Help with understanding some specifics on beginning a Mustachian lifestyle

[IronMan61693]

Hello fellow Mustachians, I have a couple questions for you all that I hope you can clarify for me. I would like to say I have read information on the following matters and still have some concerns.

1: If you pay off the entire amount of the credit card charges at the bill date you will never be charged interest?

I currently have no credit card, and this is not a question about which credit card is 'best', I am just slightly confused as to if I pay the entire amount of whatever I charged on the card if I will never be charged interest. I would like to receive some of these benefits that I see for these credit cards, and I will always pay the whole amount so I never have outstanding charges, does this mean there will be no interest I would pay on these cards? I will provide two of the numerous websites I have read from that say this at the end of my post for some clarity for reading. If it changes from card to card then where on the websites can I find if this (any) particular card charges interest with me making full payments.

2: When I begin investing what are the numbers/amounts I absolutely must keep track of in order to not cause problems for myself? Particularly as far as taxes are concerned?

I have not begun investing but as soon as I am debt free (hopefully 3 months for now), and I intend to put my money into betterment; however, as I am investing and generating profit I am unsure as to exactly which numbers I must keep track of. Do I have to track exactly how much I invest and how much I make and claim any extra profits as work profit for the taxes? I apologize I am very lacking in knowledge of how taxes themselves work. I understand the different categories people fit in economically change the amount of percentage for taxes they must pay.  I understand there are things like tax harvesting etc... and I do not even know where to begin as far as what I need to know in order to protect myself.

Thank you very any advice and answers that you provide for me.

The websites I read regarding the credit cards include:

- https://premierbanking.com/resources/six-myths-about-credit-cards
- https://www.creditkarma.com/article/when-should-i-pay-my-credit-cards

[FLBiker]

1: If you pay off the entire amount of the credit card charges at the bill date you will never be charged interest?

Exactly right.  If you pay off the full amount each billing cycle you don't pay any interest.  You can do this via autopay (just say the "full statement amount") and never have to worry about it.

2: When I begin investing what are the numbers/amounts I absolutely must keep track of in order to not cause problems for myself? Particularly as far as taxes are concerned?

I haven't used Betterment specifically, but generally the way it works is that you'll get a 1099 form from the investment company and it will tell you what your gains/losses are.  Basic investments are quite easy to handle as far as taxes go -- you just plug a couple of numbers from the 1099 into your tax forms and you're good to go.

Good luck!

[IronMan61693]

Thank you very much.

[Eric]

1: If you pay off the entire amount of the credit card charges at the bill date you will never be charged interest?

Exactly right.  If you pay off the full amount each billing cycle you don't pay any interest.  You can do this via autopay (just say the "full statement amount") and never have to worry about it.

I think the only exception is if you use your CC to take a cash advance.  Those usually start accruing interest from that day, not at the end of the billing cycle.  However, if you're just making regular purchases, then you'll never be charged interest if you pay in full every month.

2: When I begin investing what are the numbers/amounts I absolutely must keep track of in order to not cause problems for myself? Particularly as far as taxes are concerned?

I have not begun investing but as soon as I am debt free (hopefully 3 months for now), and I intend to put my money into betterment; however, as I am investing and generating profit I am unsure as to exactly which numbers I must keep track of. Do I have to track exactly how much I invest and how much I make and claim any extra profits as work profit for the taxes? I apologize I am very lacking in knowledge of how taxes themselves work. I understand the different categories people fit in economically change the amount of percentage for taxes they must pay.  I understand there are things like tax harvesting etc... and I do not even know where to begin as far as what I need to know in order to protect myself.

Just a note that you don't pay any taxes on unrealized profits.  So if your investments increase from $1500 to $2000 because the stock market went up, you owe no taxes at that time.  It's only when you sell that you'll pay taxes on the gains. ($500 in this case)  If you earn dividends (which you will if you're in a broad market index fund), those are taxable every year whether they are reinvested or not.  However, it takes a really really long time to earn any amount that will have any significant effect on your taxes, so it's nothing to worry about.  For example, the S&P 500 EFT (SPY) pays out a 1.86% dividend yield per year.  So if your $2000 was all invested in that, you'd earn and pay taxes on an extra $37.20.

And as FLBiker mentioned above, the brokerage keeps track of everything for you and sends you the proper forms to file your taxes so there's not a whole lot for you to keep track of.

[mxt0133]

The only thing I can add is that you say you want to start investing after you pay of your debts, which is a great goal to have, but do you have an emergency fund?  In the event that you have a financial emergency, medical bill, get laid off from work, ect, dp you have liquid funds that you can use?  The worst thing that could happen is you invest, the investment don't do well initially and you have to sell to meet some financial obligations.  The time horizon for your investments will also help dictate what you invest in.

I would strongly recommend drafting a investment policy statement (ISP) as discussed here: http://www.bogleheads.org/wiki/Investment_policy_statement

[ShoulderThingThatGoesUp]

To get an idea what your taxes are, most investing platforms let you see your cost basis. Sale price - cost basis = capital gains, which have their own federal tax brackets. That doesn't lead to any taxes until you sell. You can also get taxed on quarterly/monthly/annual dividends that stocks or funds you own pay you.

Your state may also charge taxes on investment income, some in odd and confusing ways. Definitely use TurboTax or an accountant, at least when starting out, to make sure you're doing things right.

[epipenguin]

Assuming you're in the US - Before I invested in an account that might generate yearly taxes, I'd make sure I was maxing out my IRA contributions ($5500 a year if under 55) and 401k (through your job). If not in the US - take advantage of whatever tax advantaged retirement accounts are available in your country.

Also, have an emergency fund in cash in a savings account, as already mentioned.