We are just starting our IPS. We've been saving for a while, but with no real targets, meaning, or strategy aside from "put something in the 401K". We've never drawn from the 401K, but we have wavered in contribution amounts. We are a mid-30s couple, 2 young children and considering a 3rd.
Step 1 was to complete a budget - with accruals for known future expenses like car replacement, repairs, home repairs, children's activities, etc. - Complete - operational 12 months
Step 2 was to payoff all non-mortgage debt (personal preference rather than holding some low interest long term student loans... I just wanted them out of our life).
Step 3 build the IPS (where I am now)
The first part of the IPS I think, for us, is developing a strategy of the order in which we will invest in what types of vehicles to maximize tax strategy. This is not an allocation IPS, but something I think we needed prior to that so we have a plan outline.
The only real problem I am having now is balancing getting the Emergency fund to where we want it with our tax liability. I believe our AGI will be upper 100s/low 200s this year. The deductions for 401K contributions are very valuable, and is tax-deferred space I don't think we can lose long-term. We've decided to simultaneously contribute to the Oregon earner's 401K at a rate of 12%+match, which although isn't the maximum of 17,500 for 2013, is reducing our federal tax liability by about $2500, plus $800 for state income taxes. I view that tax savings as "free money" for now. We are contributing to the EF at a rate that should have it fully funded by mid-2014 and in cash assets (including accruals stated above) we do have 3-months earnings in cash at a credit union. Is this wise?
FIT solid 28%
SIT 9% on 60% of our income. Other income is exempt for non-residency.
That said... any additional feedback on the following?
Thanks very much in advance. This forum over the last while has been very helpful for me to see that without a strategy, we have no idea what we are aiming for.