Investing too much?

Q

I am an average guy who puts 10% of my paycheck into my 401(k) plan at work, invests in two Ariel mutual funds, and buys--$100 or $50 bonds every month. My problem is that I only have $100 left after investing and paying my bills. How can I arrange to have more spending money?

--G. Cager

Houston, TX

A

First off, you should be commended for being serious about investing for your future. However, you don't have to squirrel so much money away. The key to your situation lies in your asset allocation--the selection of investment choices you have within your total portfolio. A well-diversified portfolio will have a mix of investment choices, such as large cap mutual funds, growth mutual funds, small cap mutual funds, international mutual funds, and bond funds so that you can lower overall market risk.

I suggest you take a careful study of the Ariel mutual funds and the mutual funds you are invested in within your 401(k) plan and reassess which funds best fit your risk tolerance and investment goals. If several of your 401(k) choices have the same investment objectives as the Ariel funds, choose between them--don't invest in both. Since you are already investing more than 10% of your income, you can afford to free up some money to enjoy yourself more. You should also consider discontinuing your purchase of the $100 and $50 bonds, and instead, invest in a bond mutual fund within your 401(k)plan.

Another option is to cut back on your monthly expenses. Find more inexpensive services to help lower your bills. And, of course, you can use your skills to do freelance work in your spare time to earn more money. All of these things can help you find extra spending money.

--Matthew S. Scott

Mail your money management questions to Ask B.E., BLACK ENTERPRISE, 130 Fifth Ave., New York, NY 10011, or send an e-mail to [e-mail].