Creating my Investing Plan for 2012: Contributions

My first goal for 2012 is to max out my traditional 401(k). First, I need to calculate how much I need to contribute monthly to reach this goal and then I need to calculate into which funds I should deposit the contributions.

Monthly 401(k) Contributions

I have a simple little spreadsheet that takes the following formula to tell me how much to set my monthly contributions at:

  • H3 = annual base pay (gross)
  • H2 = ROUND(H3/12,2) = my monthly gross base pay
  • J2 = Yearly max to the 401(k) – $17,000 for 2012
  • I2 = ROUNDUP(J2/H3,2) = the % that I should contribute monthly from my paycheck to max out the 401(k) over the course of the year

My second goal for 2012 is to invest 20% of my gross income. The % in I2 combined with my employer match adds up to 21%, but barely, so I’ll come out barely investing more than 20% of my gross income for the year into my 401(k) and that’s okay.

How to deal with a Raise

I know, I know, raises aren’t terrible – they’re awesome! But when you went and calculated the perfect percentage to contribute to your 401(k) each month, a raise will go and change that number. If you’re lucky to get a huge raise, you could go and accidentally max out your 401(k) in *gasp* November!

For this, I have another simple little spreadsheet!

  • A1 = Yearly max to the 401(k) – $17,000 for 2012
  • A2 = amount contributed so far
  • A3 = A1 – A2 = amount remaining to contribute to your 401(k)
  • A4 = new annual base pay (gross)
  • A5 = ROUND(A4/12,2) = new monthly gross base pay
  • A6 = number of paychecks remaining in the year (so if you got your raise effective on your July paycheck, then you would set this to 5)
  • A7 = A5 * A6 = salary remaining for the year
  • A8 = ROUNDUP(A3/A7,2) = the % that you should contribute monthly from your paycheck to max out your 401(k) with your last paycheck in December!

Other Income

Since I will accomplish my goal of maxing out my 401(k) in December with my regular monthly salary, the second goal applies to any extra income I receive. Since I don’t know if I can Roth IRA or not until I receive my third quarter bonus, I will use all bonuses up until that point in 2012 to re-pay my various savings buckets and max out the Roth IRA with my third quarter bonus.

Any remaining funds to get myself up to 20% of the gross amount of my income will either come out of my fourth quarter bonus or my December paycheck.

Roth IRA Eligibility

Throughout the year, I will keep a running total of my total expected pay for the year (regular salary, plus extra income seen so far). When I am confident with my full, partial or none Roth IRA eligibility for the year, I will make the maximum contribution to my Roth IRA. This will likely happen when I receive my third quarter bonus.

3 thoughts on “Creating my Investing Plan for 2012: Contributions

    • Haha, yes that is “excel” speak! You don’t want to know how many spreadsheets I have :) I seriously believe that the planning of all financial problems can be done with spreadsheets LOL

      I am totally up for helping you improve your Excel spreadsheets! ;)

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