Welcome to the path of FI!! Like you, I was there not too long ago and I could not believe that I never came across this concept before. I am sure you will be super glad in a couple years. After two years on the path of FI, the only thing I am not happy about is why did I not start it sooner. Seeing that you are starting in your early thirties, I have nothing but envy :-)
Before I answer your questions, I would recommend one step that was super useful for me. Try to come up with a story on what Financial Independence means to you. I was struggling with direction until I came up with my story and then sacrifices along my FI journey became very easy. Here is what FI means to me:
https://humblefi.com/category/financial-independence/financial-independence-to-me/That said, here are answers to your question.
Questions for you season investors:
>> I assume need to open a taxable account with Vanguard such as an brokerage account to invest the 142k. But any gain/losses I made get I have to report this on
>> my tax returns every year going forward correct?
Yes. If you use Turbo Tax, it will import everything for you :-) If not, just use the tax statement that Vanguard sends you...it is pretty easy to do.
Depending on whether you purchase a mutual fund OR an ETF, the tax treatment is slightly different, but for that, we will need your tax bracket info.
>> 2. I do plan on purchasing a home one day when I can actually afford it but for now I believe stocks are a better option to build wealth. What are your thoughts?
You will find arguments for both sides on this one. I would recommend you read up on what Financial Samurai has to say. He is amazing like MMM but a different kind. Take a peek here:
http://www.financialsamurai.com/which-is-a-better-investment-real-estate-or-stocks/>> 3. Should I only invest VTSAX or should I diversify for the long term or is there better options with low cost expense ratios that you would recommend?
Develop your FI story first and then you can look for appropriate answers. For example, factors like if you need income from this fund to support early retirement, OR if your tax bracket is low/high, OR you are not going to touch your money for the next 30 years, etc can change your investment vehicles.
That said, it might be better to add a bond component to your investment to act as a buffer for market variations.
>> 4. Do you guys think 8k in cash is to high for an emergency fund? Do you think I should shovel more into my investments because of the lost in potential opportunity
>> cost.
This depends on how much you need to survive each month in the event of job loss or other emergencies. If your monthly budget is $800, then $8K is 10 months expense....a nice cushion. If your monthly budget is $2000, then 4 months of emergency money may be cutting it too short. But, if you work in a super stable job, then 4 months is more than appropriate.
Hope that helps. Best wishes for your FI journey!