I (37F) am expecting an additional $1.25k per month net salary increase. This will be after increasing my Roth 401k savings rate to 17% – started investing late.
Currently my net salary is equal to my expenses so only savings I do is through retirement savings. I am a single parent with a high interest mortgage in a VHCOL area. No cc debt, $250k in 401k and 3 months emergency fund ($22.8k).
What is the best way to deploy the $1.25k increase? Options are:
– Support kid (19 yo) with university expenses. No 529 plan so we intend to do student loans next year. No student loans to date. Kid also wants to live on campus so could support feeding etc. Thinking $600 per month – is this enough?
– Travel – haven’t done any int’l trips before and looking forward to being able to do this before my child decides it’s uncool to hang out with me. Also would like to do solo trips as well / with friends
– Have more spending income for lifestyle creep. Would be nice to go out more, get a hobby , fun experiences, etc
– Increase emergency fund to 6 months.
What to do with salary increase?
byu/Still_Foundation_894 inpersonalfinance
Posted by Still_Foundation_894
9 Comments
Sounds like you are asking about a framework for what to do with money.
Start with reviewing the Prime Directive in the PF Wiki. It will answer your question and many other questions you didn’t realize you should be asking.
* https://www.reddit.com//r/personalfinance/wiki/commontopics
I would increase the emergency fund first and then help the kid with university. You don’t want to get wiped out by an an emergency and giving the kid any amount of financial help during university is going to be a boon for their own financial life. As for if $600 a month is enough, it really just comes down to the school and the area.
I would save for a trip if I were in that situation. If the kid wants to live on campus, I would consider it if they are already working or maintaining a decent GPA. increasing E fund would be the safest route but you gotta live a little. Lifestyle creep would also mean increasing e fund depending on what that entails.
You seem fairly well positioned financially.
You mention your retirement savings rate and age, but not your gross income. This is important so we can determine if you are behind in your retirement savings. Being close to age 40, you should have nearly 3x your salary saved for retirement.
Personally I am a saver and I advise people to always save more, however I realize that not everyone has the same philisophy.
Are you save enough? If you aren’t on track to retire with at least 1 mm you are saving enough. Probably should be 2mm really. Throw the kid some money it also make them get a job and help with expenses.
Increase emergency fund to 6-9 months as you’re single.
Save for more for retirement – you can student loan eduction. You cannot take loans for retirement
Save at least half of every raise.
I’d up that emergency fund to 6 months of living expenses at the very wast. Also, a brokerage account wouldn’t be a bad idea if you’re maxing out your 401k and Roth IRA.
25% 401k til match, ira max, HSA max – brokerage in VGT as much as possible. Wait 5 years, take trips