Over The Cliff With A 401(K)

To begin discussing this subject let us be aware of all the facts we know about a 401(k).

What is a 401(k)?

A 401(k) is nothing but a retirement savings plan sponsored or paid by the employer. The employer lets the employee save and invest a certain percentage of their pay before it is taxed. Point to remember in a 401(k) is that you will only be taxed when the money is withdrawn and not when it is deposited.

So would it be worthwhile to contribute to 401(k) with a 3-year cliff?

Your question to me could be what exactly is a cliff? Is it the edge of a mountain or the end to nowhere? A cliff is nothing but vesting. A cliff vesting is when an employee becomes completely vested in a specified period in time. So for example, you have fully vested in a company sponsored pension plan only after 5 years of full service.

Now, coming back quickly to the intended subject, the money that you invest in a 401(k) is all yours. So for example, you work for 5 years and leave your job, there will not be any effect on the investment that you had made in a 401(k). The only thing that changes is the contribution of the employer because that depends on the vesting period. It is a good plan with good benefits. However, it is not something that is quickly recommended to young professionals.

To begin with, a 401(k) is ideally to be kept as a secondary hold. The idea is to maximize other resources and then fall back on this vehicle. My advice would be to begin investing in the Roth IRA and contribute to it till you do not reach the maximum limit. Once you have touched the limit, look towards the 401(k). This has a great advantage, the first and foremost being diversification.

There is a different school of thought who might suggest that given the pretax nature of 401(k), you will have more money to start with and then go ahead with your contributions to the Roth IRA.

Remember, most successful finances are largely behavioral. So a 401(k) being an automated process, really makes you keep aside a certain amount of investment, which otherwise would have been spent elsewhere. It actually is dependent on how you see yourself in 10 years time.

$10 For A 40 Hour A Week, Do I Still Travel?

Let me begin by asking a very simple yet a pertinent question? How much is time really worth to you? Or what is the value of your time?

The answer to the first question will, of course, be similar for most of us. Time is really worth for all us. It is because of its finite self and the limited shelf life we all come with. And that quickly takes me to the second question. What is its value?

Can time be quantified?

The subject for this article will answer it best or perhaps it will give it its best.

Let’s begin with some math first.

A 1-hour commute can roughly translate into 60 miles one way. That would mean 120 miles two ways for a $10 an hour job. So supposedly while traveling let us assume you will burning roughly 7 gallons of gas at $2.5 per gallon. That is $17.5 of gas every day. Now, that figure can vary from $17.5 to $20. And I am talking every day. For an $80 a day earning you will spend almost $20 on gas does not add up to a good career move.

Traveling times are a sheer wastage of limited resources. I do agree, left with no other choice one has to travel great distances or risk the effects of unemployment. However, even if a minimum wage job is available at a distance which is quite comfortable, my advice would be to go for it. Unless that travel time is compensated by an extraordinary rise in pay or a career defining move, it really is not worth wasting so much time.

Instead, save that two and a half hours, which ideally would have been spent in transportation, and use it to diversify. Make use of that time to learn a new skill, add something new to your resume, probably exercise and rest, the list is endless.

So can time be quantified?

Yes, it surely can. Depends on whether you do want to make an attempt to use it wisely. The return you get in terms of financials, knowledge or even emotionally does it make it a worthwhile effort.

For centuries, mankind has been in the grips of the time versus money dilemma. Do I save two hours on a direct flight or $90 while taking a direct flight? It is not an easy question to answer primarily because we are yet to ascertain the priorities at hand. Set it first and then automatically you will be able to judge it.

Tips for Young Married Couples When Buying a House

Young married couples have already started a new life and they are excited about settling down and having a family. Buying a house is the biggest dream of any young couple because they will always need a place they can call home. However, when they actually get down to buying a home, they find it an extremely challenging and stressful task. They have to take care of several things like credit score, eligibility criteria, down payments, taxation and on top of that go in search of a property that suits their budget and needs.

Buying a home can be a daunting task because it is a major decision that a young couple takes after getting married and both need to be on the same page to ensure an appropriate choice. Here are some quick tips that will make their task less-challenging and fun:

  • Check your credit score: Credit score plays a vital role in deciding whether you are eligible for a housing loan or not. Banks follow a very strict procedure when it comes to approving loans and the first thing they consider while making a decision is your credit score. You can’t expect to get a housing loan if your credit score is in shambles. Thus, You will have to check your credit report for unpaid accounts or collection accounts or mistakes and rectify anything that can adversely affect your credit score. If you have a damaged credit score then you will have to invest some money and time to get it rectified.
  • Check the property before applying for a loan: Your new house will be your only place for the rest of your life, so be very careful in choosing one. Young couples often tend to disagree on several things but when it’s their house, they need to be on the same page. Finalize a property when you both find it appealing.
  • Get the Documents right: You will need to furnish several documents to the bank before they approve your loans, so you will have to be ready with those when the time comes. You will be asked to provide your bank statements. Pay slips, tax documents etc.
  • You’re in it for love: In all the hustle-bustle of buying a house, you may often forget that your house is the symbol of your love. Do not lose faith on each other because of petty differences. Keep in mind – you’re in it for love.

To Invest to Stocks or Not to Invest: What’s Your Final Verdict?

Why should you invest to stocks and why shouldn’t?

Whenever people heard about investing in stocks, they automatically think individuals making millions of dollars in the stock market. Stocks are considered to be as one of the traditional forms in raising a capital for businesses. Aside from that, it can open your door to greater opportunities in making a lot of money if you invest successfully. You have to be wise in picking the right stock at the right for this can result in bigger stocks while the stock value is tremendously increasing.

The biggest challenge for you in investing to stocks is to pick the good stocks during their lowest price then, sell them during its highest value. Well, this might require a lot of knowledge as well as experience to do so.  Investing in the stock market is all about right timing when to buy and sell stock.

The truth is your investment to stocks can actually benefit you a lot in making money at the same time; it can introduce you to high risks. If you do not have enough knowledge or experience in the world of stock market, you have to consult a financial adviser to gain a better understanding of the right strategy and timing. But, if you are just in the state of deciding whether you have to invest or not, the following advantages and disadvantages in investing to stocks:

Advantages of Investing in Stocks

  • A variety of Choices. With so much trade companies available, you can easily assemble portfolios that will meet whatever objectives you wanted to obtain. Also, this wide range of mutual funds will allow you to expand across industries or any company size coming from small to large cap.
  • Long term growth. Compounding your returns and dividends greatly create wealth over the long term. Your long term investment gives you easier plan where the rate of your return increases.
  • Risk tolerance. In investing in stocks, you have the freedom in selecting risk tolerance. If you prefer to have a low risk, investing in an established company is a great idea while if you wanted low more risk, you can consider riskier companies.

 

Disadvantages of Investing in Stocks

  • Lately, markets have become been quite volatile. As the market is in the panic mode, people tend to choose emotions instead of the fundamentals of logical economy creating amazing bargains.
  • Time-consuming. Though you choose a mutual fund and you belong to a small business, you are still you may face challenges of which one you should buy. To do so, you need to conduct a substantial research which is time-consuming.
  • Never be risk-free. Investing in stocks will never free you from risks since the value of your investments can go up and can go down. All form of business involves risk, but if you know how to handle it, you have the opportunity to succeed.

As mentioned above, the answer to whether to invest to stocks or not will always depend on to the right choice of stock and time, so you need to be wise. Also, it is much easier for you to succeed in investing to stocks if you have knowledge and experience.

Is Renting a Car More Pocket Friendly Than Buying

The straight and simple answer to this extremely tricky question is a big YES!

Renting a car is always more cost effective than buying a new one because you are able to save on the huge investment that you actually make on buying an asset that depreciates with time. If we are to talk in a strictly financial language then it is never wise to buy assets that depreciate in value; however, it is always good to buy assets like property and shares that increase in value.

It is really hard to not fall prey to the temptation of buying your own car, especially when you are unable to hail a taxi during the rush hours. If you are able to actually count the number of days in a year when you felt the need of a car real badly then you will be surprised to find that it is not more than 10 to 15 days in a year. Do you really need to buy a car that you will need only 15 days in a year? No logic behind buying a car exists unless you have a lot of extra money to waste on assets that depreciates in value over time.

According to the statistics, a new car depreciates by 40% of its list price in the very first year itself. By the end of the third year, the value drops by 60% of the list price and this keeps falling till your car is valued not more than junk iron sheets. Why do you want to waste your money investing on something that really does not add any value to your life?

Buying a car is probably the dumbest idea and an absolute waste of money when you have many other options. Renting a car can save you hundreds of dollars a month and you can go step further to even get a car on lease. Both these make a lot of sense than just blindly buying a car. Lease is a long term rental deal that lets you drive a car for a fixed monthly price. In the US, people are more into driving around in the latest models than actually buying them. Now, there isn’t a better deal than renting the car and driving to wherever they wish.

Renting or leasing a car does not make you the owner of the car but you definitely save hundreds of dollars while driving some of the latest models on the road.