If the company you are working at has some kind of 401k matching program I recommend that you max that out before putting any money in a separate traditional IRA.
Also, if you are at a low tax bracket, a Roth IRA might be more tax efficient than a traditional IRA.
True, by this we mean the employer will set up a 401(k) for you and if you put money in it the company will also put oney in, up to X% of your paycheck.
CAVEAT!
Often your 401(k) funds, the entire amount, are tied to how long you work there. This is "vesting" or some shit. You work there 1 year and get canned, you lose the whole thing. You work there 2 years and get canned, you get to keep only 15% or something. Furthermore, ask how they calculate "years" which is not what you might assume as a reasonable person. Last job I had they defined "years of employment" for 401(k) purposes as "how many full calendar years were you employed". I was hired in Oct, worked through to the following Oct, then the following Oct, then laid off the next May. To me, that means I worked there 2.5 years or so. To them, it was 1 full calendar year for my first January to my second January.
So point is, don't put money into a vestment-scheduled 401(k) until you actuall get a decent amount of vestment. Otherwise they could royally screw you.
I agree with the people saying "pay off your high interest debts". As importantly, pay secured debt before unsecured debt. That is, if they can repo it, pay it off. If they can't repo it, the debt can wait a bit. Negotiate with your creditors. Don't let them run you ragged, RUN THEM RAGGED. They will be happy to get whatever they can from you, times are so tough.
I'd also say to live low, as low as you're comfortable. Take advantage of any free things, including government assistance. Stop buying video games, get free games from the Internet. Stop renting movies or paying for cable TV, just use the Internet (Hulu, etc) and the library, or if you're desperate use Netflix. Shop for clothes etc. at thrift stores. Get free stuff and trade for stuff on Craigslist. If you're in a city with good mass transit, use that instead of a car, supplemented by a bicycle. But if you don't, drive an inexpensive motorcycle. If you need a car, drive an old Honda (and a Club, everyone steals them). Rent a place that doesn't have vermin and where you feel like you can walk around during the day, but not someplace with any kind of view or near desirable places like schools or whatever.
One thing I stress is to eat right. Don't eat organic free-range beef from cows who were scared to death by other cows or struck by lightning. But eat good food. Don't just eat macaroni and cheese every night. You can get a good variety of food fairly cheap, but don't go too cheap or your health will suffer. And to be honest, your health is probably more valuable to you than a lot of things, right?
Which reminds me, don't join a gym. You can get plenty of exercise bicycling around, walking, etc. Take advantage of neighborhood parks. Depending on where you live park space might be pretty awesome.
The rest of the money you have, the surplus every month, should go toward a 3-month buffer in a savings account from which you can withdraw any amount anytime. You should be able to find a bank with a 2-3% savings account with ability to withdraw anytime. Be willing to shop around and use a savings account at a bank you don't normally use. Customer loyalty is an iron maiden that will pierce your wallet and make you suffer and bleed. Once you have that 3-month emergency fund, shop around for other safe investment opportunities of at least 5% interest. Just remember that penalties for not having enough cash on hand will eat away at any interest you get from putting every spare cent in locked-down accounts like a CD.
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Topic: Saving Money- For Retirement or Rent (Read 1853 times)