Author Topic: HELP! I'm sold on FI, I'm disciplined, but I don't understand financial lingo  (Read 727 times)

FIallday

  • 5 O'Clock Shadow
  • *
  • Posts: 7
Hi all,

Without writing a novel about my backstory, I came from humbled beginnings that succumbed to lifestyle inflation the 1st year I started working out of college. When you've been poor all your life and then start earning something more than minimum wage, it feels like you've hit the lottery? After the 1st year of working, I had little to show for it, aside from a bigger waistline. Reflecting, I was like am I TRULY happier? I was disappointed in myself because I spent little money growing up :(

First book I read was Millionaire Teacher (I'm a teacher) then I stumbled upon MMM, JLCollins blog/podcast, Paula podcast, rest is history.

Here is my issue...

In short, I'm financially illiterate and don't know the "step-by-step." The book/blogs say get vanguard index funds, I call up my school district and the lady is even more clueless than me? So now we have two clueless individuals talking to each other, I want to get Vanguard but she says it's not on the list of "vendors/suppliers" and the "popular" most used by teachers in our district is a company called American Fidelity (they have a contract with the district so automatically, I'm weary of that). Anyway, I scroll through their vendor list and the only one I think I've seen before is Fidelity (no Vanguard).

Any idea where to start to make sense of all this? I'm ready to execute the plan except I feel like I've been given a broad plan with no specifics. Been listening to podcasts and reading blogs but its like tidbits here and there so I never get the full picture. I like detailed explanations and understanding the why, anyone able to help me out or point me in a good direction? I love reading/learning so where exactly can I go for Step 1 if that makes sense.

  I'm ~40-50% savings rate but that money just sitting in a bank is probably getting eaten up by inflation. I don't even have a credit card to my name as I was taught "if you can't pay it in cash you can't afford it" growing up. My only debt is a ~$18,000 student loan @ 5.85% interest, I pay the minimum on since that will be forgiven after teaching 5 years since I teach in a STEM field (so no rush to pay that off quickly right?)

Apologies it turned into a novel, but would some more stats help?

Edit: Sorry for double post, computer/server lagged, please delete other one
« Last Edit: December 15, 2018, 01:31:57 PM by FIallday »

lhamo

  • Walrus Stache
  • *******
  • Posts: 9634
  • Location: Seattle
Fidelity has some good no- or low-fee investment options, typically their index funds.

Schwab is another one of the big providers that has low-fee options.

Does the vendor list specify which funds you can invest in?  And expense ratios?  If you can pick out a few of those we might be able to suggest which ones look better from a fee/expense perspective.

Stay away from:

-- Anything with "annuity" in the name or description.  It makes absolutely 0 sense to put tax-deferred retirement funds into an annuity, but for historical reasons many school districts often have them heavily represented in their retirement plans. 

-- Anything with high buy-in or "load" fees.  American Funds have a 5.75% load on many of their funds.  They market heavily to employers, though so may show up in your plan.

Good for you for working to figure this out!  Don't apologize for not knowing this stuff.  Some of us were lucky to have had financially savvy parents, but not everyone had those privileges growing up.  What matters isn't what you were taught, but what you can learn.

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2182
  • Age: 25
Quote
I want to get Vanguard but she says it's not on the list of "vendors/suppliers" and the "popular" most used by teachers in our district is a company called American Fidelity (they have a contract with the district so automatically, I'm weary of that). Anyway, I scroll through their vendor list and the only one I think I've seen before is Fidelity (no Vanguard).
I don't know much about American Fidelity, but Fidelity is a reputable company. Right on par with Vanguard. You'd be fine using Fidelity. My assets are 50/50 split between the two.

Quote
I love reading/learning so where exactly can I go for Step 1 if that makes sense.
If you've read all of the materials, what are your specific questions? JL Collins' stock series is the first step. Were you looking for advice specific to your situation? If yes, you should make a case study.

Quote
but would some more stats help?
More information would help, yes. See here: https://forum.mrmoneymustache.com/case-studies/how-to-write-a-'case-study'-topic/

MilStachian

  • 5 O'Clock Shadow
  • *
  • Posts: 89
  • Location: New England
@FIallday; way to go, you’re killing it already.

I strongly suggest buying JL Collins’ book about financial independence. Great general financial literacy book with a FIRE tilt.  I think you’ll enjoy his writing style too.

https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926

Cwadda

  • Handlebar Stache
  • *****
  • Posts: 2182
  • Age: 25
@FIallday; way to go, you’re killing it already.

I strongly suggest buying JL Collins’ book about financial independence. Great general financial literacy book with a FIRE tilt.  I think you’ll enjoy his writing style too.

https://www.amazon.com/Simple-Path-Wealth-financial-independence/dp/1533667926

Just know that "The Simple Path to Wealth" contains the same exact information as his blog. It's just in a physical book form.

FIallday

  • 5 O'Clock Shadow
  • *
  • Posts: 7
I attached an image of the list of vendors we can choose from (Hopefully I did it correctly).

Regarding JLCollins, that's my fault in that I would listen to him being interviewed by different people and read through his various articles but I actually never sat and just read through his Stock Series. I will do that as a starting point and come back with questions I'm sure, thank you!

I'm guessing my question right now would be, selecting a vendor and then which one is the index fund to buy (like exact name and everything I'm that clueless lol), then is it 100% stock allocation? Too risky? I thought I heard JL Collins mention that if one could stomach the volatility of stocks it does provide the highest return. My idea is to contribute a fixed amount every month, set it and forget it, rebalance once a year & enjoy my life kind of thing. I think the term was Couch Potato portfolio.

I will write up a case-study! Does that warrant a new thread in the case-study or do I write it here?

P.S. I will be responding in both threads until one gets deleted as there are different responders in each thread.
P.S.S. Loving and appreciating the support thus far!

datu925

  • 5 O'Clock Shadow
  • *
  • Posts: 16
When people recommend Vanguard, they're usually recommending 1) buying index funds, in which you basically are buying large swaths of the stock market rather than individual companies, and 2) low expense ratios (i.e. fees). So those are the two things that should motivate your search of whatever retirement options are available through the district. It's definitely not the end of the world that Vanguard itself is not available if there are other options that deliver similar benefits.

I'll also point out... Vanguard is not just for retirement saving! Assuming you already have an emergency fund to your satisfaction, you can take some of that money in the bank and invest it in a taxable Vanguard account outside of work. I personally prefer to start with the tax-advantaged accounts (e.g. 401(k), 403(b), IRA) but I still put taxable investments way ahead of just keeping the money in a checking account.

Finally, I would argue that credit cards used responsibly are not only safe, but offer both short-term and long-term benefits. Down the line, you'll want to have built up credit for larger purchases, and the miles/points deals can really save you a lot of money. If you've never had a card before, definitely start slow though. Use it like a debit card with a little time lag - every month, you should pay off the full amount such that you're never paying for any interest. If you're using it to buy things that you couldn't afford otherwise, then that's a bad sign (in that sense, I still agree with the spirit of "if you can't pay it in cash you can't afford it" despite almost exclusively using credit cards for my own spending). Credit cards should be seen as just a payment method - they should impact how you pay, but not what, when, or how much you buy.


Edit: this thread got split and some of my thoughts are responses to comments from the other thread and/or repeat things that have already been said in this one, so apologies for any confusion/redundancy.
« Last Edit: December 15, 2018, 04:22:54 PM by datu925 »

datu925

  • 5 O'Clock Shadow
  • *
  • Posts: 16
FIallday, probably once you choose a vendor, they will have a list of funds that you can invest in. Some might be 100% stock, but they'll likely also have blends. A lot of these companies offer funds that are tailored to retiring in a particular year - so you could put your money in the "Retirement 2045 Fund" and it'll be a more aggressive allocation at first (90% stocks, for instance), and then over time become more conservative as you get closer to retirement. You'll probably be able to do combinations of funds as well. These are all questions you can ask in advance as well.

englishteacheralex

  • Handlebar Stache
  • *****
  • Posts: 1865
  • Age: 39
  • Location: Honolulu, HI
This was me when I started teaching, too. My 403(b) options were not good. The fees were too high. We had neither Vanguard or Fidelity available to us. There was no matching, and no vesting. It's not a great district as far as benefits go.

What I did was open up my own Roth IRA through Vanguard. The contribution limit on that is $5500/year. That's not enough to reach the astronomical rates that a lot of people on the forums save, but it's a good start, and on a single teacher's salary it was the most I could afford for a long time.

I later switched schools to a private school that only offers funds from one investment firm. The offerings are ok--fees not as low as Vanguard or Fidelity--but there is an automatic 5% contribution and another 5% match, so all I have to contribute is 5% and I get a 15% contribution, so I go with it. I have an S&P 500 index fund from them. It is the cheapest fund they offer, and the fees aren't terrible.

I am now married, and my husband is a federal employee with access to the TSP. We do 15% of his salary in that. We still invest $3000/year in my Vanguard Roth IRA, additionally. 

Keep asking around, especially if there are any kind of old, wise, battle-scarred teachers who drive crappy cars and have been in the system for a long time. There are some damn frugal teachers in every school. It's not a job that requires a lot of flashy showing off, so a lot of us wind up stealth wealthy. Somebody drinking coffee in your workroom is probably on their way to 1m. Just keep asking; keep going into HR; keep taking advantage of any of the slick-talking dudes from the investment firms who periodically will sit down with you for free and run you through your options. Get to know what reasonable fees are and what your options are for the money you have available. Don't rush into anything.

The Vanguard Roth IRA is my #1 suggestion (or a regular IRA if you don't like the whole Roth thing; some people discourage it; personally, I hedge my bets and have both a Roth and the 403(b)s). Back when I started it had a $1k minimum to start investing. I think it took me 6 months to scratch that together back when I was 24. It's an option that's open to anybody, the fees are the lowest out there, and their funds are just basic indexes.

MDM

  • Walrus Stache
  • *******
  • Posts: 9495
1) Have you clicked on "Report to moderator" to ask that the other (smaller) thread be locked?

2) Have you used 403bcompare.com as suggested on the posted screen shot?  Fidelity Investments (#1133) may or may not be your best choice, but I'll wager it is at least one of the best.

lhamo

  • Walrus Stache
  • *******
  • Posts: 9634
  • Location: Seattle
I would check the Fidelity offerings first -- highly doubt that any of the others will have lower fees.

Stay away from anything with Life, Life Insurance, or Assurance in the name -- those will probably mostly be annuities, which are pointless in a retirement account.  Scandalous that they are the bulk of what is on offer.  The website 403bwise.com has useful advice if you want to try to advocate for more low-fee options.