Friday, October 10, 2008

1 Mistake I Made in Light of the Market and 1 Thing I Did Right

Well, everyone has been posting a lot about the economy. How can you not with the wild fluctuations going on? In light of what's going on, there is one thing I did that I can identify as a mistake and one thing I did that I can identify as a good decision.

My Mistake
The mistake I made was in not distributing my 401K contributions evenly across the year. Had I done so, I could have taken advantage of dollar cost averaging. Instead, I maxed out my contributions mid-September, meaning that my account is not going to be taking advantage of these new lower prices. I knew that I was going to max out in September but I decided to do so anyway since I thought it would be nice to have extra money for Christmas and potential year end vacations. I also thought I might be switching jobs so it would be easier if I maxed out my 401K at one employer rather than trying to figure out the exact amount I would need to contribute in my new employer without going over the maximum contribution limit. Now it looks like I won't be switching jobs in the near future. Since I work in financial services consulting, it just feels too unstable to be looking for something new. I'm also well respected in my current job and I enjoy it for the most part.

My Good Decision
The good decision I made was in deciding to hold our home down payment funds in cash. I began saving in earnest for a home about 3 years ago. It was always my intention to buy a place in 2007 or 2008. After getting married 2 years ago, my husband and I were able to significantly increase our down payment fund. It's pretty disheartening to see so much of your money only early 3% when the rest of your money is earning 7% or 10%. But we stuck to traditional wisdom and kept that money in an ING Savings account. I never even opened a CD since I was never really sure when we would find a house that we liked and pull the trigger on the purchase. Now I am so glad that we didn't risk that money since we want to use it in the short term.