]

There is a lot of great advice here but everyone should step back and remember that life is uncertain and that you should not deny yourself everything in the name of saving. Live life and enjoy it and if that means splurging once in a while, don't hesitate to do it within reason.

Good thing to keep in perspective. Sometimes, it's worth shelling out the extra money. I've known relatives who have their houses freezing in the winter to save on heating costs. They actually go around wearing coats in the house because the house is below 60 degrees.

If one really wants to save money - move out of California, don't have kids, don't have any hobbies or go on vacations.

For me, I live frugally day-to-day (pack a lunch instead of eating out, drive an older car, don't spend a lot on new clothes, go to the library instead of buying books) and spend a little extra while on vacation - it's a time to relax and not worry about finding the least expensive meal.

[Chad Vander Veen]

There seems to be a lot of smart guys here. What do you do to save money?

I don't buy stuff I can't afford. Seems to work

[skatedad]

I don't buy stuff I can't afford. Seems to work

Great advice c_. The only interest I have paid in years is on my mortgage. I could use my equity credit line to buy any car I want but choose to drive my 12 yr old honda.

[ChipShot]

Great advice c_. The only interest I have paid in years is on my mortgage. I could use my equity credit line to buy any car I want but choose to drive my 12 yr old honda.

I only buy things I need. I know, I know...I'm out of touch.

[bookwom]

Kids are expensive. If you already have them:

Make sure they have naturally straight teeth.

Never let them watch Hannah Montana!

[banana]

A lot of this stuff is pretty subjective.

How do you know/determine what you can afford? Just because you have cash?

A, B want to buy X. X will cost $10k. Who can afford it?

(Interest on all debts and investments is 6%)

A: $150k in mortgage debt, no other debts, $25k in cash & investments
B: $100k in mortgage debt, $50k in other debts, $25k in cash & investments

[Chad Vander Veen]

A lot of this stuff is pretty subjective.

How do you know/determine what you can afford? Just because you have cash?

A, B want to buy X. X will cost $10k. Who can afford it?

(Interest on all debts and investments is 6%)

A: $150k in mortgage debt, no other debts, $25k in cash & investments
B: $100k in mortgage debt, $50k in other debts, $25k in cash & investments

Gee, I'd say if you don't know what you can afford, you're in a bad situation. A&B should both have $10k readily available and spending it should not affect their ability to pay their existing bills.