This is a guest post from one of my most frequent commenters, Bobbi. She doesn’t have her own blog, but I hope she’ll considering starting one now! There’s no better time than the new year!
I’m also going through a similar dilemma with my year-end bonus, so I can definitely relate. Please weigh in and help Bobbi make a decision about what to do with this money and how to start saving for retirement now.
First, I would like to say that I feel truly blessed to have a job in these hard times, much less to have received a “year end” bonus from my employer. Thank you Bob! Second, thank you to “Living Well on Less” for letting me guest post. This is my first. :)
A little background: I am a mid-40 something woman with a grown daughter. I don’t spend more than I earn (anymore), and I work for a small business that has been in business for 10+ years. The business is doing pretty well in spite of this crazy economy (we are very versatile in what we do). However, I do not have a 401k or retirement at all so I am trying to build my own. I have no mortgage, so I am able to save every month.
My dilemma is what should I do with my bonus ($2,000) and I am hoping your readers can give me some advice. :) I am not an investor right now, but one of my goals for 2009 is to learn more. Right now I need to do something simple. These are the choices I am considering:
- ING savings account – 2.75%
- FNBO savings – 3.252%
- My Credit Union ‘daily interest’ account – 1.29% (daily)
- 24 mo CU CD – 4.69% (12/09 maturity date)
- IRA – Roth or standard – ?
- I have a credit card @ 0% interest until March with a balance of $1500.
- Car loan around $19,000
I don’t know much about Roth IRAs and I’m not even sure I can open one with this amount. I am leaning toward taking half and paying on the credit card and putting the other half in some sort of savings. I would love to hear what your readers would do or if they can give me more information on the IRAs.
Thank you and happy holidays to all!
I recommended that she pay off that credit card debt and start the new year with a clean slate! What do you think she should do? And can anyone give her some advice on the best way to save for retirement when you’re getting a bit of a late start?
I agree, pay the credit card off! And maybe put the rest in savings, or toward paying off the car loan. My $.02.
Sarah F.’s last blog post..Best Christmas present ever: Card Three paid off!
Bobbi, do you have an emergency fund? If not, I’d say put $1000 in the FBNO savings and leave it alone until an emergency pops up. Take the other $1000 and put it toward the card.
If you already have at least $1k set aside for emergencies, I’d say pay off your credit card in full, put $400 in an IRA, and take $100 and buy yourself something you’ve been wanting.
You CAN open a roth IRA with any amount. There is a maximum you can contribute each year — something like $4k.
I know it sounds a bit daunting, but its your future and you can’t afford not to fund it!
I’d definitely encourage you to start a blog. Blogging has helped me stay focused on saving money, and I’ve learned a lot from it! Be sure to let me know if you do start one, and I’ll be one of your first readers.
Kacie’s last blog post..Happy birthday to my baby!
Thanks girls! I will definitely pay off the card and then put the balance in savings.
Kacie, congrats to you and yours on a fine looking son. I am seriously thinking of starting a blog in the new year coming, so I will let you know. :) Thanks for the encouragement!
Hey Bobbi,
I know I’m a little late, I just got back into town and am catching up on my reading :)
As for IRA’s the difference is how they are taxed. A Roth IRA is funded with money that you have already paid taxes on (take home pay) and when you withdraw it you will not be taxed. A regular IRA I am not as certain on, but I do know that you will get taxed when you remove the money at retirement. My suggestion is to go with a Roth if you meet the requirements (a financial specialist can tell you). Dave Ramsey is excellent at explainging it and you can find his list of recommended financial experts at his website: http://www.daveramsey.com. Mine didn’t charge anything for a consultation.
I’m with everyone else on paying off the debt and having an emergency fund, but you should make retirement a focus all year long- designate a certain amount and pay it to your account monthly like any other bill.
Sorry it’s so long, but this is a topic I love! I look forward to reading your blog!!!