most recent 30 from http://www.cashcommons.com 2010-03-14T21:26:05Z http://www.cashcommons.com/feeds/question/7 http://www.creativecommons.org/licenses/by-nc/2.5/rdf http://www.cashcommons.com/questions/7/how-do-i-know-what-funds-to-choose-for-my-401k Danielle 2009-10-01T06:49:47Z 2009-11-11T15:48:52Z

<p>I am 33 and formerly financially irresponsible. I am concentrating on reducing my mountain o' debt (which is around $153k of the unsecured variety). I don't have a ton of extra income to put into my 401(k), so I want to get the most bang for my buck. Since I only know how to spend money and not how to save it, how do I figure out what funds to assign my money to. I tend to be relatively safe because I don't know what I'm doing. Is there any secret to this? How can I figure out where it is best to put my money?</p>

http://www.cashcommons.com/questions/7/how-do-i-know-what-funds-to-choose-for-my-401k/8#8 mbhunter 2009-10-01T07:06:41Z 2009-10-01T07:06:41Z

<p>$153k is a <em>lot</em> of debt.</p> <p>I presume you're paying interest on that debt. For that amount of debt, the interest you're paying could easily be greater than any matching and interest you'd earn from contributions to your 401(k).</p> <p>Possibly the most "bang for your buck" would be paying down your debt.</p> <p>Run your numbers and see what kind of return you'd need to outpace the interest you're paying. Look at typical "safe" investment rates of return and your 401(k) matching (if any) to get an estimate for what you'd earn. </p> <p>(Of course, this is just my non-professional opinion. Please treat it as such!) </p>

http://www.cashcommons.com/questions/7/how-do-i-know-what-funds-to-choose-for-my-401k/201#201 Cyrus 2009-11-11T15:48:52Z 2009-11-11T15:48:52Z

<p>Making the best use of your money is not as simple as weighing the interest payed on debt versus the gains on investments. You must mathematically factor in risk as well. Paying down debt will reduce financial risk 100% of the time, whereas investing in the stock market or real estate always adds risk along with the higher returns. In addition, responsible financial planning has much more to do with changing behaviors than the math.</p> <p>Therefore, my recommendation is to temporarily stop ALL investments and concentrate solely on paying down your unsecured debt and living below your means. If your debt to income ratio is too high, you may need to take a second job and/or sell some assets like a car or other large items. Stopping retirement for 2 or 3 years while you do this will set yourself up significantly better for the future when you begin investing again. Hope this helps!</p>