One of the Lucky Ones...

So consider yourself a very lucky LMF4HMW reader if you meet the following criteria: 1) you're contributing the maximum amount to your 401(k); and 2) you're contributing the maximum amount to your IRA or Roth IRA. You're well on your way to a bright financial future given that you're annually saving $20,500 if you're under 50 and $25,500 if you're older! In addition to the impressive annual savings rate, the powers of market returns and compounding will both boost your investment earnings significantly over time.

So what's a girl who's already a golden LMF4HMW member to do? Splurge on another pair of $200 jeans? Spring for that Fendi bag? Book a trip to Bali? Buy a new luxury car? You're owed some sort of reward, right?!!

The best answer and the commensurate size of your reward depends on your overall financial house. You've earned yourself a significant reward if you meet the following criteria: 1) all of your bills are paid on time, all the time; 2)you have six months of living expenses saved as a SDH* cushion; 3) and you're debt free (i.e., neither Visa nor Mastercard has you in a financial headlock). Trip, car, you name it! If you're quite not there or a ways from this point, the relative size of your treat should be smaller (spa day, anyone?).

For those winning the jackpot given a sparkling financial house, after you've rewarded yourself, it's time to open a taxable account and yes, contribute more. Perhaps it's your bonus or a percentage therefor, the money you save after (finally) finishing paying Social Security taxes each year (that period seems to come later and later), or the raise you get. In any event, you're going to deposit a sum of after tax money and purchase more financial assets.

Any financial planner worth her salt will advise that you look at your entire portfolio (retirement accounts, savings, etc.) to determine the best investments. If your 401(k) doesn't offer a fund with a certain class of stocks (i.e., small cap or mid-cap), or international or emerging market investments, a taxable account is the place to round our your overall portfolio. The easiest thing to do is invest in low cost index or exchange traded funds and plan to hold them for the long term.

Happy splurging and saving!

*SDH - a.k.a.,"sh*t does happen"; job loss, car trouble, family issues, pet surgery, unforeseen problems, etc.