In December 2006, I wrote a post called Learning how to save which put down in words what I had done to organize my finances the year prior (opened an IRA and rolled my previous retirement accounts into it). Since then I’ve been posting yearly updates (2007, 2008), recording the major financial decisions I’ve made as a way to encourage long-term thinking.
In 2009 I made one change. At the end of July I diverted the money from my paycheck that I was automatically investing in three index funds over to a “high” interest savings account at Schwab. I made this change primarily to bolster my emergency fund. As a plus, the market had risen so much since its low in March, I’d recovered the unrealized losses I’d weathered since I’d started investing outside of my retirement accounts.
Though I could be disciplined and regularly save something like 10% in cash, and 90% in stocks and bonds, in reality, sometimes I actually need cash to buy things, so it’s easier for me to alternate between investing, when that makes sense, and building up a little nest egg when I anticipate some major expenses on the horizon.
My IRA still has quite a way to go to regain lost ground, since most of my investments there occurred while the market was at its 2006/07 highs. Meanwhile, my Roth 401(k), which I began in September 2008, has been doing quite nicely, currently worth about 120% of its “cost basis”. Net-net, across all my investments, I’m about even, which is good, because at the end of 2008 I was kind of wishing my money was all just in savings.
One thing I plan to do in the next few days is rebalance my index fund portfolio, as the mix between stocks and bonds has gotten a little out of whack. And then I’ll probably shift the garden hose back to automatically investing in index funds once the money bin is shored up.