Money | Sophisticated Bags

See the sports betting thread

By Woodenpapangus Go To PostSee the sports betting thread

Bankroll gotta come from somewhere

i "sold" weed brownies in highschool

I really want to get into entrepreneurship but I'll see about that after I'm done with school.

Paycheck to paycheck clan squad up

ive been contributing to my 401k and HSA savings account for a while...
¯\_(ツ)_/¯

I highly suggest YNAB

www.youneedabudget.com

It goes real deep and they have a 30 day free trial.

Between my wife and me, she's much more fiscally restrained. She just took over management of our finances, so I think it should really help us come out ahead each month like we should.

We both work and make decent money, plus no kids so we should really be putting aside/investing a lot more than we currently do. We don't really watch our spending too closely which is fun and all, but we can still enjoy a lot of nice things while being financially responsible.

Since I'm a contractor I'm responsible for my own retirement but I've only put $3 or $4k into a Vanguard IRA to date. That needs to change.

Goals: Build up emergency savings fund; pay off my student loans before I'm 40 (I'm 32 atm); consistently have a substantial surplus at the end of each month. Doable, but it'll require some discipline.

By Smokey Go To PostI highly suggest YNAB

www.youneedabudget.com

It goes real deep and they have a 30 day free trial.

I second this. My wife and I use this and it helps a lot.

There's also Betterment

https://www.betterment.com

This is auto investing. Basically you invest your money, choose an investing style, and then let automation take it from there.

I am going to give this site a try soon. I want to be able to plant seeds in my 20s (albeit late 20s) for some passive income in the future. There are certain stocks out there that are better to invest in for those who want to cash out on dividends

On a more serious note, I've started looking into real estate investment trusts--or more particularly those focused on commercial properties i.e. office space.

By Dark PhaZe Go To PostOn a more serious note, I've started looking into real estate investment trusts–or more particularly those focused on commercial properties i.e. office space.

I actually started looking into this too. Co worker of mine is some how involved with apartments and is building a car wash somewhere. Dude is loaded

I have a JP Morgan investment account I opened a few weeks ago. I'm already up over a thousand dollars. This is with instructions to be as safe and conservative as possible; I'm extremely satisfied with the results I'm seeing so far. I should've done this a long time ago. I want shit to be cautious because China is going to crash sooner or later and that's going to fuck everyone for a good while. After that happens I'm planning to ask my dude to be a little more aggressive and maybe we can double what I got when the market is on the upswing again.

I dont really have the disposable income to invest beyond the property I own. What little I do save I try and use to improve the property I own.

By Forever Go To PostI have a JP Morgan investment account I opened a few weeks ago. I'm already up over a thousand dollars. This is with instructions to be as safe and conservative as possible; I'm extremely satisfied with the results I'm seeing so far. I should've done this a long time ago. I want shit to be cautious because China is going to crash sooner or later and that's going to fuck everyone for a good while. After that happens I'm planning to ask my dude to be a little more aggressive and maybe we can double what I got when the market is on the upswing again.

So you have a set amount of money to invest and just tell your guy what to do?

I'd like to do that, but I'm the type that has to research and know wtf is going on .

Right now I'm seeing a 10% return on my 401k so far this year. Pretty happy about that. I want to keep momentum going and open up some other investment account tho.

Forever what are the fees like

By Smokey Go To PostSo you have a set amount of money to invest and just tell your guy what to do?

Yeah that's basically how it works. They provide all the information about everything and you can ask for more details whenever you want. We went line by line down each sector they're investing in; there were some real estate investment trusts, some gold, S&P 500, foreign currencies. A very diverse portfolio designed to protect me against a market crash (which I fully expect to happen within a year or so).

These people know a lot more about this shit than I ever will, so I just tell them what my goals are, what my concerns are, and how aggressive or cautious I want them to be. I'm paying 1.4% and they've promised something like 4% annually AFTER the fees. Again, when the market bottoms out I'm going to ask them to be more aggressive and I expect a better return at that point. Right now I just want to beat inflation.

10% is a GREAT return. You should be very pleased with that.

Promoted.

My one year goal is to kill 75% of my credit card debt. If I can do that, I'll be more than alright. Debating whether to re-finance my car, sell it (would save me a ton) or trade it in for a lease of a new car (would save me $150-200/mo potentially). Once I can clear up some of my debt I can then up my 401k contributions.

This is actually something I seriously need help with, like on some deeper emotional psycological tip, does anyone have any good books learning financial restraint? It's not so much putting money away that I have a problem with its my attitude towards money is horrible. I just don't have the discipline required to say no and because there's practically nothing I've ever had to save for due to having quite a good job, I've always had surplus but should be doing so much better with it than I am

By Smokey Go To PostI highly suggest YNAB

www.youneedabudget.com

It goes real deep and they have a 30 day free trial.

Yep this and knowing how to use CCs has made my life so much easier. Of course I'm hilariously poor and can't afford to put money into retirement yet or savings. But hopefully I can get a web developer job soon cuz first thing I'm doing with my first paycheck is putting anything I can into a Roth IRA.

By Forever Go To PostYeah that's basically how it works. They provide all the information about everything and you can ask for more details whenever you want. We went line by line down each sector they're investing in; there were some real estate investment trusts, some gold, S&P 500, foreign currencies. A very diverse portfolio designed to protect me against a market crash (which I fully expect to happen within a year or so).

These people know a lot more about this shit than I ever will, so I just tell them what my goals are, what my concerns are, and how aggressive or cautious I want them to be. I'm paying 1.4% and they've promised something like 4% annually AFTER the fees. Again, when the market bottoms out I'm going to ask them to be more aggressive and I expect a better return at that point. Right now I just want to beat inflation.

10% is a GREAT return. You should be very pleased with that.

Definitely interested in this. You just walked in to a branch and asked for an investment analyst, or you call and they set you up with someone?

By reilo Go To PostPromoted.

My one year goal is to kill 75% of my credit card debt. If I can do that, I'll be more than alright. Debating whether to re-finance my car, sell it (would save me a ton) or trade it in for a lease of a new car (would save me $150-200/mo potentially). Once I can clear up some of my debt I can then up my 401k contributions.

We talked about it a bit in the car thread, but I've got about 4k left on my car. I'm going to have a large amount freed up when this thing is done in a few months. I plan to then hit the CCs hard af just like you and invest some of it. I guess that speaks to how ridiculous my car payment is, but they got me good at the time. Won't happen again.

I'd sell the M3 and use that $200 towards the CC. You'll get something newer and with less maintenance. Plus you'll get the ball rolling on knocking out CCs.

By Kidjr Go To PostThis is actually something I seriously need help with, like on some deeper emotional psycological tip, does anyone have any good books learning financial restraint? It's not so much putting money away that I have a problem with its my attitude towards money is horrible. I just don't have the discipline required to say no and because there's practically nothing I've ever had to save for due to having quite a good job, I've always had surplus but should be doing so much better with it than I am

Have you tried Dave Ramsey's stuff? He has a show everyday and it's also converted to podcast. I listen to it often. Wish I would've when I was younger.

Try YNAB that I linked earlier. It's important o see where your money is going. Once you have a clear picture of what's left over, look into investing it. Might as well have some of that extra money making you money while you do nothing.

By Smokey Go To PostI'd sell the M3 and use that $200 towards the CC. You'll get something newer and with less maintenance. Plus you'll get the ball rolling on knocking out CCs.

Selling the M3 would save me close to $800/mo but then I'd be car less. I can do 2hr delivery on anything though because I live in SF. I'd want to knock out the CCs first before I get another car.

By Smokey Go To PostDefinitely interested in this. You just walked in to a branch and asked for an investment analyst, or you call and they set you up with someone?

Yeah most major banks also have an investment branch. TD AmeriTrade, JP Morgan Chase, etc. Like I said I've had a good experience with JP Morgan so far. Ask about a managed brokerage account. The nice thing is I can check in on my online banking account anytime and see exactly what's going on and where they've put my money. It looks like this:

Good look man. Gonna research a few and ask around.

As someone who works for a financial planning firm, great topic.

By lovingsteam Go To PostAs someone who works for a financial planning firm, great topic.

Great addition.

By reilo Go To PostPromoted.

My one year goal is to kill 75% of my credit card debt. If I can do that, I'll be more than alright. Debating whether to re-finance my car, sell it (would save me a ton) or trade it in for a lease of a new car (would save me $150-200/mo potentially). Once I can clear up some of my debt I can then up my 401k contributions.

Does your employer offer a Roth 401k option? If so, may want to look into it. It would cause your paycheck to be a bit smaller since you're getting taxed now but it would help in the long run since you wouldn't have to worry about the deferral hit when you end up taking the money.

By giririsss Go To PostGreat addition.

Thanks, I try.

By Smokey Go To PostGood look man. Gonna research a few and ask around.

I'm not saying don't be educated about what your guy is investing in. But you can't know everything about everything you're investing in. You don't have the time in your life.

Particularly the million and one things that you can Potentially invest in. Or the extra million products that a trust that has a significant bank roll can get into.

By lovingsteam Go To PostThanks, I try.

<3

Dave Ramsey isn't bad since like Smokey said great tidbits on paying down debt, savings but don't lean on him for a comprehensive plan. Everybody's financial situation is specific and different and Dave is there to give a good general overview to get folks started. He isn't a planner. I'd seriously recommend trying to find a group in your area with certified financial planners, at least to give you a brief overview of where you're at. They have to act as a fiduciary for you which is important.

With so many people heavily leaning on their employer provided benefits for the long term retirement, etc., definitely worth it to sit down with a professional, even if you don't move forward.

I don't know why we didn't do this sooner.

I'll write a comprehensive thing here soon for you guys when I get some free time

By lovingsteam Go To PostDoes your employer offer a Roth 401k option? If so, may want to look into it. It would cause your paycheck to be a bit smaller since you're getting taxed now but it would help in the long run since you wouldn't have to worry about the deferral hit when you end up taking the money.

I believe it does but I am only enrolled to a regular 401k atm.

By reilo Go To PostI believe it does but I am only enrolled to a regular 401k atm.

You seriously may want to consider changing that. We work with large corporate employees and federal employees alike. More times than not we recommend to switch whether gradually or altogether from the traditional 401k to the Roth. We don't know what taxes will be in 20-30 years when you're looking to retire and use that money. Most folks expect taxes to go up since federal income tax today is quite low. Better to pay the tax today when you know what it would be rather than gamble on what it may be in the future.

The Roth one will have your contributions and growth come out tax free while your employer's match will still be deferred. Much better option than the traditional. Hope that helps.

I'm a little confused. It's a pre-tax contribution, so as long as I don't withdraw the money before retirement (e.g. 65) then I won't have to pay income taxes. If I withdraw early, not only do I pay taxes but I also pay a 10% early withdrawal penalty.

By reilo Go To PostI'm a little confused. It's a pre-tax contribution, so as long as I don't withdraw the money before retirement (e.g. 65) then I won't have to pay income taxes. If I withdraw early, not only do I pay taxes but I also pay a 10% early withdrawal penalty.

The traditional 401k is indeed pretax which means you're taxes are being deferred. The growth that your gaining over the next 20-30 years will be taxable to you. Let's say your 401k is 1 million dollars upon retirement at age 65. All of that isn't yours. It will cost you to access that money. Let's say you want to access $100k a year, it may cost you $130k a year in 20-30 years. Which is why you want to have a Roth IRA as a tax free bucket and now with the Roth 401k as another tax preferred bucket. In retirement taxes are a killer. You're going to possibly live 20+ years without a traditional income so you're heavily dependent upon the assets you built beforehand. If all of your monies are in the tax deferred bucket than that means all of your monies will be taxed when you need it the most.

I just want to add regarding this topic, everybody talks about being diversified in the market (which is obviously true) but you also should be tax diversified. Having all of your eggs in one tax bucket can be a recipe for disaster. When the market is down (think 2008 and people losing 30-40% of their 401k and were retiring too soon to ride out the downturn to enjoy the upswing) you want to access assets that aren't connected to the market. When the market is healthy and you're able to access your assets without touching the principal, you do so and you wouldn't need to access the non market correlated assets which are tax preferred like your Roth IRA, municipal bonds, certain types of insurances, etc. You want a combination.

Apologies for hijacking this thread lol.

You're not hijacking, it's exactly what this topic is about (Smokey correct us if your intentions were otherwise) and it's very helpful.

So it sounds like you're completely opposed to a traditional 401k?

By reilo Go To PostYou're not hijacking, it's exactly what this topic is about (Smokey correct us if your intentions were otherwise) and it's very helpful.

So it sounds like you're completely opposed to a traditional 401k?

Well, I won't say that. What I would say is that the Roth provides a great deal of benefit with a small negative. The negative being you're going to pay more taxes on your paycheck now. What I would do is do a breakdown comparison of what your paycheck would be if you switched to the Roth 401k compared to what it is now. If it's doable then definitely consider it. If it's not doable, you may want to at least start the transition with putting some of your contribution in the Roth as well as keeping some on the traditional. Ultimately what I would say and say this to most of my friends is take some time and sit down with a professional, even to just get a good overview. If your financial future is something that is a focus you should really sit down with an expert since they will take emotion out of your decision making which is exactly what you want.

Many planners offer a free consultation or even would waive the initial planning fee for the first 6 months or so to try them out (We waive it for the first year for instance). Most folks have never put all of their finances down on paper, tracked every dollar, see where it's going, and put their goals on paper. If you were to do this you'd be able to look at the 401k question in the context of the bigger picture. Just a thought.

By reilo Go To PostYou're not hijacking, it's exactly what this topic is about (Smokey correct us if your intentions were otherwise) and it's very helpful.

So it sounds like you're completely opposed to a traditional 401k?

It's fine. I mentioned in the OP Personal Finance, Investing, Home Buying...anything financial related I'm cool with.

I'd like more info on the Roth 401k too. I'm enrolled in the regular one, but heard maybe I should change the option to a Roth as the benefits are better in the long run.

So if I switch...does the new money go into the Roth 401k, or does the entire current balance?

By Smokey Go To PostIt's fine. I mentioned in the OP Personal Finance, Investing, Home Buying…anything financial related I'm cool with.

I'd like more info on the Roth 401k too. I'm enrolled in the regular one, but heard maybe I should change the option to a Roth as the benefits are better in the long run.

So if I switch…does the new money go into the Roth 401k, or does the entire current balance?

Some companies allow a downright conversion from your traditional 401k to the Roth. Others don't in which case your future contributions would be the only ones to gain the benefits of the Roth 401k. Definitely should check your benefits and see what is allowed.

K. So here are some general thoughts.

1) If your company provides 401K matching of any sort, you need to be gaining full access to that matching like yesterday. Whether it's 50% or 100% matching up to a certain amount, that is free gotdamn money that's essentially doubling your money now. It's infinitely more important than paying off cards or saving up money (neither savings accounts nor credit cards have 50% or 100% interest rates), don't let the Dave Ramsey's or anyone else tell you differently. In addition to the free money, there's this magical thing called the time value of money. It goes a little something like this.

For simplification purposes we're going to assume annual returns once a year and annual deposits once a year:

$3,000 a year growing at 7% for 29 years would be roughly $21,000 less at the end than
$3,000 a year growing at 7% for 30 years.

Which means if you pay off some of your debt now, and then wait a year to start your 401K or Roth IRA or anything else, you're going to lose the compound interest on your last year and not the tiny amount you'd make in your first year. It's a typical mistake that people make when assessing whether or not to invest. "Eh what's the problem with waiting a year, what could go wrong". You're literally flushing tens or hundreds of thousands of dollars down the drain every single year you put this off.


2) Roth IRA's are taxable now but COMPLETELY TAX-FREE once liquidated after you're 59 and a half. By contrast, IRA's or traditional 401K's are tax-free now, but BOTH THE PRINCIPAL AND THE EARNINGS will be taxed depending on your annual distributions and the tax rates of your annual income at the time. Understand, though, that if you're stopping yourself from investing the full allowable into your ROTH IRA because of the current taxes, you're also missing out on the compounded interest that extra money would make.

So if you invest $2,200.00 a year into a ROTH IRA using the same 7% return at 30 years you'll end up with roughly 207K. Whereas if you invest 3,000 a year into a traditional IRA using the same 7% return at 30 years you'll end up with roughly 283K. You're basically making a third less money. So there go your tax savings. In addition, the time value of money is a basic principle of finance that says that a dollar today is worth more than a dollar at any point in time in the future, so the overall benefits kind of cross off. In order to really maximize a Roth 401K or Roth IRA, you have to make sure that you're contributing THE SAME AMOUNT as you would and letting the added tax consequences eat into your lifestyle spending instead of your investing budget. Namely - investing 3K would cost you about a 1,000 more every year in taxable fees if you were to go the Roth instead of the traditional route. So if you simply divy up the same 3K into IRS + investment fund - you're not coming out ahead much, if at all. You have to eat the tax costs now and live more frugally in order to really see the benefit.

3) If you're going to build a budget, you HAVE TO HAVE TO HAVE TO HAVE TO budget in your goals as well. Otherwise, you're wasting your budget. Budgeting in your goals looks like this:

"I want to have 1,000,000 when I retire. Assuming 8% returns over 30 years compounded, I need to invest $8,827.43 a year if the contributions and earnings are annual. If the contributions and earnings are quarterly with the same 8% compounded - I need to invest a total of $2,048.10 each quarter which equals $8,192.00 a year. If the contributions and earnings are added and compounded monthly, I need to invest $670.43 a month or $8,040.00" etc.

To show you how amazing compound interest is here and why you should start now - if you had 35 years before you retired instead of 30 - you'd only need to invest $5,803.26 annually if the contributions and returns were both on an annual basis. Which means you save $3,000.00 a year in contributions - or $90,000 less the extra 5 years of $5,803.26 which is $29,016.30. Meaning starting 5 years earlier will get you to the same goal while using $61,983.70 LESS of your own contributions. You basically got a 1,000,000 portfolio spending like 25% less money. It's nuts. Those savings increase if your contributions and earnings are applied on a quarterly basis instead of annually.

https://www.youtube.com/watch?v=733mgqrzNKs

Brief explanation of time value of money. Basically the premise is exactly what I stated:

"

By 3SidedPolygons Go To Postthe time value of money is a basic principle of finance that says that a dollar today is worth more than a dollar at any point in time in the future.

There are Time Value of Money calculators. I HIGHLY HIGHLY HIGHLY suggest you learn to use them. It takes a little bit of work. And you need to remember to be consistent with your rates of return and number of earnings. But once you learn to use this calculator, you'll be able to do a great job figuring out everything from investment goals, amounts, returns, etc. to payments on loans like car payments or mortgages or credit cards. Everything that has compound interest included can be calculated accurately using the Time Value of Money.

By reilo Go To PostSelling the M3 would save me close to $800/mo but then I'd be car less. I can do 2hr delivery on anything though because I live in SF. I'd want to knock out the CCs first before I get another car.

The best financial decision over time, assuming you don't get a lemon or a bad car, is to buy a used car that's within 3-5 years old and under 30K miles. Leasing is obviously always a waste of money, buying old cars that have little to no resale value, tons of extra repair work can also be a really bad idea. Whatever your budget is for a car, apply it towards a used car under those parameters. If that means that you get a 2012 Hyundai with 30K miles instead of a 2008 BMW with 60K miles - that's the better financial decision. If you get a 2012 Hyundai with 30K miles instead of lease a brand new Benz for the same monthly payments - that's also the better financial decision.


Figure out what your budget is using the time value of money, then find the car you want within 3-5 years old and under 30K mileage that you can buy with that much money.

My car buying decisions will always be emotional and never financial/logical lol. I already conceded that point. Cars are not a utility/appliance for me, they are a hobby. An expensive one.

By reilo Go To PostMy car buying decisions will always be emotional and never financial/logical lol. I already conceded that point. Cars are not a utility/appliance for me, they are a hobby. An expensive one.

That's obviously totally fine. Just talking about the best financial decision.

Honestly - personal finance can be broken down into 4 things.

1) Form a budget with your goals factored in then stick to it

2) Invest in long term investments with compounded interest like yesterday

3) learn about the time value of money, understand it, and understand how to calculate everything with it, then apply it to point 1 and 2.

4) get out of bad debt, but ONLY bad debt. Paying off low cost debt with low rates is a waste of money (if you understand the time value of money, this is self-evident).

Going to save 3SP info for tomorrow morning. Should be a good read over coffee and checking emails.

Great posts 3SP. The paying down bad debt is something many don't think about when they're looking to speedup paying off their home. If your mortgage interest rate is say 3-4%, why in the world are people paying MORE each money instead of contributing to the Roth IRA or even putting more into their 401k or something else that will provide a better return than said 3-4%.

By lovingsteam Go To PostSome companies allow a downright conversion from your traditional 401k to the Roth. Others don't in which case your future contributions would be the only ones to gain the benefits of the Roth 401k. Definitely should check your benefits and see what is allowed.

If your company contributes to the Roth 401K, that money will be taxable when you retire. Only your taxed contributions to the account will not be taxed coming out.

I have a regular 401K and my company matches up to 2K a year. My contribution is automatically set to increase by 1% each year (I'm currently contributing 8%). I need to look into whether a Roth 401K is offered.

The company I work for an 100% employee owned though. As such we all get stock disbursements each year and it's a % of your income. Everyone in the company gets the same percentage from the top to the bottom. The disbursements range from 5% to 10% based on a number of factors.

I have decent equity too since I bought my first house in 2008

By lovingsteam Go To PostGreat posts 3SP. The paying down bad debt is something many don't think about when they're looking to speedup paying off their home. If your mortgage interest rate is say 3-4%, why in the world are people paying MORE each money instead of contributing to the Roth IRA or even putting more into their 401k or something else that will provide a better return than said 3-4%.

Doubly so because other than the interest savings, your ROR on real estate investment is actually 0%. And will always be 0%.

Most people don't understand this but real estate is a bad place to put your money.