I am going to make an attempt to contribute $5000 to my Roth IRA again this year. I’m currently trying to figure out a strategy. My Roth IRA is at Vanguard, and I currently have my money in two funds: the Vanguard Total Stock Market Index and the Vanguard Total International Stock Index. Not surprisingly, both tanked in 2008. The premise behind the two funds is sound, but I have two dilemmas on my hands.
1. Do I just contribute to these two funds or do I add another fund?
2. How should I schedule my contributions?
The second question depends a bit on the first. With Vanguard funds, there’s a minimum initial purchase, typically $1000-$3000. So if I add another fund, I will have to make a large initial contribution. Once I’ve purchased shares of a fund, I can contribute much smaller amounts and could do dollar cost averaging over the rest of the year.
I have to admit, I’ve been avoiding thinking about it, because I feel like I’m just pouring money into a losing strategy, when I know that I won’t need this money for 30+ years, and history tells me that it’s a good idea to invest in my future.
Right now, I’m holding off until I’ve finished my taxes. It looks like I’m going to owe the tax man again this year, which is always frustrating, but at least I’m not giving the government an interest free loan. I’m not going to owe so much that it will change how much I can contribute, but it’s a good way for me to set a personal deadline and not be worrying about too many personal finance issues all at the same time.
Megan is a 30-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.