A Vexing Choice faced by money novice...

From: bonsai@channel1.com
Subject: A Vexing Choice faced by money novice...
Date: Thu, 23 Jul 1998 20:15:21 -0400 (EDT)

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I mostly lurk, but I'm always grateful to receive your helpful responses
when I do post the occasional specific question. Now I have a very
*general* question and I'm looking for some different points of view from
the list, if I may:

I recently got a raise and I'm determined, for the first time in my life,
NOT to squander the extra money or let it slip away unnoticed in daily
nickel-and-dime expenditures. This is a big step for me ;-)

So I have about $400-$500 a month that I want to put somewhere, and I am
torn between three options (each with obvious advantages, or tied to goals
I have):

1. Put extra money into my retirement account each month. I work in higher
ed and have my retirement money in TIAA-CREF (actually, all in CREF stock
funds). (I have no other investments). I currently put in 5% of my salary
and my employer matches 7%, so effectively, 12% of my salary is going into
my retirement fund. I can put in up to 16.67% (the school's contribution
will not go up, 7% is the max they will do). I'm tempted to put in more
(and many things I'm reading say I should if I can) because the
contributions are tax deferred. However:

2. I have no "three-month" cushion, or any # of months cushion in savings
- -- so accessible savings is also a goal/priority for me.

3. Also, I would like to pull together a (to me) considerable sum of cash
to be used as a downpayment on a house or property I'll get around to
wanting to buy within the next 2-4 years.

I just don't know how to choose the best route. Are #'s 2 and 3 mutually
exclusive, I mean, does anyone ever have BOTH "safety cushion" money AND a
downpayment sitting around at once? I feel like if I split the money up
toward all three goals, the amounts going toward #2 and #3 are never going
to get me anywhere... I also don't know where to begin to evaluate WHERE to
put money for #s 2 and 3....

I should also mention (both because I expect it to come up as a
consideration in some answers and because I'm very happy to be able to say
it) that I have no consumer debt; I have FINALLY moved beyond "Step 1: Pay
off your expensive debt" ;-)...

Now how do I negotiate Step 2??

Any insights, suggestions, gut feelings, non-binding anecdotal advice
and/or hard-won experience will be most appreciated ;-)

tia,
Bonnie





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