Next steps after debt paid off.

Anonymous Nurse: Q and A

Question: I am a nurse in Kansas and I am bringing in about $60,000 a year. I have paid off my car and student loans!  I am currently getting my employer match in my 401k (only pre-tax option), now what?  Do I open a new account, pay more towards my mortgage or increase my emergency savings, I currently have $3,000 in a money market account?  I have an extra $200 a month to invest.

More or Less in Retirement

If you currently need $60,000 a year to cover your expenses BUT you think you will need LESS after retirement, then you should increase your 401k pre-tax contributions.  An example of this is if you have kids and you are helping with college now and expect them to be independent of your finances later.  Another reason you might need less in retirement is if you are paying down a mortgage now but plan to live in a small home after retirement then you will most likely need less.    

If you think you will need MORE in retirement, then you should put more money into a Roth IRA. If you think you will have more expensive vacations, start paying for kids’ college or move to a higher cost of living after you retire than the Roth IRA is your best bet.   

Personal finance is very personal.  Here is what I would do in this situation with the following assumption:you don’t know if you will retire needing more money per month or less.

  • Open a Roth IRA account and start with a small month deposit of $50.
  • Open an HSA account and start with $50
  • Open a New Car Fund and start with $50
  • Add to your emergency account $50
  • Plan to increase your 401k by at least 1 % with your next raise.

The hardest part about finances is taking the first step of opening the accounts and automating it.  If you take this tiny first step everything else starts to fall into place.

How would you allocate the extra $200/month?

This Post Has One Comment

  1. Excellent advice. Only thing I would change…. instead of increasing 401k by 1% I would work toward maxing out the RothIRA instead. That is one area Mr. & Mrs. Miser disagree….

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