Credit, Retirement, The Home 

More Referrer Q’s: 401(k) Contributions, Financing Debt with HELOC and more!

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Here is another set of personal finance search engine referrals turned questions turned answers! Yay! This week we have a question about how much your take home pay decreases with 401(k) contributions, whether you should finance a credit card debt with a home equity line of credit and what is the best home improvement you can do to save on energy prices.

Q. How much will my take home pay decrease if I increase my 401k contributions?
How much your take home pay decreases when you increase your 401(k) contribution depends on what your marginal tax rate is because your 401(k) contribution reduces your total income. For example, if you’re in the 25% marginal tax rate (single filer, income between $30,650 – $74,200), each $1 you contribute will reduce your take home pay by 75 cents. If you’re in the 15% tax bracket, each additional dollar you contribute will reduce your take home pay by 85 cents.

Q. Should I finance debt with HELOC?
Tricky tricky question, I’m going to assume that this searcher was looking for ways to reduce the interest rate on their credit card loans and had a bit of equity in their home that they could use. There are some obvious benefits and very dangerous drawbacks to financing your credit card debt with a home equity line of credit:
1. Benefits – Significantly lower interest rates.
2. Drawbacks – You risk losing your house because instead of unsecured credit card debt, you’re dealing with a debt that uses your house or condo as collateral.

If you can’t get a 0% balance transfer of some kind to get a bit of breathing room (that’s the page that appears in Google’s SERPs anyway), getting a HELOC to cover your credit card debt seems okay if you aren’t at risk of missing payments.

Q. What are some energy saving home improvements?
I think the best and cheapest home improvement project you can undertake to conserve your energy usage is installing a programmable thermostat. For a few bucks ($30 from Home Depot), you can have your HVAC system automatically (pre-programmed of course) shut off when you’re gone and turned on before you return. While I’ve competing theories that keeping your AC/heat on during the day means your home is maintained at a constant temperature so the HVAC system doesn’t work as hard so it uses less energy overall.

I don’t buy it. An AC is a relatively simple creature to understand, you basically have air blowing across very cold pipes (inside of which you will find low pressure Freon gas) circulating around your house. The AC only knows two settings, on or off. If the thermostat reads the temperature in the ambient air is 75 degrees and the setting is at 74, it turns it on, the freon does its compression thing, and the fan blows across the cold coils. It doesn’t matter if the ambient air is 75 or 105, the AC works just as hard in either case. When the AC is on, it costs you money because it needs electricity to operate its compressor and the fans.

If you read the How Stuff Works page, check out the bottom where they calculate energy usage. Note that the only consideration is how long your AC runs and how efficient it is, no one mentions how hard it works.

I want to reiterate I’m not a financial professional, I’m a kid with a computer, a keyboard, and the ability to string a few words together. Consult a professional, preferably two or three, before you make any sort of decision that could affect your life.

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