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I am rethinking my 5% 401k contribution with the disappointing news about my raise and the upcoming increase in student loan payments. My checking account is pretty low and I am wondering if I should try to build it back up with the extra $250 over the next 2 months.
I have until next Tuesday to cancel.
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5 comments:
Would the cancellation become effective in time to make a difference?
It might be a good idea to bulk up your cash reserves while you're dealing with the raise situation and looking for another job.
It's a personal preference but I always feel better with more cash at my back when on the cusp of leaving any job, or even just when I'm seriously looking.
As much as I hate to say it, it might be a good idea to cancel the increase and hoard the reserves until you get a better handle on things. I'm sure you've mentioned it before, but I can't remember, but are your federal loans on an income sensitive plan, or do you not qualify? I remember you taking the deferrals, but I couldn't remember about the rest. If you aren't on one and do qualify, it might help with the monthly payments.
hard to say... very good point about the job search- do you have a match?
What is the logic behind the short term and long term savings/investments? I would think you are spending way more per month in interest in your cc than you are earning. I think you need an emergency fund a large one too but i don't get the logic behind anything more than 6 months of emergency savings with the amount of debt you have and how tight things are.
I am in the same camp as Theresa. My recommendation would be to turn the 401k off and dump it on your debt.
This being said, I know you are not facing an easy decision, especially since it goes against everything you have ever been told about having a 401k.
For me I have found the decision to not contribute to be worth it. Knowing that I could potentially max out both Roth IRA and 401k after dumping ALL debt has been my comforting thoughts.
I cancelled the 401k contribution and the 1% to my ESPP program. It was ambitious to begin with but I always hoped for the best with my raise.
I am going to post my revised budget for the next 2 months which includes the small salary increase and the change in my witholdings.
Theresa:
Now that my 1% into my ESPP is cancelled, I am not at all focused on long term savings or investments. I just lopped my past investments into the category for tracking purposes. The $10,000 I have in short-term savings is 3 months of expenses should anything happen with my job. The $2,000 emergency fund is for anything from a car repair to a home repair.
I am focused now solely on debt reduction, finding another job and keeping my spending and expenses in check.
Revanche:
Having the cash in my savings and checking does give me some amount of comfort and steers me away from debt.
Aaren:
My federal and private loans are on graduated repayment. So I am paying interest only on qualifying loans right now. I believe my payment would be more under the income sensitive plan. Come June, the interest only payment will be approximately 7% of my gross whereas I believe it would be at 10% under the income sensitive plan. It is my understanding that the IBR plan does not account for private loans but please let me know if I am wrong. Come June, 18% of my gross monthly income will go towards student loan payments. (Ouch!!!)
Broke By Choice:
I agree. There is some comfort in knowing that I will really be able to ramp up my retirement savings once this debt is repaid.
Thanks for staying with me Guys and for your questions, suggestions and encouragement!!!
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