Slaving to Savings?

Sorry for the LONG delay - I've been taking some of my own advice from previous posts and have been busy with lots of little side jobs and selling a lot of useless crap in my apartment on craigslist and eBay.



In my last post I wrote about going from being someone scared of leaving your job because you've got nothing to fall back on, to becoming someone empowered once you have a few months worth of savings tucked away. Was able to acheive my 3-month emergency fund in about 2 months and can sleep better now.

Now what to do after that? The way I see it I have 4 options:

1) Start living it up and spend my discretionary income on clothes, going out, etc.
While I agree that you should have a life, if you've read any of my previous posts, you will know that I'm all about doing things on the cheap here in LA to reach future goals. (www.lafreebee.com is a great site) Plus this should be accounted for in the monthly budget anyway so it's really a matter of priorities. Seeing my account balance go up and the possibilities that open with it is much more fun for me anyway. (nerd alert!)

2) Save until I have a 6-month-to-1-year emergency fund (earns 2% now).
Having 6 months to 1 year's worth of savings is a good idea, especially in this very unstable economy and industry. But it won't get me very far beyond a little more basic security since an emergency fund is just for emergencies - not to get ahead. That said, it's probably a good idea to continue putting SOME money here to pad out the possible (aka definite) lean times ahead.

Instead of a bigger E-Fund though, it might make more sense to view this as a down-payment on a home to keep me motivated. Gotta start that by the way...

3) Pay down my student loans ($11 K @ 1.63%).

Almost everyone new to LA & Hollywood has these after graduating with a useless film degree, and these seem like an eternal ball and chain which never will die.

By throwing everything I can at the student loan, I can pay it off in under 2 years assuming no major incidents or pay raises. But since the payments are just $96 a month and tax-deductible, it's definitely manageable. Plus once taxes factor in, it's more like paying 1.38% (yes, I went over my IRS forms to see how much difference it made to pay this or not... hey, never claimed not to be a nerd. I write a fucking finance blog for God's sake!) The "spread" here - that is, post-tax interest difference between savings & loans - is only 0.6% though.

So paying this off won't do much other than lower my monthly expenses and eliminate a liability. I also miss out on compound interest at a higher rate than 0.6% - which I can use to buy a home/rental property, reinvest, start a business or ... make a low-budget feature. Still kind of torn on this one and there's no universal answer here as everyone's circumstances are different here so I can only speak for my own situation. Like savings, I might put some excess towards here as well.

4) Invest the excess money in real estate, stocks, 401Ks, mutual funds, IRAs, etc.

Of course this is the big moneymaker here, though I don't know much about it aside from what I'm trying to educate myself on through books, websites, etc. I do know that this is pretty much the only real way to get ahead though as it definitely won't be on my $25 K salary per year.



So what are your thoughts on this? I'm including a poll on this site for your opinion. No pressure but I need you to save my life!! Results will be posted in a few weeks.

OK assistants, so how are things on your end regarding savings and such?