Author Topic: Reader Case Study – Main Question: How am I doing for 28? What can I do better?  (Read 4774 times)

guessingatgreen

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The Main Question: How am I doing for 28? What can I do better? Where are you considering a punch in the face? (I have a pretty good idea where!) I've been lurking for a while reading all the other case studies and finally got the nerve up to ask for help and advice!
 
UPDATE 1: Based on all the feedback, I've already done the following:
1) My BF is now paying all car-related expenses.
2) Researching cheaper cell and internet options
3) found a cheaper hair place
4) Changed my retirement contribution percents to only invest in the traditional 401K based on some awesome articles about conversion (now at 15% matched at 5% for a total of 19% traditional 401K).
5) Begun the process of converting my 3k savings account to a vanguard account
6) Am researching consolidating my 2k personal USAA savings into the Vanguard account referenced above.

7) Am going to speak with Boss re possibilities for remote work[/s]

UPDATE 2:
1) Changed the Simple IRA from a managed fund to a basic non-managed fund with USAA and next month will do an in-kind transfer to a Vanguard IRA.
2) Created a new Vanguard Total Market Index fund with a 3K savings account at Capital One 360 that wasn't doing anything for me save for earning .75% and started an in-kind transfer to avoid any taxes from the USAA 2K account you noted at a 1.23% expense ratio for a total of a new consolidated account with the Total Market fund for a little under 6K
3) Did an in-kind transfer from the Roth IRA to a Vanguard IRA
4) am leaving the AM Century account alone for the moment while I get the statements from them to see how much is long-term vs short term; ideally I'd do an in-kind transfer from here to the same Vanguard account to just consolidate the crap out of all these little lingering accounts, based on your advice to consolidate and simplify.
5) Talked to my boss and gotten a conditional Yes to begin looking at the possibility of working 100% remote and have picked Reno NV as a good place to move to. Am starting a new thread on the MMM forum around living in Reno to get some feedback around that.


I would love to have a plan to get to 400K in investment by 40 (????) so I could at least be financially independent and able to switch to a low-paying part time job that would be super do-gooderish (like banding birds or saving sea turtles for a small non profit) or doing a ton of volunteer citizen science in my free time and not really feel like I HAVE to work and still be ok.


Life Situation: Single, female, no kids, Co-inhabiting with boyfriend of over four years/ Live and work in Washington DC. Considering a relocation to DE or Arlington VA (happy to start a new thread on that topic alone, or have  spin off convo in the thread here)

Gross Salary/Wages: 62,500 a year; work at a small non profit in DC
Adjusted Gross Income: I bring home after taxes and after my deductions for IRA/transit pre tax allowance, about $45,000



Taxes: I’m in the 25% tax bracket in the USA and taxed at 8.5% in DC.


Current expenses: PER MONTH on average
Rent: $607 (split in half with BF)
Phone: $78
Utilities: $20-25
Internet: $71
Transport (Uber, metro) = $60
Renters/Car insurance: $550 for 6 month policy ($95 a month split with BF, so $50 a month for me) *note BF pays for gas
Alcohol/Bars = $80-100 (this could be cut I’m sure)
Groceries: $200-300 (this could be cut I’m sure)
Restaurants: $60-80 (this could be cut I’m sure)
Medical (can’t cut yet): $500
Pharmacy: ~$30 (every 6 or so months (recurring Rx)
Personal care: ~$45 (every 2/3 months) (hair cut)
Misc. crap (: ~$140) (every 2/3 months)  This includes things like wedding gifts, movies, clothing, charitable stuff. I'm sure I can split this out better.



Assets:
CD: $5,051 (.05% interest – terrible I know but I made it at 16 and had no idea!)
Capital One 360 Money Market (1% interest) $15,000 & I add $600 a month
Capital One 360 Savings (.75 % interest) $3,003 + 150 each month
Simple IRA: from old job: $25,500 – add 1,000 each year, managed through USAA for a small fee of $2 a month.
Pre-tax deductions Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%)
Misc savings USAA Account: $3150 (add whatever is left after budget and monthly expenses)
Personal mutual fund: $2000 add $50 a month plus 1/2 any tax returns each year
American Century Investment fund: $16,367 (aggressive)
Roth IRA – add $50 a month if left over from budget, plus 1/2 any tax returns each year


Liabilities: Credit, paid off in full each month so not really a liability
Just paid off 37K in student loans in May 2017! Sociology BA
9K in car loan financing at 3.9% interest for my 2008 Honda
(I should mention I choose to finance vs pay in cash because a) i didn't want to deplete my emergency savings for a non-emergency and b) advice I got suggested that having no long-term debt history to my name will hurt me later when I want to get a house or a more expensive thing like that. I view the financing as investing in lower interest rates later)
« Last Edit: July 17, 2017, 10:19:58 AM by guessingatgreen »

mozar

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You're doing well. What are your goals?
Embracing the absurd condition of human existence while also defiantly continuing to explore and search for meaning

guessingatgreen

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You're doing well. What are your goals?

Wow that's a great question and one I can't believe I forgot to include! I would love to have a plan to get to 400K in investment by 40 (????) so I could at least be financially independent and able to switch to a low-paying part time job that would be super do-gooderish (like banding turtles for a small non profit) or doing a ton of volunteer citizen science in my free time and not really feel like I HAVE to work and still be ok.

AccidentialMustache

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USAA's fees for investors are sometimes a hot mess and should be approached with caution. I love their insurance, but beware their investment stuff. Their kids college 529 has fees ranging from 0.5% to 1.0%. When I have the bandwidth to deal with moving that over to Vanguard, that's on my list so the fees can be an order of magnitude less.

Assuming your numbers are accurate you have a yearly surplus of 21k (45k in, 2k monthly spend * 12 months), not even adding in the ~800 of additional savings you broke out and 401k/IRA of another ~10k. So that's real roughly 32k saved a year, vs 24k spent -- a good ratio. If you compound out 32k savings for 12 years (28 to 40), that alone is a touch over 600k at a 7% annual rate of return. So in terms of the target given you're fine.

The question comes down to do you trust your numbers, and are you putting your savings to work where it is earning reasonable returns. 1% on 15 grand is not reasonable.

CrispySub

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Hi,

This is my first time posting on one of these boards and I thought I would throw my two cents in.

As a background, I also live in DC and I turned 29 in May and started out 42k in debt at 22 after college.  I now have a net worth between 300-400k via hard work and smart investing.  Take my recommendations as you will.

First off, DC is a good city and honestly, congratulations for managing a low rent/grocery/cost of living. That being said, there are some tweaks you could do.

If there is anything you could do to reduce the medical expenses of 500 a month, that is a strong recommendation.  See if your employer maybe has a tax advantaged health saving account that could cover that expense.  Using pretax dollars or getting the expense as partially tax deductible would save over $1000 a year, if possible.  Same with switching providers or if it is a past medical bill, see if the owner of the medical debt would settle for a cash payment now at a great discount.  IE, if you owe 10k in medical bills at 500 a month, see if they would accept 7k or less now.  Just a thought.

If you want to streamline your monthly bills:
Metro PCS and Virgin mobile have plans for under $40 a month and will often give you a free lower quality smart phone.  If having a high end phone isn't a priority for you, you could sell your current phone and save $30 a month.
A small handful of DC places have women's haircuts for under $25 (my girlfriend didn't believe this until I showed her).
As for internet, I always recommend no contract internet.  FIOS and RCN (if available) have good deals occasionally.  I pay 60 a month with no contract through FIOS for 300MB connection.  If RCN is available to you, they have a TV and 150mb special for 30 a month.

Your utility usage looks good, but you could always shave off a bit on electricity here and there.  All in all, that could save you more than $50 a month.


Now onto the heart of the matter.  You are a saver, but I think you should become an investor.  If you want to FIRE at 40, your retirement accounts don't really matter.  They act as a great boost and safety net at age 60 and can be used to help on a down-payment on a home in the near future (which I recommend, if your projections place you at over a million when you are able to withdraw).  At 40 or 30, it doesn't help too much with living expenses.


If my math is correct, you have you have a net worth of just over 60k.  You have 44k in taxable accounts/now money and 26k of that averages <1% a year. Even with 10% returns on your mutual funds, you will average around 4.5% pretax gains per year (around 2000$).  Take out your 25% tax rate plus DC taxes on capital gains, that is realistically under 3.5% actually gained with inflation being over 2%.  So your money is effectively growing at 1% a year.

This next piece of advice will have some potentially strong disagreement. First thing, find your credit score.  Use Credit Karma or check the free annual credit reports or potentially your credit card/USAA reporting.  If it is above 720 (or 750), then you are definitely doing fine for the building of credit.  You have years of student loans and years of credit cards to build it.  The auto loan won't raise your score too much if you are already in the 700's.  I am assuming you have a 2008 civic or accord or something with a resale value under 10k (most likely under 8k as all DC Craigslist 2008 'Honda's' are 7k and less).  That is $1100 a year in insurance in case your 10k car gets totaled in an accident that is your fault.  If you have a 1k deductible, then you would spend $2200 in a year to receive $7000 if you cause an accident, otherwise you spend 1100 a year for risk tolerance. 

Since you are receiving 1% on your investments, I think paying off the 9k would be a greater return on your money and once the car lien clears, drop to liability insurance.  My 6 month liability insurance is around $200 through USAA in DC.  You are currently paying 350 a year in interest payments and you are paying 550 a year via comprehensive insurance while your 9k in savings is earning 90 in interest a year (maybe 65 after taxes).  If you pay off the loan and drop to reasonable liability policy (with say $300 for a six month policy, split by 2 people), then your 9k will effectively "yield" more than 5% (or return 500 back a year "tax free" vice $65 after taxes).  You have enough money saved up to buy a comparable used car in case of totality.

And for investments, I can't stress enough to learn about as much as you can, especially if you find or like niches.  If you are completely risk adverse, Navy Federal (I assume you can get membership since you are USAA) has a 3% CD for I think up to $3000.  Numerous other savings account pay over 1% and offer a $100+ cash bonus if you deposit x thousand with them and hold it for 3-4 months.  You could open savings account after savings account, maintaining the average 1% rate while collecting a few hundred in bonuses (and with that, actually beating inflation).  If you want to step up the game, you could get into credit card churning (though this will initially hurt your credit score, it might improve it in the long run).  CC's offer bonuses if you spend x money in y months.  Charge everything, pay it off at the end of the month, and reap the benefits.

For higher level investments, I recommend Motif since you can buy other people's basket of stocks based upon whatever criteria you want.  Split half motifs, half mutual funds with a comfortable amount in your savings accounts.  Maybe you could increase your annual real gains from 1% to more than 5% (maybe more than 10%).  You could also invest in some dividend stocks if you like "interest".  O Realty is a monthly payment and WRE is a DC reit (It is actually possible to live in a building owned by WRE that you are a partial owner in...so your rent goes into your future dividends in a sense).

If you like Niche markets (for >10% gains), I recommend looking into Fundrise, Upfund, doing mock trials for DC law firms, going to estate sales and scouring the craigslist free section.  Within the past few months via CL, I have picked up 2 free mirrors within walking distance, cleaned them off with a paper tower and windex and sold them on CL for 50$ and 75$ within 3 days.  Last week, I picked up a set of actual copper pots and pans for free that just needed to be scrubbed with salt and vinegar.  At an estate sale, I bought an entire drawer of miscellaneous silverware for 3$.  Some of the pieces were actual silver (estimated melt value at the time was about 90$).  The Ebay resale value piece by piece was around $450.  All of that for a 3$ purchase.

Those are my current recommendations on things you can improve upon.  I have had success with my own philosophies.  Feel free to reply or message me if you want me to keep talking as I do live in the same area.



Heroes821

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Re: Reader Case Study – Main Question:
« Reply #5 on: July 13, 2017, 07:22:34 AM »
I really disagree with Crispy regarding finding Niche markets, that seems like a job for play money.


Anyway, since you seem to pay for a metro pass, and your BF pays for Gas...do you need the car?

What's the car payment? How much of that insurance is just the car?  What was the split on Uber and metro individually?

In a city like DC if you live close enough to entertainment (parks, museums, w/e fun you do) and work it might be cheaper to Uber once a week for a year than to pay for insurance/gas/carpayment.

If you have been with your SO for 4 years are you thinking of staying single until 40? That could drastically accelerate your FI (tax breaks) or interrupt things if you separate, he's more spendy than you etc.

If you are just learning about investing start here: http://jlcollinsnh.com/stock-series/  very shot and to the point and very MMM.

guessingatgreen

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USAA's fees for investors are sometimes a hot mess and should be approached with caution. I love their insurance, but beware their investment stuff. Their kids college 529 has fees ranging from 0.5% to 1.0%. When I have the bandwidth to deal with moving that over to Vanguard, that's on my list so the fees can be an order of magnitude less.

Assuming your numbers are accurate you have a yearly surplus of 21k (45k in, 2k monthly spend * 12 months), not even adding in the ~800 of additional savings you broke out and 401k/IRA of another ~10k. So that's real roughly 32k saved a year, vs 24k spent -- a good ratio. If you compound out 32k savings for 12 years (28 to 40), that alone is a touch over 600k at a 7% annual rate of return. So in terms of the target given you're fine.

The question comes down to do you trust your numbers, and are you putting your savings to work where it is earning reasonable returns. 1% on 15 grand is not reasonable.

Hmm that's a good point about USAA - I was considering getting rid of that by just dropping from the managed fund into something that just does it's thing since as another poster pointed out, it's not like I can get at this money until 60+ and it's got years left to fluctuate. not like I need it to grow quickly.

to be honest, I thought 1% was pretty good as I had all the savings in USAA until Jan,when I realized I was earning 0.05% interest!!!!1  so I immediately moved it all to the Capital One account. I'm currently considering taking the 3K in capital one and moving it into a Vanguard Total Stock Market ETF since that seems to be the most lauded one on the MMM forums.

Alf91

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Phone: $78 This seems high to me - are there cheaper options where you are?

Internet: $71 This also seems high - take a look at different companies.

Alcohol/Bars = $80-100 (this could be cut I’m sure) Drink at home if you want to drink - way cheaper!

Groceries: $200-300 (this could be cut I’m sure) Is this for both of you - if so, reasonable. If it's just for you, that's high! Lots of threads on here about how to cut grocery costs.

Restaurants: $60-80 (this could be cut I’m sure) Eat at home!

Personal care: ~$45 (every 2/3 months) (hair cut) Cut your own hair - youtube can teach you. Or go to a discount place ($20) or a haircutting school where they do it free or very inexpensive!

Just paid off 37K in student loans in May 2017! Congrats, that's awesome!!

9K in car loan financing at 3.9% interest for my 2008 Honda Do you need the car? Sounds like you have a decent transit system there.


guessingatgreen

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Re: Reader Case Study – Main Question:
« Reply #8 on: July 13, 2017, 08:09:16 AM »
I really disagree with Crispy regarding finding Niche markets, that seems like a job for play money.


Anyway, since you seem to pay for a metro pass, and your BF pays for Gas...do you need the car?

What's the car payment? How much of that insurance is just the car?  What was the split on Uber and metro individually?

In a city like DC if you live close enough to entertainment (parks, museums, w/e fun you do) and work it might be cheaper to Uber once a week for a year than to pay for insurance/gas/carpayment.

If you have been with your SO for 4 years are you thinking of staying single until 40? That could drastically accelerate your FI (tax breaks) or interrupt things if you separate, he's more spendy than you etc.

If you are just learning about investing start here: http://jlcollinsnh.com/stock-series/  very shot and to the point and very MMM.

The metro comes from my employer subsidy so that's $100 I don't pay. I just got this subsidy since my old job didn't pay metro for me. So that should go down (yay) . The car payment is $179 a month, and we split that. We use the car to get out of town since we were spending basically the car payment each month to get a few rentals each month over the last few years (car is a pretty recent purchase and has really changed the quality of recreation and life, since we can now get to the Shenandoah and hiking/camping/state parks at the drop of a hat vs Zipcar or rental. He also drives it to work. Additionally, we're considering moving to DE soon and we would definitely need the car there.

I'm planning on staying single forever and he's not interested in marriage too. We talk about finances and he could def do better at the MMM lifestyle but he's been evolving as a human being since we've been together and really started to see the value of what I do and changing his habits (success!) I don't do pooled assets, having watched too many messy divorces and lack of pre-nups to ever do it. Maybe a shared checking account for groceries. But yea. no marriage.

thanks for the link - as another poster pointed out, I'm a saver and definitely good at that, but not so great at making the money do stuff other than sit there and be saved...

guessingatgreen

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Phone: $78 This seems high to me - are there cheaper options where you are? I'm looking into this as we type

Internet: $71 This also seems high - take a look at different companies. I'm looking into this as we type. I hate comcast

Alcohol/Bars = $80-100 (this could be cut I’m sure) Drink at home if you want to drink - way cheaper! We've cut out going out mostly, and I read a great blog recently from MMM on box wines and have found it to be a really nice way to stretch for good value and the BF who was skeptical likes the wine too. win/win

Groceries: $200-300 (this could be cut I’m sure) Is this for both of you - if so, reasonable. If it's just for you, that's high! Lots of threads on here about how to cut grocery costs. This is about 2/3 for both of us. BF makes less than I do so we don't do a 50/50 split since i make more so I cover more of the food but he insists on a split so I'm not paying alone. nice guy

Restaurants: $60-80 (this could be cut I’m sure) Eat at home! cutting out restaurants yay

Personal care: ~$45 (every 2/3 months) (hair cut) Cut your own hair - youtube can teach you. Or go to a discount place ($20) or a haircutting school where they do it free or very inexpensive! Found a great place for $25

Just paid off 37K in student loans in May 2017! Congrats, that's awesome!! a bday gift to me lol

9K in car loan financing at 3.9% interest for my 2008 Honda Do you need the car? Sounds like you have a decent transit system there. emotionally I need the car since I actually really dislike DC and leave town every weekend to go hiking/camping/fishing/find some silence that isn't full of people and sirens. We're possibly moving to DE to escape if I can get permission to remote work (fingers crossed!)


PapaBear

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I'm currently considering taking the 3K in capital one and moving it into a Vanguard Total Stock Market ETF since that seems to be the most lauded one on the MMM forums.

Perfect. That would be the right time to think about your asset allocation (https://www.bogleheads.org/wiki/Asset_allocation) and to consolidate your investments. Basically you split your total portfolio up into two parts, a risky part that brings the returns (mainly domestic and international stocks) and a less risky part that brings stability (bonds, money market, savings accounts).
A great place for the risky part are total market index funds with a low expense ratio (e.g., Vanguard or others). Definitely have a look at the expense ratios of your current investments, some mutual funds are eating away your profits with ridiculous expense ratios compared to low-cost index funds.

Before you start, I would also have a look at the investment order here: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153
If you do not max out your tax-advantaged accounts yet, it might be better in the long run to throw your money there instead of throwing after-tax money into money market accounts.
« Last Edit: July 13, 2017, 08:30:34 AM by PapaBear »

guessingatgreen

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Hi,

This is my first time posting on one of these boards and I thought I would throw my two cents in.

As a background, I also live in DC and I turned 29 in May and started out 42k in debt at 22 after college.  I now have a net worth between 300-400k via hard work and smart investing.  Take my recommendations as you will.

First off, DC is a good city and honestly, congratulations for managing a low rent/grocery/cost of living. That being said, there are some tweaks you could do. 
 Thanks! I work really hard at living frugally here. it's easy to get caught into the brunching/drinking/eating scene!

If there is anything you could do to reduce the medical expenses of 500 a month, that is a strong recommendation.  See if your employer maybe has a tax advantaged health saving account that could cover that expense.  Using pretax dollars or getting the expense as partially tax deductible would save over $1000 a year, if possible.  Same with switching providers or if it is a past medical bill, see if the owner of the medical debt would settle for a cash payment now at a great discount.  IE, if you owe 10k in medical bills at 500 a month, see if they would accept 7k or less now.  Just a thought. Sadly, this isn't an easy fix and while I'm working to reduce costs, this might end up being one of this investments in self moments 

If you want to streamline your monthly bills:
Metro PCS and Virgin mobile have plans for under $40 a month and will often give you a free lower quality smart phone.  If having a high end phone isn't a priority for you, you could sell your current phone and save $30 a month. Researching this now. I don't really love my plan and what I get so definitely open to leaving AT&T
A small handful of DC places have women's haircuts for under $25 (my girlfriend didn't believe this until I showed her).  I found one! $25 bucks yay
As for internet, I always recommend no contract internet.  FIOS and RCN (if available) have good deals occasionally.  I pay 60 a month with no contract through FIOS for 300MB connection.  If RCN is available to you, they have a TV and 150mb special for 30 a month. this is awesome because I hate comcast with a passion and am googling this frantically.

Your utility usage looks good, but you could always shave off a bit on electricity here and there.  All in all, that could save you more than $50 a month.


Now onto the heart of the matter.  You are a saver, but I think you should become an investor.  If you want to FIRE at 40, your retirement accounts don't really matter.  They act as a great boost and safety net at age 60 and can be used to help on a down-payment on a home in the near future (which I recommend, if your projections place you at over a million when you are able to withdraw).  At 40 or 30, it doesn't help too much with living expenses. You're very right - I'm a saver but totally new to the investment game; I am good at saving the money but then it just sits there and I am starting to dip my toes into investing and learning about how to do this without oh, being too freaked out by the horror stories of people loosing it all. Since I don't make that much and likely won't (non profits definitely don't pay!) I need to get the income up some other way.


If my math is correct, you have you have a net worth of just over 60k.  You have 44k in taxable accounts/now money and 26k of that averages <1% a year. Even with 10% returns on your mutual funds, you will average around 4.5% pretax gains per year (around 2000$).  Take out your 25% tax rate plus DC taxes on capital gains, that is realistically under 3.5% actually gained with inflation being over 2%.  So your money is effectively growing at 1% a year.

This next piece of advice will have some potentially strong disagreement. First thing, find your credit score.  Use Credit Karma or check the free annual credit reports or potentially your credit card/USAA reporting.  If it is above 720 (or 750), then you are definitely doing fine for the building of credit.  You have years of student loans and years of credit cards to build it.  The auto loan won't raise your score too much if you are already in the 700's.  I am assuming you have a 2008 civic or accord or something with a resale value under 10k (most likely under 8k as all DC Craigslist 2008 'Honda's' are 7k and less).  That is $1100 a year in insurance in case your 10k car gets totaled in an accident that is your fault.  If you have a 1k deductible, then you would spend $2200 in a year to receive $7000 if you cause an accident, otherwise you spend 1100 a year for risk tolerance.  My score is 797/815 depending on what ever credit org I go through apparently. That sucks. I think I'll just dump some money at the car loan then since I only got it to build long-term credit equity/debt history for a house later

Since you are receiving 1% on your investments, I think paying off the 9k would be a greater return on your money and once the car lien clears, drop to liability insurance.  My 6 month liability insurance is around $200 through USAA in DC.  You are currently paying 350 a year in interest payments and you are paying 550 a year via comprehensive insurance while your 9k in savings is earning 90 in interest a year (maybe 65 after taxes).  If you pay off the loan and drop to reasonable liability policy (with say $300 for a six month policy, split by 2 people), then your 9k will effectively "yield" more than 5% (or return 500 back a year "tax free" vice $65 after taxes).  You have enough money saved up to buy a comparable used car in case of totality.

And for investments, I can't stress enough to learn about as much as you can, especially if you find or like niches.  If you are completely risk adverse, Navy Federal (I assume you can get membership since you are USAA) has a 3% CD for I think up to $3000.  Numerous other savings account pay over 1% and offer a $100+ cash bonus if you deposit x thousand with them and hold it for 3-4 months.  You could open savings account after savings account, maintaining the average 1% rate while collecting a few hundred in bonuses (and with that, actually beating inflation).  If you want to step up the game, you could get into credit card churning (though this will initially hurt your credit score, it might improve it in the long run).  CC's offer bonuses if you spend x money in y months.  Charge everything, pay it off at the end of the month, and reap the benefits.

For higher level investments, I recommend Motif since you can buy other people's basket of stocks based upon whatever criteria you want.  Split half motifs, half mutual funds with a comfortable amount in your savings accounts.  Maybe you could increase your annual real gains from 1% to more than 5% (maybe more than 10%).  You could also invest in some dividend stocks if you like "interest".  O Realty is a monthly payment and WRE is a DC reit (It is actually possible to live in a building owned by WRE that you are a partial owner in...so your rent goes into your future dividends in a sense).

If you like Niche markets (for >10% gains), I recommend looking into Fundrise, Upfund, doing mock trials for DC law firms, going to estate sales and scouring the craigslist free section.  Within the past few months via CL, I have picked up 2 free mirrors within walking distance, cleaned them off with a paper tower and windex and sold them on CL for 50$ and 75$ within 3 days.  Last week, I picked up a set of actual copper pots and pans for free that just needed to be scrubbed with salt and vinegar.  At an estate sale, I bought an entire drawer of miscellaneous silverware for 3$.  Some of the pieces were actual silver (estimated melt value at the time was about 90$).  The Ebay resale value piece by piece was around $450.  All of that for a 3$ purchase.

Those are my current recommendations on things you can improve upon.  I have had success with my own philosophies.  Feel free to reply or message me if you want me to keep talking as I do live in the same area.

guessingatgreen

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I'm currently considering taking the 3K in capital one and moving it into a Vanguard Total Stock Market ETF since that seems to be the most lauded one on the MMM forums.

Perfect. That would be the right time to think about your asset allocation (https://www.bogleheads.org/wiki/Asset_allocation) and to consolidate your investments. Basically you split your total portfolio up into two parts, a risky part that brings the returns (mainly domestic and international stocks) and a less risky part that brings stability (bonds, money market, savings accounts).
A great place for the risky part are total market index funds with a low expense ratio (e.g., Vanguard or others). Definitely have a look at the expense ratios of your current investments, some mutual funds are eating away your profits with ridiculous expense ratios compared to low-cost index funds.

Before you start, I would also have a look at the investment order here: https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153
If you do not max out your tax-advantaged accounts yet, it might be better in the long run to throw your money there instead of throwing after-tax money into money market accounts.

I'm a little confused about the advice on that thread to max out my retirement (which, while pre tax) seems counter intuitive to my if my goal is to retire or have enough to cut back on working before I can get the money back out at 60+. I currently have an employer-based Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%) plus my old IRA from my previous job, plus a ROTH IRA that I started that I put a little bit of money in but I think I can only put 5k in it so it's small change really.

Heroes821

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Re: Reader Case Study – Main Question:
« Reply #13 on: July 13, 2017, 08:41:36 AM »
snip

The metro comes from my employer subsidy so that's $100 I don't pay. I just got this subsidy since my old job didn't pay metro for me. So that should go down (yay) . The car payment is $179 a month, and we split that. We use the car to get out of town since we were spending basically the car payment each month to get a few rentals each month over the last few years (car is a pretty recent purchase and has really changed the quality of recreation and life, since we can now get to the Shenandoah and hiking/camping/state parks at the drop of a hat vs Zipcar or rental. He also drives it to work. Additionally, we're considering moving to DE soon and we would definitely need the car there.

I'm planning on staying single forever and he's not interested in marriage too. We talk about finances and he could def do better at the MMM lifestyle but he's been evolving as a human being since we've been together and really started to see the value of what I do and changing his habits (success!) I don't do pooled assets, having watched too many messy divorces and lack of pre-nups to ever do it. Maybe a shared checking account for groceries. But yea. no marriage.

thanks for the link - as another poster pointed out, I'm a saver and definitely good at that, but not so great at making the money do stuff other than sit there and be saved...

So everything you've said here...why are you paying for the car?  If you don't want to mix assets, but you split the car payment, insurance and he pays ALL the gas and he drives the car DAILY it should be a loan in his name.

Also from other posts of yours I just want to point out that from my understanding of the DC area your (I'm guessing) 100k ish joint income seem low end for two people working.  I would definitely look at moving away.  Even if you two take pay decreases you could end up making more money in a lower COL city that would have things you enjoy doing without driving out of town all the time.

Roboturner

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I'm a little confused about the advice on that thread to max out my retirement (which, while pre tax) seems counter intuitive to my if my goal is to retire or have enough to cut back on working before I can get the money back out at 60+. I currently have an employer-based Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%) plus my old IRA from my previous job, plus a ROTH IRA that I started that I put a little bit of money in but I think I can only put 5k in it so it's small change really.

http://www.madfientist.com/how-to-access-retirement-funds-early/
http://www.madfientist.com/retire-even-earlier/

also this is a fabulous (long) set of posts that will answer just about anything you may have questions on http://jlcollinsnh.com/stock-series/

Roth conversion ladder - ALWAYS MAX TAX ADVANTAGED ACCOUNTS FIRST otherwise you are giving free money to the government, and nobody wants to do that


Note: As an aside, I highly suggest signing up for personal capital, their stock and asset tracking is wonderful (the budgeting portion sucks though, so use mint for that)
« Last Edit: July 13, 2017, 08:52:40 AM by Roboturner »
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DarkandStormy

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UPDATE: *I forgot to include the goal!* I would love to have a plan to get to 400K in investment by 40 (????) so I could at least be financially independent

Current expenses: PER MONTH on average
Rent: $607 (split in half with BF)
Phone: $78 $78/month is way too expensive.  Research Project Fi,
 Republic Wireless, Virgin Mobile, etc.  Anything over $40/month is just throwing money away.

Utilities: $20-25
Internet: $71 How?  Unless you're video conferencing all day or are a hardcore gamer, you don't need the massive internet speeds.  See what you can find - you'll be surprised at what's available for under $40/month.
Transport (Uber, metro) = $60
Renters/Car insurance: $550 for 6 month policy ($95 a month split with BF, so $50 a month for me) *note BF pays for gas
Alcohol/Bars = $80-100 (this could be cut I’m sure) Yes, cut.  If you are out, maybe consider trying to find Ibotta rebates - e.g. $3 rebate on Bud Light is a common one.
Groceries: $200-300 (this could be cut I’m sure) Is this for you or you &
 your bf?

Restaurants: $60-80 (this could be cut I’m sure)
Medical (can’t cut yet): $500
Pharmacy: ~$30 (every 6 or so months (recurring Rx)
Personal care: ~$45 (every 2/3 months) (hair cut)
Misc. crap (: ~$140) (every 2/3 months)  This includes things like wedding gifts, movies, clothing, charitable stuff. I'm sure I can split this out better.



Assets:
CD: $5,051 (.05% interest – terrible I know but I made it at 16 and had no idea!)
Capital One 360 Money Market (1% interest) $15,000 & I add $600 a month
Capital One 360 Savings (.75 % interest) $3,003 + 150 each month
Simple IRA: from old job: $25,500 – add 1,000 each year, managed through USAA for a small fee of $2 a month.
Pre-tax deductions Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%)
Misc savings USAA Account: $3150 (add whatever is left after budget and monthly expenses)
Personal mutual fund: $2000 add $50 a month plus 1/2 any tax returns each year
American Century Investment fund: $16,367 (aggressive)
Roth IRA – add $50 a month if left over from budget, plus 1/2 any tax returns each year


Liabilities: Credit, paid off in full each month so not really a liability
Just paid off 37K in student loans in May 2017! Sociology BA
9K in car loan financing at 3.9% interest for my 2008 Honda
(I should mention I choose to finance vs pay in cash because a) i didn't want to deplete my emergency savings for a non-emergency and b) advice I got suggested that having no long-term debt history to my name will hurt me later when I want to get a house or a more expensive thing like that. I view the financing as investing in lower interest rates later)

You have over $26K sitting in accounts that aren't even out-pacing the rate of inflation (highlighted in yellow).  That is terrible.  Plan out when you think you'll buy that house because yes, you'll need cash for the down payment.  Still, I'd consider something like VWINX or VASGX with Vanguard as a more conservative option to try to beat the <1% interest you're getting now.

Keep in mind, $400K will only make you "financially independent" if you are living off of ~$16K/year.  Your annual expenses now look to be closer to $24K, in which case you'll need $600K.  This does not factor in how your expenses might change with a house purchase - mortgage, home repairs/upgrades, property taxes, homeowner's insurance, etc.

Without knowing the current values of the IRAs, 401(k), etc. I don't think anyone can make even an educated guess if you are on the right path to FI by 40.
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guessingatgreen

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Re: Reader Case Study – Main Question:
« Reply #16 on: July 13, 2017, 10:01:19 AM »
snip

The metro comes from my employer subsidy so that's $100 I don't pay. I just got this subsidy since my old job didn't pay metro for me. So that should go down (yay) . The car payment is $179 a month, and we split that. We use the car to get out of town since we were spending basically the car payment each month to get a few rentals each month over the last few years (car is a pretty recent purchase and has really changed the quality of recreation and life, since we can now get to the Shenandoah and hiking/camping/state parks at the drop of a hat vs Zipcar or rental. He also drives it to work. Additionally, we're considering moving to DE soon and we would definitely need the car there.

I'm planning on staying single forever and he's not interested in marriage too. We talk about finances and he could def do better at the MMM lifestyle but he's been evolving as a human being since we've been together and really started to see the value of what I do and changing his habits (success!) I don't do pooled assets, having watched too many messy divorces and lack of pre-nups to ever do it. Maybe a shared checking account for groceries. But yea. no marriage.

thanks for the link - as another poster pointed out, I'm a saver and definitely good at that, but not so great at making the money do stuff other than sit there and be saved...

So everything you've said here...why are you paying for the car?  If you don't want to mix assets, but you split the car payment, insurance and he pays ALL the gas and he drives the car DAILY it should be a loan in his name. Right - we talked it out and agreed he'll pay the whole thing.
 I can't transfer the loan but he'll pay the thing and then I'll transfer the title to him - we signed a notarized contract in case :)


Also from other posts of yours I just want to point out that from my understanding of the DC area your (I'm guessing) 100k ish joint income seem low end for two people working.  I would definitely look at moving away.  Even if you two take pay decreases you could end up making more money in a lower COL city that would have things you enjoy doing without driving out of town all the time.
Yea we definitely are in the lower income combined for DC - I make 60 pre tax and he makes 40 soooo we aren't make a lot and living in one of the most expensive places to boot. sigh

guessingatgreen

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UPDATE: *I forgot to include the goal!* I would love to have a plan to get to 400K in investment by 40 (????) so I could at least be financially independent

Current expenses: PER MONTH on average
Rent: $607 (split in half with BF)
Phone: $78 $78/month is way too expensive.  Research Project Fi,
 Republic Wireless, Virgin Mobile, etc.  Anything over $40/month is just throwing money away.

Utilities: $20-25
Internet: $71 How?  Unless you're video conferencing all day or are a hardcore gamer, you don't need the massive internet speeds.  See what you can find - you'll be surprised at what's available for under $40/month.
Transport (Uber, metro) = $60
Renters/Car insurance: $550 for 6 month policy ($95 a month split with BF, so $50 a month for me) *note BF pays for gas
Alcohol/Bars = $80-100 (this could be cut I’m sure) Yes, cut.  If you are out, maybe consider trying to find Ibotta rebates - e.g. $3 rebate on Bud Light is a common one.
Groceries: $200-300 (this could be cut I’m sure) Is this for you or you &
 your bf?

Restaurants: $60-80 (this could be cut I’m sure)
Medical (can’t cut yet): $500
Pharmacy: ~$30 (every 6 or so months (recurring Rx)
Personal care: ~$45 (every 2/3 months) (hair cut)
Misc. crap (: ~$140) (every 2/3 months)  This includes things like wedding gifts, movies, clothing, charitable stuff. I'm sure I can split this out better.



Assets:
CD: $5,051 (.05% interest – terrible I know but I made it at 16 and had no idea!)
Capital One 360 Money Market (1% interest) $15,000 & I add $600 a month
Capital One 360 Savings (.75 % interest) $3,003 + 150 each month
Simple IRA: from old job: $25,500 – add 1,000 each year, managed through USAA for a small fee of $2 a month.
Pre-tax deductions Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%)
Misc savings USAA Account: $3150 (add whatever is left after budget and monthly expenses)
Personal mutual fund: $2000 add $50 a month plus 1/2 any tax returns each year
American Century Investment fund: $16,367 (aggressive)
Roth IRA – add $50 a month if left over from budget, plus 1/2 any tax returns each year


Liabilities: Credit, paid off in full each month so not really a liability
Just paid off 37K in student loans in May 2017! Sociology BA
9K in car loan financing at 3.9% interest for my 2008 Honda
(I should mention I choose to finance vs pay in cash because a) i didn't want to deplete my emergency savings for a non-emergency and b) advice I got suggested that having no long-term debt history to my name will hurt me later when I want to get a house or a more expensive thing like that. I view the financing as investing in lower interest rates later)

You have over $26K sitting in accounts that aren't even out-pacing the rate of inflation (highlighted in yellow).  That is terrible.  Plan out when you think you'll buy that house because yes, you'll need cash for the down payment.  Still, I'd consider something like VWINX or VASGX with Vanguard as a more conservative option to try to beat the <1% interest you're getting now.

Keep in mind, $400K will only make you "financially independent" if you are living off of ~$16K/year.  Your annual expenses now look to be closer to $24K, in which case you'll need $600K.  This does not factor in how your expenses might change with a house purchase - mortgage, home repairs/upgrades, property taxes, homeowner's insurance, etc.

Without knowing the current values of the IRAs, 401(k), etc. I don't think anyone can make even an educated guess if you are on the right path to FI by 40.

That's very true - they aren't doing jack for me. I am good at the savings part but literally have lost money because this stuff sat in a USAA savings account for 0.05% interest so I just moved it for 1% and am thinking through the vanguard approach. So my goal isn't necessarily full FIRE, but just the option to do part time work or supplement. I mean, FIRE doesn't mean never working (well, it might for some true!) for me, it's more the freedom to choose.

My total retirement/investments/savings to date are:
Simple IRA: from old job: $26,500 – add 1,000 each year, managed through USAA for a small fee of $2 a month.
Pre-tax deductions Roth 401k = 8%, Traditional IRA 4% matched by current employer at 5% for a total of 17%)
Misc savings USAA Account: $3150 (add whatever is left after budget and monthly expenses) Just started this one at new job so it's only at $1568
Personal mutual fund: $2000 add $50 a month plus 1/2 any tax returns each year Currently at 2250
American Century Investment fund: $16,367 (aggressive) $16,367
Roth IRA – add $50 a month if left over from budget, plus 1/2 any tax returns each year this is at 250 with some of the misc savings I noted above being set aside to add at the end of the year to max it out at 5000

Heroes821

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Re: Reader Case Study – Main Question: How am I doing for
« Reply #18 on: July 13, 2017, 12:04:18 PM »
Just so you know if your 401k is pre-tax it is not a Roth.

Roth is after tax and can apply to your 401k or a kind of IRA account.

PapaBear

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Does your employer also offer a traditional 401k?

If you want to deep dive in your investments and asset allocation, we can discuss this here as well.
For that, it would be helpful to know in what kind of funds you are currently invested in your simple IRA, Roth 401k and Roth IRA (ticker symbols of the funds would be most helpful). I guess the Simple IRA would be priority, since their management fee of 2 USD/month might be low, but the expense ratios of the used funds might be less than modest.

EDIT: Just saw the update in your first post, looks like great progress in a very short timeframe.
« Last Edit: July 13, 2017, 12:51:39 PM by PapaBear »

guessingatgreen

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Does your employer also offer a traditional 401k? yes I get a Traditional IRA that I contribute to 14% matched by current employer at 5% for a total of 19%)

If you want to deep dive in your investments and asset allocation, we can discuss this here as well. sweet - I'll pull info out tonight
For that, it would be helpful to know in what kind of funds you are currently invested in your simple IRA, Roth 401k and Roth IRA (ticker symbols of the funds would be most helpful). I guess the Simple IRA would be priority, since their management fee of 2 USD/month might be low, but the expense ratios of the used funds might be less than modest.

EDIT: Just saw the update in your first post, looks like great progress in a very short timeframe. I'm motivated. I want to move from saving to earning since I've got the saving down all things considered. Could cut here and there but for the most part I do well at savings but haven't been able to to figure out how to move to something that does more than just....sit.
« Last Edit: July 13, 2017, 01:38:46 PM by guessingatgreen »

mamagoose

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Internet - for two adults working outside the home, why even have it? Maybe if you're using it for wifi for your cell phones (ala Google Fi or Republic Wireless), otherwise you're double-paying for data. I used to work and live in DC and spent so little time at home that I didn't even have the internet at home. Easy enough to pay bills on my work computer over lunch, and so much more fun stuff to do in DC than sit around watching Netflix.
The person who says it cannot be done should not interrupt the person doing it.

Dicey

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Guessingatgreen and Crispy sub, I am impressed with both of you. For newbs, you've got a lot figured out already.

Just want to say that kicking yourself for lost opportunities is not productive,  so quit it!

I was never a huge wage earner, was a good saver, but late to the investing game. I got to FIRE and so will you.

I'm on vacation at the moment, and my keyboard is being wonky, so just posting to follow for now.

One final thought (or two): focusing on increasing your income is going to have as much effect as anything else you can do, so please put that on your list. Also, quit splitting expenses based on income! Two people = 50% each. Don't subsidize your able-bodied BF.
I did it! I have a journal!
A Lot Like This
And hell yes, I am still moving confidently in the direction of my dreams...

Lepetitange3

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$300 as 2/3rds of a grocery bill for 2 adults and another $100 in booze is really high.  Even in HCOL like D.C.  Where are you shopping?  Are you buying lots of prepackaged convenience foods?  What about meat?

I'm $350-400 for 6 (2 adults, 1 teen boy, 3 Littles...the teenage boy probably eats slightly higher than the average adult).  This includes booze because where I live beer/wine is sold in the grocery store.  I might have to replenish the "hard" liquor stock twice a year.


guessingatgreen

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Guessingatgreen and Crispy sub, I am impressed with both of you. For newbs, you've got a lot figured out already.

Just want to say that kicking yourself for lost opportunities is not productive,  so quit it!

I was never a huge wage earner, was a good saver, but late to the investing game. I got to FIRE and so will you.

I'm on vacation at the moment, and my keyboard is being wonky, so just posting to follow for now.

One final thought (or two): focusing on increasing your income is going to have as much effect as anything else you can do, so please put that on your list. Also, quit splitting expenses based on income! Two people = 50% each. Don't subsidize your able-bodied BF.

Looking forward to hearing your thoughts!
noted re: the BF; we're sitting down to talk through budgeting since he's now paying all the car costs save for the split on the car insurance.
Getting an income bump is definitely always welcome and actively sought, but I usually don't plan on it since I work in the non-profit world and the areas I focus on are usually low on budgets and paying well!

guessingatgreen

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$300 as 2/3rds of a grocery bill for 2 adults and another $100 in booze is really high.  Even in HCOL like D.C.  Where are you shopping?  Are you buying lots of prepackaged convenience foods?  What about meat?

I'm $350-400 for 6 (2 adults, 1 teen boy, 3 Littles...the teenage boy probably eats slightly higher than the average adult).  This includes booze because where I live beer/wine is sold in the grocery store.  I might have to replenish the "hard" liquor stock twice a year.

We shop at Giant and have the giant card etc., so not crazy like Whole Foods or anything. We don't buy very many pre-packaged foods beyond popsicles and crap like croissants. Meat yes. A lot. The BF is a heavy meat eater for sure. I'm sitting down w my last few receipts to see wtf I'm actually spending the most on and where I can cut or look for sales etc. The booze - yeah....that's just wine and beer. That's high. No excuses for that save for DC lifestyle creep? Just nixed all single-bottles of wine and am now doing boxed wine per a recent MMM article I read and I'm implementing a no drinking save for weekends. I admit we drink most nights , which is common in DC...no idea about elsewhere since I've been here my entire legal drinking life

guessingatgreen

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Does your employer also offer a traditional 401k?

If you want to deep dive in your investments and asset allocation, we can discuss this here as well.
For that, it would be helpful to know in what kind of funds you are currently invested in your simple IRA, Roth 401k and Roth IRA (ticker symbols of the funds would be most helpful). I guess the Simple IRA would be priority, since their management fee of 2 USD/month might be low, but the expense ratios of the used funds might be less than modest.

EDIT: Just saw the update in your first post, looks like great progress in a very short timeframe.

Ok so I have no idea what most of this means but! I've attached the following because I see I have that option to share files: Copied and pasted as well
- ROTH IRA from USAA ($200)
- IRA - rolled over from old job to USAA  ($26K)
- personal USAA agressive  ($2k)
*I am in the process of rolling the 3k savings account into a Vanguard and will do the vanguard total stock market index fund and try to also get the 2K from USAA to go into that so I just have the IRA, the traditional employer 401K with match, a small Roth IRA and 2 personal investments - one with American Century and the other with Vanguard. 
- American Century investment (16K)

If that's not the right information - let me know, I can get whatever, Literally the first time I've looked at the back end of this stuff!

« Last Edit: July 14, 2017, 03:50:13 PM by guessingatgreen »

Lepetitange3

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Well don't know if D.C. Has found Aldi yet.  Good God how I love Aldi for crushing the grocery bill.  But Shoppers Food Warehouse is your friend.

PapaBear

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Great, thank you for sharing your data. I looked at the files and tried to identify the underlying funds (all my expense data is from Morningstar and according to Morningstar classification):

  • Simple IRA: I attached a more detailed analysis as a *.jpg. Overall the allocation is not so bad, with 48% US stock, 34% Intl. stock and 17% Bonds + money market, at a weighted expense rate of 0.16%. However, on top of the 0.16% expense, there is the 2 USD management fee, which adds up to another 0.15% expenses, total 0.31% expense ratio for something you can easily replicate yourself for <0.15% at Vanguard.
    However, I have the feeling that they wanted the portfolio to look very sophisticated, since some of the funds are there in triplicate with different tilts (e.g. Russel 1000 in the value, growth and market version). With 16k overall invested and some funds with <1k, this makes absolutely no sense in my opinion. Thus you might want to consider moving the Simple IRA to Vanguard as well.
  • Roth IRA: Invested in ~50% QRETQ (FDIC INSURED ACCOUNT - IRA), I guess that means cash?
                 and ~50% UCAGX (75% stocks/25% bonds) at 1.23% expense ratio - Too expensive.
    Since it is a Roth, and there is not a lot of money in the account, you might want to consider transferring the whole Roth IRA to Vanguard, they will offer you cheaper ways to invest future contributions.
  • USAA: Invested in UCAGX (75% stocks/25% bonds) at 1.23% expense ratio - In my opinion too expensive.
    But since it is in a taxable account, selling will incur capital gains tax. Can you check how much of the 2k are short-term and how much are long-term capital gains? And please stop contributing and re-investing dividends.
  • American Century investment: This is invested in AOGIX (80% stocks/20% bonds) at 1.01% expense ratio - In my opinion too expensive.
    But since it is in a taxable account, selling will incur capital gains tax. Can you check how much of the 16k are short-term and how much are long-term capital gains? And please stop contributing and re-investing dividends.

Overall, I would try to consolidate and simplify the investments as much as possible. The simpler the investment is structured, the easier the management and rebalancing will be. You can do that yourself with little effort, there is no external management needed.
Therefore, I would try to consolidate everything to one or two providers, where it makes sense. Vanguard is usually a good choice, since they can also manage IRAs. You might want to contact them and ask them about transfer options - they will be able to cover the rest.
Before transferring the taxable accounts, I would investigate the capital gains tax situation. Depending how much they gained in the mean time, it might make sense to keep them were they are right now or transferring them "in-kind" (without selling and incurring capital gains tax). But please stop contributing and re-investing dividends - the underlying funds are too expensive. If you have the information regarding the capital gains (split in long and short term capital gains), we can discuss the best next steps for your taxable accounts here.

However, first step would be to determine your target asset allocation (https://www.bogleheads.org/wiki/Asset_allocation).  I would try to keep things as simple as possible, with 3-5 asset classes maximum (e.g., Domestic stocks, International stocks, Domestic bonds, International bonds). In the implementation, the  Vanguard Total market funds might be helpful, as they over broad exposure at low cost.

EDIT: One more thing - How did you allocate your future traditional 401k and previous Roth 401k investments? In which funds will/did the 401k invest? Maybe there is a bit more room for improvement there as well. Additionally, it would be great to know whether your custodian allows in-service distributions (these are required for the Mega Backdoor Roth).
« Last Edit: July 15, 2017, 06:54:49 AM by PapaBear »

guessingatgreen

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Great, thank you for sharing your data. I looked at the files and tried to identify the underlying funds (all my expense data is from Morningstar and according to Morningstar classification):

  • Simple IRA: I attached a more detailed analysis as a *.jpg. Overall the allocation is not so bad, with 48% US stock, 34% Intl. stock and 17% Bonds + money market, at a weighted expense rate of 0.16%. However, on top of the 0.16% expense, there is the 2 USD management fee, which adds up to another 0.15% expenses, total 0.31% expense ratio for something you can easily replicate yourself for <0.15% at Vanguard.
    However, I have the feeling that they wanted the portfolio to look very sophisticated, since some of the funds are there in triplicate with different tilts (e.g. Russel 1000 in the value, growth and market version). With 16k overall invested and some funds with <1k, this makes absolutely no sense in my opinion. Thus you might want to consider moving the Simple IRA to Vanguard as well.
  • Roth IRA: Invested in ~50% QRETQ (FDIC INSURED ACCOUNT - IRA), I guess that means cash?
                 and ~50% UCAGX (75% stocks/25% bonds) at 1.23% expense ratio - Too expensive.
    Since it is a Roth, and there is not a lot of money in the account, you might want to consider transferring the whole Roth IRA to Vanguard, they will offer you cheaper ways to invest future contributions.
  • USAA: Invested in UCAGX (75% stocks/25% bonds) at 1.23% expense ratio - In my opinion too expensive.
    But since it is in a taxable account, selling will incur capital gains tax. Can you check how much of the 2k are short-term and how much are long-term capital gains? And please stop contributing and re-investing dividends.
  • American Century investment: This is invested in AOGIX (80% stocks/20% bonds) at 1.01% expense ratio - In my opinion too expensive.
    But since it is in a taxable account, selling will incur capital gains tax. Can you check how much of the 16k are short-term and how much are long-term capital gains? And please stop contributing and re-investing dividends.

Overall, I would try to consolidate and simplify the investments as much as possible. The simpler the investment is structured, the easier the management and rebalancing will be. You can do that yourself with little effort, there is no external management needed.
Therefore, I would try to consolidate everything to one or two providers, where it makes sense. Vanguard is usually a good choice, since they can also manage IRAs. You might want to contact them and ask them about transfer options - they will be able to cover the rest.
Before transferring the taxable accounts, I would investigate the capital gains tax situation. Depending how much they gained in the mean time, it might make sense to keep them were they are right now or transferring them "in-kind" (without selling and incurring capital gains tax). But please stop contributing and re-investing dividends - the underlying funds are too expensive. If you have the information regarding the capital gains (split in long and short term capital gains), we can discuss the best next steps for your taxable accounts here.

However, first step would be to determine your target asset allocation (https://www.bogleheads.org/wiki/Asset_allocation).  I would try to keep things as simple as possible, with 3-5 asset classes maximum (e.g., Domestic stocks, International stocks, Domestic bonds, International bonds). In the implementation, the  Vanguard Total market funds might be helpful, as they over broad exposure at low cost.

EDIT: One more thing - How did you allocate your future traditional 401k and previous Roth 401k investments? In which funds will/did the 401k invest? Maybe there is a bit more room for improvement there as well. Additionally, it would be great to know whether your custodian allows in-service distributions (these are required for the Mega Backdoor Roth).

Thank you so much!

I've done the following since reading your advice:
1) Changed the Simple IRA from a managed fund to a basic non-managed fund with USAA and next month will do an in-kind transfer to a Vanguard IRA.
2) Created a new Vanguard Total Market Index fund with a 3K savings account at Capital One 360 that wasn't doing anything for me save for earning .75% and started an in-kind transfer to avoid any taxes from the USAA 2K account you noted at a 1.23% expense ratio for a total of a new consolidated account with the Total Market fund for a little under 6K
3) Did an in-kind transfer from the Roth IRA to a Vanguard IRA
4) am leaving the AM Century account alone for the moment while I get the statements from them to see how much is long-term vs short term; ideally I'd do an in-kind transfer from here to the same Vanguard account to just consolidate the crap out of all these little lingering accounts, based on your advice to consolidate and simplify.
5) employer matched 401k Retirement accounts are held through  Fidelity.
6) Talked to my boss and gotten a conditional Yes to begin looking at the possibility of working 100% remote and have picked Reno NV as a good place to move to. Am starting a new thread on the MMM forum around living in Reno to get some feedback around that.

I do have 2 questions so far"
1) When you said "And please stop contributing and re-investing dividends." What does this mean and what should I do with them instead? I was told that investing the dividends was how you added to the snowball effect of compound interest.
2) I'm not sure what this means ("custodian allows in-service distributions") and I have an email out to HR to find out the answer!


PapaBear

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Again, great to see such progress in such a short timeframe. That is what I like about this forum so much.

I do have 2 questions so far"
1) When you said "And please stop contributing and re-investing dividends." What does this mean and what should I do with them instead? I was told that investing the dividends was how you added to the snowball effect of compound interest.
2) I'm not sure what this means ("custodian allows in-service distributions") and I have an email out to HR to find out the answer!

1 - Reinvesting dividends is great when your funds have a low expense rate. However, when your funds have high expenses and you don't want to contribute to them any longer, then you need to stop re-investing dividends in them as well (only applies to funds that distribute, some brokers re-invest distributions automatically in the same fund). This is basically the first step/no-brainer to do before you decide what to do with the fund. You can then manually re-invest the dividend in a low-cost index fund of your choice.

2- The in-service distributions are required to pull off a Mega Beackdoor Roth (see e.g., http://www.madfientist.com/after-tax-contributions/) - another great way to contribute to your Roth when you have maxed out your contribution limits.  It basically means that your 401k provider allows you to roll over parts of your 401k to your IRAs while still working at the employers. Some allow that while still working, others only allow rollovers when you quit your job.

---

One more thing regarding your planned in-kind transfers of taxable accounts: The good thing about in-kind transfers is that they are not considered as a sale, but as a transfer of assets. The bad thing is: You are still invested in the same (high-fee) fund, it is only held in a different account (e.g. at Vanguard).
If you decide that you want to switch the fund and the account (while taking the tax hit of the capital gains tax), then you need to sell the fund eventually.
Therefore, I would research the selling fees in both accounts first before transferring. One user has previously pointed out that Vanguard has quite high fees for selling funds of other providers. Maybe also calling them helps and asking them for a rebate as your are consolidating quite an array of funds with them. Just to make sure that they are not killing you with selling fees.

EDIT: I tried to find the relevant selling cost at Vanguard, but could not find anything outrageous: https://investor.vanguard.com/investing/trading-fees-commissions
However, no matter where you sell them, in the long run, one-time selling expenses will not matter much, but annual expenses of your funds will matter a lot

---

EDIT 2:
Quote
5) employer matched 401k Retirement accounts are held through  Fidelity.

Which funds did you pick here for your contributions? I guess Fidelity should also offer some low cost index funds tracking the total US and total International market. Any expense ratio <0.20% is good, <0.10% is great.
« Last Edit: July 17, 2017, 11:32:04 AM by PapaBear »

guessingatgreen

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Again, great to see such progress in such a short timeframe. That is what I like about this forum so much.

I do have 2 questions so far"
1) When you said "And please stop contributing and re-investing dividends." What does this mean and what should I do with them instead? I was told that investing the dividends was how you added to the snowball effect of compound interest.
2) I'm not sure what this means ("custodian allows in-service distributions") and I have an email out to HR to find out the answer!

Quote
1 - Reinvesting dividends is great when your funds have a low expense rate. However, when your funds have high expenses and you don't want to contribute to them any longer, then you need to stop re-investing dividends in them as well (only applies to funds that distribute, some brokers re-invest distributions automatically in the same fund). This is basically the first step/no-brainer to do before you decide what to do with the fund. You can then manually re-invest the dividend in a low-cost index fund of your choice.
Awesome - I set the dividends to reinvest in the vanguard and paused the auto investments in the Am Cent. investment

Quote
  2- The in-service distributions are required to pull off a Mega Beackdoor Roth (see e.g., http://www.madfientist.com/after-tax-contributions/) - another great way to contribute to your Roth when you have maxed out your contribution limits.  It basically means that your 401k provider allows you to roll over parts of your 401k to your IRAs while still working at the employers. Some allow that while still working, others only allow rollovers when you quit your job.
Thanks! I'm working on the maxing out so this is helpful context to research before I get there!


---

Quote
  One more thing regarding your planned in-kind transfers of taxable accounts: The good thing about in-kind transfers is that they are not considered as a sale, but as a transfer of assets. The bad thing is: You are still invested in the same (high-fee) fund, it is only held in a different account (e.g. at Vanguard).
If you decide that you want to switch the fund and the account (while taking the tax hit of the capital gains tax), then you need to sell the fund eventually.
Therefore, I would research the selling fees in both accounts first before transferring. One user has previously pointed out that Vanguard has quite high fees for selling funds of other providers. Maybe also calling them helps and asking them for a rebate as your are consolidating quite an array of funds with them. Just to make sure that they are not killing you with selling fees.

EDIT: I tried to find the relevant selling cost at Vanguard, but could not find anything outrageous: https://investor.vanguard.com/investing/trading-fees-commissions
However, no matter where you sell them, in the long run, one-time selling expenses will not matter much, but annual expenses of your funds will matter a lot

I think since they are so small <3k, I'm OK with the initial hit - once they all get to Vanguard, I'll give them a call and actually do the sales in both the personal 2k investment fund and the 400$ Roth IRA. The gains are so small now that the tax hit will be minimal - but thank you for the heads up; my hope is to get these things robust income earning machines that just sit there and churn out money but for now, they are so small the gains and losses are negligible.
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EDIT 2:
Quote
5) employer matched 401k Retirement accounts are held through  Fidelity.

Quote
Which funds did you pick here for your contributions? I guess Fidelity should also offer some low cost index funds tracking the total US and total International market. Any expense ratio <0.20% is good, <0.10% is great.


Checking on this now

guessingatgreen

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I've also changed my investment dividends from the American Century Investment fund to a direct deposit since they are taxed anyway and have an automatic rule in my bank account to automatically transfer any dividends from Am Cent to the Vanguard account

AccidentialMustache

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Something else to consider -- you're really early on in investing. It is a great time to dump money into a single fund category until you get to lower expense ratios. Those hit at vanguard at about $10k invested. If you only have $10k in, dump it all into that single fund until you score lower expense ratios. "Admiral Shares" are what you're looking for: VTSAX/VTIAX/VBTLX, with ratios of 0.04/0.11/0.05%. You're not at a point you need to be balanced for safety, so pick one and dive in until you can turn it Admiral. Once you have a healthy margin above the admiral minimum, then you can diversify and dump into a second class. Or even continue to feed the first till it hits ~30k and re-balance it into one of the other classes you're missing.

It's worth doing some math and seeing -- yes you may take a tax hit now, pulling out of a bad expense ratio fund, but if you gain that 1.1% back as returns annually, how long does that take to eclipse the tax hit?

guessingatgreen

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Something else to consider -- you're really early on in investing. It is a great time to dump money into a single fund category until you get to lower expense ratios. Those hit at vanguard at about $10k invested. If you only have $10k in, dump it all into that single fund until you score lower expense ratios. "Admiral Shares" are what you're looking for: VTSAX/VTIAX/VBTLX, with ratios of 0.04/0.11/0.05%. You're not at a point you need to be balanced for safety, so pick one and dive in until you can turn it Admiral. Once you have a healthy margin above the admiral minimum, then you can diversify and dump into a second class. Or even continue to feed the first till it hits ~30k and re-balance it into one of the other classes you're missing.

It's worth doing some math and seeing -- yes you may take a tax hit now, pulling out of a bad expense ratio fund, but if you gain that 1.1% back as returns annually, how long does that take to eclipse the tax hit?

So I've dumped the 3k from my savings account into VTSMX at Vanguard, rolled my 2k in personal investment from USAA to Vanguard and sold it (taking a tax hit on less than 100$ in capital gains) and dropped that into the VTSMX as well. in the process of rolling my ROTH 401k into a Vanguard account. Am drawing all my gains from the american century investment fund and instead of reinvesting, I'm automatically transferring them from Am Cent to my checking account to my Vanguard VTSMX as well. Once my 5K CD comes due, I'll also dump that into the VTSMX. The simple IRA that USAA is managing, I changed from a managed IRA to a passive one and will probably roll that over to Vanguard here in the next few months now.

PapaBear

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Great progress. As further motivation: If you continue that path, you should have access to the even cheaper Vanguard admiral shares (VTSAX) in no time.
That will cut another 0.11% in annual expenses.