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Comprehensive advice for the OP’s protégé re: finances is tough because it’s going to get complex in order for it to be useful beyond adages. The more complex it gets, the less attention you will retain, and it’s all for naught if you lose their attention. Credit, in general: talk about how the score is calculated, but stress that good credit comes from good habits. It does not need to be gamed in any way. Debt and financing, in general: there’s two kinds of financing/debt: good and bad. Good financing is used to improve your productive capacity: education to get paid more, car to go to work (and get paid), and home to live in (so you can work again tomorrow). Financing/carrying debt on anything other than education, car, and home is “bad”, and if anyone wants to argue on that point it’s either an edge case, or you’re way beyond newbie adages. Investing: I wrote a bunch above. Index funds and time are guaranteed wins, anything else is a crap shoot. “Rich” vs Wealth: Rich is having a lot of stuff. Wealthy is having a big bank account. Choose one.
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May 16, 2022 13:57
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DNK posted:“Rich” vs Wealth: Rich is having a lot of stuff. Wealthy is having a big bank account. Choose one. I know lots of people who would push back against this and insist that money is made for spending (which is mostly true), and so what's the point of having a lot of money if you can't spend it? And if you counter with videos of financial independence or retiring early/comfortably, they may very well counter that with that your time isn't guaranteed and some of those things you can do if you were retired rich would be better spent doing them in your youth when you were able to better enjoy the experience. I think those are totally valid viewpoints. But my approach to FIRE has been examining the motivations for why I spend money on some discretionary things and why I shouldn't spend it on others. Or to seek higher value in the money I am spending... and now 9 years later I'm at a point where I have to consciously relax some of that and look at whether I can spend a little for comfort and convenience, but again, where it makes sense.
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May 16, 2022 14:35
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Dying with a lot of money isn't great but it's nowhere near as bad as outliving your retirement savings IMO.
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May 16, 2022 14:43
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The problem is everyone thinks the break even age is like 60 when in reality it's not even close to that. Now that I'm getting old (turning 31 soon) my friends who didn't save earlier in their life are getting hit by things like "how do I buy a house" and " why can't I afford vacations anymore". Money is meant to make you feel good and in my experience financial security feels pretty drat good.
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May 16, 2022 14:50
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Money can’t by happiness but being poor sure as poo poo made me depressed.
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May 16, 2022 14:58
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SpelledBackwards posted:I know lots of people who would push back against this and insist that money is made for spending ultrafilter posted:Dying with a lot of money isn't great but it's nowhere near as bad as outliving your retirement savings IMO. What Ultrafilter said, and to be courteous to your point: yeah totally, money’s purpose is to be spent. However, if you’re trying to crash-course educate a 21yo about financial literacy you gotta club ‘em in the head. The purpose of this particular club is to awaken them to the thin veneer that Richness has. A 21yo should see every single positive asset as a negative credit card debt. Instagram is full of people who are spending and scamming for clout, and the correct mental response to that should be disdain and contempt rather than jealousy and wonder. Hopefully, eventually they will wake up one day and wonder why they are living in a 1br studio while saving $5000/mo into their $400k bank account, and then they are free to contemplate what appropriate consumption is.
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May 16, 2022 14:59
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Anne Whateley posted:No offense, and I think the advice is good, but this reads like it was written by an 80-year-old. Imo it also introduces and asks way too much for a 101. If you're finna spill the tea on a bussin stack of guap but Willy-B is too cheugy, just stan the jlcollins Stock Series and sis will be a Bogle-Simp in no time, bet https://jlcollinsnh.com/stock-series/
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May 16, 2022 17:28
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ultrafilter posted:Dying with a lot of money isn't great but it's nowhere near as bad as outliving your retirement savings IMO. Also, dying with a lot of money is way better than dying with no money. Dying with no money has this weird habit of hurting you a lot beforehand, and hurting your family a lot afterward.
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May 16, 2022 18:53
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Counterpoint, if you don't have kids for various reasons, you can simply choose not to outlive a comfortable level of savingsGoGoGadgetChris posted:If you're finna spill the tea on a bussin stack of guap but Willy-B is too cheugy, just stan the jlcollins Stock Series and sis will be a Bogle-Simp in no time, bet
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May 16, 2022 19:39
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i like nice words
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Medullah posted:We just moved to a High Deductible Health Care plan with a HSA a year or so ago, and I'm at the point where I can invest some of it (I max it out and haven't had major expenses). When I click the "Invest" button, it gives me two options. Any advice on which direction to go? I assume choice #1 is the "Dummy" option that does all the work for you You don't show the Expense Ratios but I'm willing to bet the Betterment option is putting an additional ER on top of the index funds it selects. I'd recommend choosing option 2 and either choose a target date if the ER is low or choose the total market Vanguard fund. If total market isn't available the S&P500 is close enough. Just in case this isn't obvious, these are all investments that could lose value. If you need the HSA funds in a short time frame, say less than 3-5 years, then you shouldn't be investing it. asur fucked around with this message at 19:56 on May 16, 2022 |
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May 16, 2022 19:52
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asur posted:You don't show the Expense Ratios but I'm willing to bet the Betterment option is putting an additional ER on top of the index funds it selects. I'd recommend choosing option 2 and either choose a target date if the ER is low or choose the total market Vanguard fund. If total market isn't available the S&P500 is close enough. Yeah I'm only putting a small chunk of it in, keeping around 80% of it which should be enough for any major problems that may pop up. Thanks for the advice.
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May 16, 2022 20:00
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GoGoGadgetChris posted:If you're finna spill the tea on a bussin stack of guap but Willy-B is too cheugy, just stan the jlcollins Stock Series and sis will be a Bogle-Simp in no time, bet Am I having a stroke?
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May 16, 2022 20:18
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Definitely referring to Bernstein as Willy B forevermore.
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May 16, 2022 22:18
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Apologies if this has been addressed recently, but what are the thread's thoughts on usefulness of a financial planner (assuming I'm not a millionaire, but also not paycheck to paycheck). Is it better to just figure out your own path using the resources\guidance discussed here, or can they add real value sometimes (again, noting I'm not managing lots of money, just trying to navigate the right path for my future)? For what it's worth, this would be someone recommended by a super old and currently well-off (wasn't born into money or poverty) extended family member who has used this guy for decades. Obviously I'd still do my own vetting of the guy, company, etc. (and to that end, is there something in particular I should look out for when vetting?), but I'm curious if the commission would be a waste versus just doing my own thing. It's my understanding that I don't pay him, but he takes a cut of my profits, or there's fees associated with investments he chooses and he gets a cut of that, although maybe I've got that wrong or it wouldn't make a difference using him versus something like making my own account on Fidelity or whatever.
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May 18, 2022 22:16
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The only financial planner you should ever consider is one that has a fiduciary duty to you and is fee only. Paying a percent of assets at whatever cadence is a huge drag on returns and if they don't have a fiduciary duty to you then they are highly likely to sell you on garbage funds with insane expenses to make money.
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May 19, 2022 02:01
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That makes sense. I guess the question I'm struggling with the most at this stage is deciding whether to put more money into my 401k or start an IRA. My employer doesn't offer a match - they provide a flat percentage of my salary (10% currently, raising to 15% in a couple months). I currently contribute 6% on top of that, but I'm wondering whether it would make more sense to max out an IRA. This is all assuming everything else is fine, like emergency fund, debt, etc. - just curious how to compare putting funds in the 401k vs an IRA when there isn't a match to worry about.
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May 20, 2022 20:20
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Google the /r/personalfinance flow chart. Since your company gives a generous contribution with no match required, you're probably better off contributing to a Roth IRA.
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May 20, 2022 20:30
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The decision then becomes which one has better funds. Usually it's the IRA, but sometimes 401ks have really super low expense ratios. If you can, max out both, but if you're deciding between them, just pick the one with the cheapest index funds.
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May 20, 2022 21:27
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Cool, thanks for the thoughts. It looks like it would be best to go ahead and open the Roth IRA.
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May 21, 2022 01:08
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Should I go for an index fund with this description?quote:The Fund is designed to generate excess returns compared to its benchmark through an enhanced index approach, combining the elements of passive and active management. It has a 9% 1-year return rate, while comparable funds tracking the same index are -8%. On one hand it does follow the index, but the bit about the active management worries me a bit. The point of index funds is to have a fund where the fund manager isn't actively screwing it up, right? I'll be buying and holding so dips don't worry me, but I'm trying to pick the best performing one.
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May 25, 2022 07:57
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Lily Catts posted:Should I go for an index fund with this description? my advice is to pick a passive index fund with the lowest expense ratio and least amount of index tracking error. if this fund is 17 percentage points off from every other fund, and presumably its benchmark, it can't rightly be called an index fund. the spread should be measured in basis points, not percentages. the description seems like meaningless marketing speak designed to confuse people who have heard passive investing is a good choice. it is simply an active fund this fund may have had good performance over the last year, but that's an incredibly short period to consider. reviews of historical data show that hot funds inevitably return to the mean, it is almost impossible to continue to beat the market over an entire investing career. even 5-year and 10-year returns are meaningless. consider bill miller of legg mason trust. he beat the sp500 for 15 years running, then in the span of a few years lost all of it. warren buffett and peter lynch have done it, but buffett has unique structural advantages and lynch got out at the top of his game and his handpicked successor was unable to keep up the success. so, two guys in the last two or three generations. picking the fund that will perform best over the next year or next 30 years is a matter of blind luck, not past performance (there's a reason they put those disclaimers in their ads). what you can control are fees and taxes. pick the lowest cost option, with as little internal stock turnover as possible for a more in-depth breakdown of passive vs active i recommend jack bogle's "common sense on mutual funds", william bernstein's "four pillars of investing", and burton malkiel's "random walk down wallstreet"
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May 25, 2022 08:46
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Yeah it does sound like they're marketing it as an index fund when it's not. I guess I'll keep reviewing as I am investing in one already but I might find one that has a better expense ratio. Thanks!
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May 25, 2022 09:23
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The entire point of index funds is to match the overall market. Trying to beat it means that you also might well do worse. And 1-year performance is pretty meaningless for something where you'll be planning to invest for more than five years (right?). Plus, actively managed funds have more overhead than passive ones, which eats some of the supposed benefits. e:f;b by a lot
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May 25, 2022 14:15
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I've been reading books on investing for years, and read some of the recommendations here recently, and in the FIRE thread. I'm still confused on one thing. I have been keeping 6 months wages in savings lately and am ready to invest the surplus in a tax advantaged space, but my employer doesn't match even though I'm a union contractor at a government site. They do pay into my union pension and annuity and I am now vested. It used to be you would earn $90 a month for every year worked for retirement but it floats now with the amount of members and billable hours. Can I not make a custom fund for my self like a simple IRA to follow the boglehead way with vanguard and would a Roth be better? To my knowledge this would depend on if I planned to make more retired or now for how much the taxes eat at my nest egg or perhaps the us government in 25-30 years would tax more then even. 2 of my coworkers will be making more retired than working, but that is not a guarantee for me (but it is possible)
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May 25, 2022 16:05
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You can have a regular IRA, either Traditional or Roth.
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May 25, 2022 16:19
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Quaint Quail Quilt posted:I've been reading books on investing for years, and read some of the recommendations here recently, and in the FIRE thread. you're correct that a roth is preferred if you think you will be in a higher income tax bracket when you retire. tax policy in 25-30 years will be a factor, but that's completely unknowable and can't really be considered in your planning. in general people's income tends to decrease in retirement, however if you are looking at a pension/annuity, and social security, and drawdowns from a large personal portfolio, it's a distinct possibility that you'll be in a higher bracket. you can use a free calculator such as https://www.citizensbank.com/financial-calculators/roth-401k-vs-traditional-401k-calculator.aspx to try to determine what your tax bracket may be based on predicted income in retirement, or i believe newretirement's premium service has some very robust tools for modeling different scenarios and selecting the optimum use of tax advantaged space (i haven't used their premium service, but i've seen some excellent reviews). personally, i decided that that level of optimization isn't worth my time, so i diversify my tax advantaged space and contribute to a traditional 401k and roth ira. i get a significant tax savings from maxing the traditional 401k that i use to help max the roth ira. it should be noted that the benefits of a traditional 401k/ira are hobbled if you don't reinvest the tax savings. if you use the tax savings as a windfall for discretionary spending, the roth comes out ahead in any scenario. another rule of thumb that i have heard is that having a very large traditional retirement account and taking a tax hit in retirement will make you a bit sad, but won't endanger the quality of your retirement. under contributing to a roth retirement account and not meeting your goals because you needed the boost from the traditional tax savings will endanger the quality of your retirement. so if you're very unsure or very conservative, go with the traditional. the tax savings are at your current marginal rate, but a large portion of the future income will be filling up the lower tax brackets, so the loss to taxes isn't quite as big as you would think if you end up in a higher tax bracket. there are income limits to opening a roth ira (magi $144,000 for single/$214,000 married), and for getting tax deductions for contributions to a traditional ira (magi $68,000 single/$109,000 married for full deduction). make sure to take that into account
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May 25, 2022 17:44
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Quaint Quail Quilt posted:Can I not make a custom fund for my self like a simple IRA to follow the boglehead way with vanguard and would a Roth be better? I hadn't heard the term "boglehead" before, but Googling it, it sounds like the Vanguard target date funds are exactly what you're looking for (low-fee, blended mix of stocks and bonds that rebalances towards bonds as time goes forward). You can pick a later target date if you want to be more aggressive.
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May 25, 2022 20:46
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I am looking to open a high-yield savings account. Looking at https://www.bankrate.com/banking/savings/rates/, I see that banks with the highest APY are online-only banks, such as Vio. Does anyone have experience with an online-only bank or any recommendations on what to look for? I do basically all of my banking online now anyway, so that part doesn't bother me, but I feel like there has to be some catch with these banks to offer rates around 1% which is so much higher than typical savings accounts. I know that sometimes banks will offer introductory rates that are high and then make them much lower after a period, but that doesn't seem to be happening with these high-yield accounts.
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Jun 1, 2022 04:50
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Forum favorite online bank used to be Ally which has been around since 2008. It is offering 0.75% APY. So 1% is aggressive but not much higher. There are banks/Fintech startups offering higher APY but with restrictions or weird hoops to jump through. In general, the risk you are taking with a bank like Vio is that it’s newer so has less of a track record of not falling apart. It is apparently a brand of a regular brick and mortar bank and is apparently FDIC insured (you can check here https://banks.data.fdic.gov/bankfind-suite/bankfind) so it should be that the risk to your money is only that the bank fails and your money is tied up for awhile in getting that resolved. More about how that works here https://www.fdic.gov/consumers/banking/facts/payment.html.
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Jun 1, 2022 11:23
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One thing to note is that 0.75% is fairly new, and it is adjustable so it may change for better or worse. It usually changes (in my experience and awareness, I could be wrong) when the Fed changes rates, as you might imagine.
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Jun 1, 2022 11:35
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Goon Boots posted:I am looking to open a high-yield savings account. Looking at https://www.bankrate.com/banking/savings/rates/, I see that banks with the highest APY are online-only banks, such as Vio. Does anyone have experience with an online-only bank or any recommendations on what to look for? I do basically all of my banking online now anyway, so that part doesn't bother me, but I feel like there has to be some catch with these banks to offer rates around 1% which is so much higher than typical savings accounts. I know that sometimes banks will offer introductory rates that are high and then make them much lower after a period, but that doesn't seem to be happening with these high-yield accounts. The catch is they don’t have to spend money on brick and mortar stores. I’ve banked with Ally (which I did initially discover posting here I think) for I think over 10 years now. Personally: as long as you do not have a lot of cash income, which we def do not, it works great. They have really good over the phone customer service, they reimburse up to $10 a month in ATM fees, which pretty much always covers our occasional need cash options , and online works consistently. Our debit card got swiped once, some rear end in a top hat withdrew $1400 from my checking account. I filed a case with Ally, they approved and reimbursed me in about 8 days. For a debit card that’s a fairly quick turn around. We moved cross country , and one fun thing is moving companies really, really like cash. I called Ally, they upped my daily withdraw limit to $2,000, and I was able to just go to a random ATM and withdraw the $1,800 I needed (I did not enjoy having that much cash on me no). Ally works fine with Zelle, and I can use it to mail checks when need be (and physical checkbooks are free). As someone noted, Ally is currently at 0.75%, they follow the Fed rates , so with the fed rate going up, it’ll likely go up a bit too. Ally was at 2.2% savings rate when Covid hit. To emphasize: all these banks are FDIC insured, which is key. So they’re a normal bank, they just save money by not having a physical brick and mortar branch. Def would recommend.
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Jun 1, 2022 12:59
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most of the big ones move together (GS/Marcus, Ally, Capital One) and then there are always weird startups offering a bit more, like former thread darling HM Bradley. The weird startups eventually become less enticing.
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Jun 1, 2022 13:20
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Duckman2008 posted:Personally: as long as you do not have a lot of cash income, which we def do not, it works great. They have really good over the phone customer service, they reimburse up to $10 a month in ATM fees, which pretty much always covers our occasional need cash options , and online works consistently. I get around this stuff by having an account at a brick and motor bank and use the online only bank as my savings account. I did it cause I didn't want to close my bank account and move everything, it's easier for me to move the money and keep the old account for paying things. (I mostly use my credit card and only have to pay it, rent, and my electric bill with the bank.) The only real downside I've thought about is how it takes a couple of days to transfer money between the accounts (and I don't have an ATM card for the online bank), so I keep some emergency cash in my brick and motor and just give up the better interest rate. Uthor fucked around with this message at 15:20 on Jun 1, 2022 |
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Jun 1, 2022 15:17
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lol at the US not having instant transfers in TYOOL 2022 We did a fairly large transaction recently and it was 24 hours of "welp, I guess we'll find out tomorrow if we got scammed" (I'm exaggerating ofc we had proof of deposit, but still).
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Jun 1, 2022 16:02
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I'm currently using T-Mobile Money. I get 1% and so far it has been pretty easy to deal with.
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Jun 1, 2022 18:32
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Uthor posted:I get around this stuff by having an account at a brick and motor bank and use the online only bank as my savings account. This is (mostly) my approach. I've been primarily online-only for a long time now (first ING/CaptialOne but now Ally) but I still keep around an ancient BofA checking account that I keep fee-free by having $250 of my paycheck sent there while the rest goes to Ally. I use it either to deposit cash at BofA ATMs, or if I need an amount of cash not easily obtained by ATM withdrawals I'll transfer it back to BofA first and then go see a teller. Large cash transactions like that are the kind of thing where I only average one a year anyway. I very much like that Ally has no limits (that I've seen as of yet) on number of accounts. I have a separate checking account that I use just for actual physical checks or Venmo transactions and money only goes into it when there's a transaction to be done. I keep most of my money in savings accounts flagged (and set up for autopay) for various bills.
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Jun 1, 2022 18:57
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Can you get physical checks from Ally? I use them to pay rent, and have not left my lovely brick and mortar bank because I still use them there.
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Jun 1, 2022 20:41
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Magnetic North posted:Can you get physical checks from Ally? I use them to pay rent, and have not left my lovely brick and mortar bank because I still use them there. Yes, they send you a checkbook just like any other bank.
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Jun 1, 2022 21:15
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Thanks for the help everyone! I'll go check out my options. I knew online banks were legitimate but I just wanted to make sure there wasn't some weird gotcha I didn't consider.
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Jun 1, 2022 21:53
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Goon Boots posted:Thanks for the help everyone! I'll go check out my options. I knew online banks were legitimate but I just wanted to make sure there wasn't some weird gotcha I didn't consider. Word up. Honestly, end of the day, as long as it’s FDIC, you can feel confident that you won’t like, have all your poo poo stolen.
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Jun 1, 2022 21:55
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