Elizabeth needs an adequate emergency savings
cushion and needs to boost her retirement savings. But one thing she can take
care of right now is to reallocate her 401(k).
Put 401(k) money into one diversified fund
She currently has her account
balance spread among nearly every option available in her plan. Diversification
is a key ingredient to investment success, but this is overkill. Her current contributions
also need an adjustment, as 70 percent is presently going to international investments.
Instead, she should allocate her current balance and ongoing contributions to
the 2035 target retirement fund, the year in which she will turn 66.
rid of high-interest debt
At present, Elizabeth has $2,800 in savings
accounts and roughly $1,700 in credit card debt. It doesn't make sense to be putting
money into savings yielding 5 percent when she is carrying credit card balances
at rates well into the double digits. Because of her saving discipline, she should
tap the savings account to pay off her credit card debt, pronto! This will still
leave her with over $1,100 available for emergency expenses.