Yvonne asks: I have been working for the past year and have not yet contributed to my 401(k). The common opinion around the office is to not bother, given the current state of the market. One co-worker had lost 40 percent of what he had contributed the previous year. What do you think? Am I better off placing money for retirement in another savings vehicle? My employer does not match 401(k) contributions.

Very simply, Yvonne, start contributing to your 401(k) today!

Investing, including in your 401(k) plan, is a long road. The best long-term investors (whether they’re professionals or individuals like you and me) make consistent contributions to investments in good times and bad. Basically, they ignore the market and keep on investing.

Obviously, the markets have ups and downs, and we’re just coming out of a pretty big “down”. Almost everybody lost a big chunk of their retirement savings last year. Mine was down about 35 percent a year ago, although it has almost entirely recovered. I didn’t actually “lose” that money because I’m invested for the long haul; I didn’t cash out. You only truly lose the money if you cash out while you’re down.

The markets will always be volatile, but as long as you make investing a habit and stay invested for the long-haul, it really doesn’t matter.

Good Luck,

David @MoneyUnder30

I have no consumer debt, as I pay off my credit cards every month. I have $20k in student loan debt at a very low rate that I don’t have any interest in paying off early.

Hi Anne,

Congrats on being in such a great financial situation. At 23, you’re already killing it!

My recommendations for your situation are pretty simple. I’d say your emergency fund should be six times your monthly expenses. If you’ve already got that covered with the $10,500, great. If not, top it off.

Next question: What’s your next big goal? Buying a car? A home? An income property? Taking time off to travel?

Even if those goals are a few years out, I’d figure out how much you’ll need for each and what you need to save each month to get there. I’d take the $10k and divide it up to “seed” each of your goals and then add monthly contributions. That way, when it’s time to do those things, you’ll have the cash ready to go.

As far as where to put the money, I’d say go ahead and open a taxable brokerage account; but stick to no-load mutual funds and/or exchange traded index funds. You can tolerate some risk while you’re saving for these goals. Just be sure to leave the emergency fund in a savings account, however paltry the yield.

Good Luck!

David @MoneyUnder30

Hey Josh, I’d say you’re doing pretty damned good for your age—definitely ahead of the curve. A few more steps and you’ll really be crushing it.

Your salary is great. You’re saving more than 25 percent of your take home pay. You already have an investment property that you say you rent for just $50 less than the mortgage, and in today’s market, at least you aren’t underwater on. And it sounds like you’ve started investing. All good.

You do have that whopper of a student loan tab (although with your salary, sounds like it was well worth it). I don’t necessarily blame you for not paying those loans down faster if you’re investing and beating the interest rates. This is a personal call—a savvy investor can definitely make more by investing money rather than paying down low-interest student loans ahead of schedule; it just means you’ll be in debt longer. Some people just want to be out of debt as quickly as possible.

As far as your savings and investing goes, make sure you’re maxing out a 401(k) if your employer has one. Take advantage of any match they offer and the tax-free contributions. (Unfortunately, as you probably know, your income is too high to make traditional or Roth IRA contributions).

Next up: How much of your savings is invested in stocks and funds and how much is in cash? If your monthly expenses are $4,760 (which I just assumed by deducting your savings from your take-home), you’ll want about $28,500 (six month’s living expenses) earmarked as an emergency fund. That doesn’t mean you need to keep all of that liquid, but you should have a plan for tapping at least that much if, God forbid, you lose your income.

Other than that, I say figure out what your next goal is and just pound away at it!

Good Luck!

David @MoneyUnder30

Chris: Thank you to you and your wife for your selfless service to our country.

Your financial details: You mentioned that you have one child, less than $500 credit card debt, two paid off cars, a mortgage, and some cash in checking accounts, but no real savings plan. The good news is, apart from the savings/investing for retirement aspect, it sounds like your finances are in good shape. It’s great you have no car payments and little credit card debt.

Before we get to your re-enlistment bonus, let’s talk about the money you already have.

You mentioned you have a joint savings account with about $7k, which sounds like the start of a great emergency fund. My first question would be: Are you making automatic contributions to it? Figure out your total monthly expenses and aim to have about six times that number saved up in that emergency fund. (Some people save even more, but your military jobs should be fairly secure. If, for example you or your wife anticipated leaving the military and finding a civilian job, it might be a good time to have a little extra tucked away).

Whatever your ultimate emergency savings goal, figure out what you can afford monthly and contribute that much until you’ve reached your number.

Now, let’s talk about that re-enlistment bonus.

• Your plans to pay cash for a new car sound fine. That’s way better than financing one.
• Next, I’d knock off that credit card debt, however small. Why bother keeping it around?
• With what’s left over of the initial distribution, make a choice:
• Use it to top-off your emergency fund
• Or start retirement and education accounts

Either way, once you have funded your emergency fund equal to six months, it’s time to look at two goals:

• Your retirement and
• Your child’s education

You and your wife are fortunate as you will have military retirement benefits, but don’t count on that being enough. I would recommend opening a Roth IRA and investing as much as you can, up to the annual $5,000 maximum, every year. The beauty of these accounts is that after you retire, qualifying distributions are tax-free. Since you’re eligible to bank with USAA, I’d check out their Roth IRA options or talk to somebody there about getting started.

Next up, you must decide if you want to save for your child’s college education. You’ll probably want to choose from two options: a 529 savings plan or Coverdell Education Savings Account. Again, check out USAA’s Education Savings programs.

When choosing investments, I recommend exchange-traded index funds or no-load mutual funds (ask the investment company you choose for some names).

This answer isn’t going to substitute for a financial planner taking a detailed look at your finances and making qualified recommendations, but I hope it gives you a foundation to start with. It sounds like you already know the right direction to go in! Congrats on your bonus, and thank you again for your service. Be safe!