Author Topic: Latest: put 5.5k of savings into traditional or roth ira before yr ends?  (Read 17648 times)

Emergo

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Hello all. This forum is pretty impressive. I've seen nothing like it, and I browse online for forums a lot. Anyway, I've read a bit about MMM and have always felt like I needed real advice from people instead of just reading the blog posts. I would gladly appreciate it if you guys could help me. I'm going to follow the stickied topic's guideline on how to make posts easy for people to help me. If it's wrong in any shape or form, please forgive me. Also, I found the spreadsheet provided very intimidating, so I did not do it. I will try to give as much information as possible.

Topic Title: General Help for 27 year-old single male, became engineer with foreign degree (Philippines, I was very blessed to find job given this) 2 years and 4 months of experience

Life Situation:
IRS filing status - single W2, I believe?
number & ages of dependents - None
(state/country of residence, age, etc.) - Houston, TX, living with my mom

Gross Salary/Wages: $65,000

Pre-tax deductions: 401k, HSA, FSA, IRA, insurance, etc. - I am not very knowledgeable about this right now (I know I should be). But I do know I'm only set at default for my 401k (without about $4k in my 401k? that's what the automated machine told me when I called last week).

--update below---
opened up my paystub and saw this:

$73.90 401k
$20.50 dental
$31.60 medical hra2
$2.60 vision

$149 ss tax
$35 medicare
$400 fed inc tax

$2 grp term life
$56 401k match


Other Ordinary Income: Nothing

Qualified Dividends & Long Term Capital Gains: Nothing

Rental Income, Actual Expenses, and Depreciation:
$200 to pay my mom for rent monthly (this actually dropped down from $300 this month, since we found another person to occupy the other room)
$21.70 Planet Fitness - Every month
$120.00 EZ Tag - Every three weeks (I go through the tollway every day, I have to)
$440.00 Tithes - Every month (please don't tell me to eliminate this, I know it's a large sum, but this is strongly part of my beliefs)
$57.66 T-Mobile - Every month
$21.95 Equifax - Every month (looking to get rid of this soon as I heard there's a free way to check credit scores once a year on a certain website)
$128.04 GEICO - Every month (I drive a 2008 Rav4 Limited, that's it)
$200-250 Gas - Every month (I commute 18 miles to get to work, and 18 miles back)
$8.65 Hulu - Every month
plus $400 on food (ROUGH estimate) - as mentioned below


Adjusted Gross Income: Umm if this means how much I get out of my paycheck every 2 weeks, it's $1780. $875 of that is put into my savings account, which sometimes I have to grab money out of since I run out of money from the other half from paying monthly debts (listed above)

Taxes: Federal, state/local, and FICA.  - I have no idea what this section is. But I have a low credit score around the 640s

Current expenses: Other than my monthly expenses... I do eat out more than I should. Yes, I should prepare food for myself to save money but I am so tired from work when I get home... I work from 8 to 5, but I get home at 6 because I have a 50 minute commute from work since traffic in Houston is HORRIBLE. My mom does time to time prepare food for me (without me paying for groceries as she does her own thing for food, she cooks for people). This might be a rough estimate on how much I spend on food monthly... but I think it's around $400. There was a month recently that I did go to Smoothie King every day and spent $13 on a large smoothie... that adds up, yes.



Expected ER expenses: Nothing

Assets: Nothing

Liabilities: Nothing, living with mom paying rent, bought my 08 rav 4 used and paid in full.

Specific Question(s):
So currently I'm close to achieving my goal of $10k emergency funds.
After that, what do I do? And yes, please help me arrange what I should do with my 401k.
I do have a goal of having my own home one day, but I'm told it is wiser to find a wife first.
I do want to get into investing, but I have no idea where and how to start. I'm read that vanguard is the best around here. But i'm still not sure if that's what I should do right away after I achieve my $10k emergency fund.
I plan to get Lasik surgery next year, so that will be around $1500.
Basically I just need a good sequence of a plan so I can go from one step to another. I already have step 1 of emergency funds... unless you guys tell me to increase that.
I just honestly don't think I earn enough (I wish i had a wife already to help me out).... but I did read the philosophy of MMM is that's a misconception and I'm just not saving enough.
I wish I had some way of earning passive income... maybe I should do audio transcription at home for $13 dollar an hour and earn some money that way.



Take it easy on me guys... I'm a newbie. A newbie who just honestly in desperate need of your help.

Might have forgotten a few things to say here, in that case I'll just post more info later...

Thanks guys.
« Last Edit: December 02, 2015, 06:49:37 AM by Emergo »

Malum Prohibitum

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What to do about your 401(k)?  You make 65,000, have no debt, and live at home with your mother.  I am not even sure why this is a question.  Contribute the maximum to your 401(k), 18,000 a year.  This is $1500 monthly, or, if you are paid twice a month, $750 a paycheck.

This will reduce your taxable income by $18000, so you will pay less in taxes.

Why do you want a $10,000 emergency fund? 

Emergo

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What to do about your 401(k)?  You make 65,000, have no debt, and live at home with your mother.  I am not even sure why this is a question.  Contribute the maximum to your 401(k), 18,000 a year.  This is $1500 monthly, or, if you are paid twice a month, $750 a paycheck.

This will reduce your taxable income by $18000, so you will pay less in taxes.

Why do you want a $10,000 emergency fund?

If I pay $750 a paycheck, I'm left with no money left for myself... then I have to eliminate the money I put into my savings account of $875 each paycheck?

Dude, that was fast! Thanks for replying btw.

Emergo

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Why do you want a $10,000 emergency fund?


In case I get laid off or any emergency event in my life or family. I thought this was the common thing people do?

Malum Prohibitum

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What to do about your 401(k)?  You make 65,000, have no debt, and live at home with your mother.  I am not even sure why this is a question.  Contribute the maximum to your 401(k), 18,000 a year.  This is $1500 monthly, or, if you are paid twice a month, $750 a paycheck.

This will reduce your taxable income by $18000, so you will pay less in taxes.

Why do you want a $10,000 emergency fund?

If I pay $750 a paycheck, I'm left with no money left for myself... then I have to eliminate the money I put into my savings account of $875 each paycheck?

Dude, that was fast! Thanks for replying btw.

You make $65000 a year.  Contributing 18000 to your 401(k) leaves you with $47,000 a year, which is about average household income in the United States (including one and two earner families), and you do not even have a household to support.

This is a no brainer, and you will thank me later.  Just do it!

Yes, I would stop putting $875 each paycheck into a savings account.  The savings account will not grow.   It just sits there.  That is why I asked why you want such a large emergency fund.

Imonaboat

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Since it brings your taxes down the max 401k contribution practically pays for itself.

10k is the emergency fund I use as a single earner of a family of 4. You could get away with less in your situation.

Emergo

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What to do about your 401(k)?  You make 65,000, have no debt, and live at home with your mother.  I am not even sure why this is a question.  Contribute the maximum to your 401(k), 18,000 a year.  This is $1500 monthly, or, if you are paid twice a month, $750 a paycheck.

This will reduce your taxable income by $18000, so you will pay less in taxes.

Why do you want a $10,000 emergency fund?

If I pay $750 a paycheck, I'm left with no money left for myself... then I have to eliminate the money I put into my savings account of $875 each paycheck?

Dude, that was fast! Thanks for replying btw.

You make $65000 a year.  Contributing 18000 to your 401(k) leaves you with $47,000 a year, which is about average household income in the United States (including one and two earner families), and you do not even have a household to support.

This is a no brainer, and you will thank me later.  Just do it!

Yes, I would stop putting $875 each paycheck into a savings account.  The savings account will not grow.   It just sits there.  That is why I asked why you want such a large emergency fund.

Okay, how long do I have to do the max contribution to 401k for? What if my life situation changes and I get married?

Emergo

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Since it brings your taxes down the max 401k contribution practically pays for itself.

10k is the emergency fund I use as a single earner of a family of 4. You could get away with less in your situation.

It brings down the $400 federal income tax I have, is that what you guys are saying?

Malum Prohibitum

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$128.04 GEICO - Every month (I drive a 2008 Rav4 Limited, that's it)
  Wow! That's a lot!  Is this full coverage?  You have enough in savings already to just about buy another one even if you totaled the car, and it was your fault.  If the wreck is somebody else's fault, then their insurance has to pay to fix your car.  I would consider self insuring the cost of this car and carrying minimum liability insurance only.

Quote
$200-250 Gas - Every month (I commute 18 miles to get to work, and 18 miles back)
  Houston has bus and rail, and they let you bring your bike on board.  Is there a bus or rail stop close enough to you to bike to it?  You could eliminate 200-250 monthly from your budget in one fell swoop.

Quote
plus $400 on food (ROUGH estimate) - as mentioned below . . .
Current expenses: Other than my monthly expenses... I do eat out more than I should. Yes, I should prepare food for myself to save money but I am so tired from work when I get home... I work from 8 to 5, but I get home at 6 because I have a 50 minute commute from work since traffic in Houston is HORRIBLE. My mom does time to time prepare food for me (without me paying for groceries as she does her own thing for food, she cooks for people). This might be a rough estimate on how much I spend on food monthly... but I think it's around $400. There was a month recently that I did go to Smoothie King every day and spent $13 on a large smoothie... that adds up, yes.
  Well, you know the answer here.  Stop doing that!  LOL!  Insert face punch here.  I do not spend much more than you to feed five people.  Pack your lunch and bring it to work.  Also, here you are mentioning how horrible the traffic is again - look into bus and rail!



Quote
So currently I'm close to achieving my goal of $10k emergency funds.
  Why so much?  What sort of emergencies are you anticipating covering?
Quote
After that, what do I do? And yes, please help me arrange what I should do with my 401k.
Index funds, Vanguard if its available in your plan.
Quote
I do want to get into investing, but I have no idea where and how to start. I'm read that vanguard is the best around here. But i'm still not sure if that's what I should do right away after I achieve my $10k emergency fund.
  I would not wait to get $10,000 together.  I would start your 401(k) maximizing now.  You are 27, you make a BUNCH of money, and you have discovered Mr. Money Mustache.  You are going to be rich in your 30s.
Quote
I plan to get Lasik surgery next year, so that will be around $1500.
  Ok, well set that aside in cash, since you are going to need it.  This is a good reason to have a savings account.
Quote
Basically I just need a good sequence of a plan so I can go from one step to another. I already have step 1 of emergency funds... unless you guys tell me to increase that.
  Increase?  I would tell you to decrease.
Quote
I just honestly don't think I earn enough (I wish i had a wife already to help me out).... but I did read the philosophy of MMM is that's a misconception and I'm just not saving enough.
  Dude, you earn plenty.  You are killing it for somebody so young.  Good job!
« Last Edit: November 07, 2015, 11:17:57 AM by Malum Prohibitum »

turketron

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I plan to get Lasik surgery next year, so that will be around $1500.

Have you had a consultation for this yet with an actual quote for the full cost of the surgery? My costs were much higher when I had Lasik (~$3500 total) so $1500 seems low to me. Regardless, if you still have the opportunity to do so, you should allocate as much as possible of the cost of the Lasik to a FSA account for 2016. The max you can contribute is $2500, but you'd be contributing pre-tax income to this so you'll save a good amount in the end. Lasik isn't cheap but I absolutely recommend it if your prescription is as bad as mine was (-6.75/-7).

Emergo

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Malum,

It's almost full coverage, without vandalism I think. What do you mean about "self insuring the cost of the car"?

I just did a quick research on bus routes. It takes approximately two hours going to work and two hours going back home. that's way too long...

Btw, so if I put in a lot of money in 401k, how does that help me in the future? Once it gets to 100k, I can retire? Sorry, I'm a newbie.

If I do put that $750 into 401k every two weeks. I'll only have about $500, maybe less, a month to do with what I wish. So this goes into Vanguard or house saving?

What about if I want to get married... Don't i need to save up for a wedding and a ring too?

Thanks guys!! Love ya!

Emergo

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I plan to get Lasik surgery next year, so that will be around $1500.

Have you had a consultation for this yet with an actual quote for the full cost of the surgery? My costs were much higher when I had Lasik (~$3500 total) so $1500 seems low to me. Regardless, if you still have the opportunity to do so, you should allocate as much as possible of the cost of the Lasik to a FSA account for 2016. The max you can contribute is $2500, but you'd be contributing pre-tax income to this so you'll save a good amount in the end. Lasik isn't cheap but I absolutely recommend it if your prescription is as bad as mine was (-6.75/-7).

My friend told me that he used a Groupon deal to get it down to $1500.

I'm still not sure how FSA works and what you mean by pre-tax income...

Malum Prohibitum

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I'm still not sure how FSA works and what you mean by pre-tax income...
  Pretax income means that it is a deduction that comes out before your income taxes are calculated.  In other words, you are not taxed on it.  It is tax free money.

So, for example, your employer deducts health insurance premiums from your paycheck.  You pay no tax on that money, even though you earned it.

Your $73.90 put into your 401(k)?  Same deal.  It is not taxable.  It is pre-tax.

Does that make more sense?

Putting money into your 401(k) reduces your taxable income from $65000.  Assuming your are paid twice monthly, the $73.90 means you are reducing your taxable income by 1773.60 a year, so you pay taxes only on $63,226.40 instead of on the full $65,000. 

If you increased your 401(k) contribution to the maximum permitted for employees, or 18,000, then only $47,000 of your income would be taxable.  The 18000 would escape taxes (or, technically, the tax would be deferring until you withdrew money from your 401(k)).

The bottom line is that it would not mean that $750 was missing from your paycheck.  It would be $750 minus whatever your marginal tax rates are, so less than $750 would be missing even though the entire $750 gets invested.
« Last Edit: November 07, 2015, 11:52:15 AM by Malum Prohibitum »

Malum Prohibitum

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Malum,

It's almost full coverage, without vandalism I think. What do you mean about "self insuring the cost of the car"?
Just this.  Reduce the insurance coverage to the minimum liability coverage.  If you get drunk and drive off the road and crash into a tree, totaling your Rav4, you have enough cash to go out an buy a replacement used car. 

I realize the RAV4 is the largest asset in your life right now (but not for long!), but you are overinsured.  You can afford to replace it, maybe with a slightly cheaper car, but you can afford to replace it.  Losing the car to a crash you caused would not be financially devastating. 

So see if you can knock that insurance premium down from 128.04 (1536 a year) to less than fifty bucks a month.

Then you will have just that much more money to buy your future.
« Last Edit: November 07, 2015, 11:52:38 AM by Malum Prohibitum »

boarder42

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Malum,

It's almost full coverage, without vandalism I think. What do you mean about "self insuring the cost of the car"?

I just did a quick research on bus routes. It takes approximately two hours going to work and two hours going back home. that's way too long...

Btw, so if I put in a lot of money in 401k, how does that help me in the future? Once it gets to 100k, I can retire? Sorry, I'm a newbie.

If I do put that $750 into 401k every two weeks. I'll only have about $500, maybe less, a month to do with what I wish. So this goes into Vanguard or house saving?

What about if I want to get married... Don't i need to save up for a wedding and a ring too?

Thanks guys!! Love ya!

i dont quite understand how you're an engineer and cant understand the math with all these questions you ask

the 1500 per month doesnt hit you at 1500 per month.  at 65k you're in the 25% bracket... texas doesnt have state income tax so you are only going to see an 1125 per month hit.

128 on car insurance is bat shit crazy on a monthly basis.  shop around find something lower.

400 on food for one person - bat shit crazy

250 for gas - bat shit crazy

even if we assume this and dont decrease your expenses posted one bit. you're at 1600 a month or 19.2k per year.  YOU HAVE MONEY GOING SOMEWHERE ELSE

so lets say youre spending 25k per year. give you some fluff

you make 65k - contribute 18k to your 401k now you're making 47k

taxes on 47k - 12k
FICA on 65k - 5k

so now you have 30k leftover after just maxing your 401k

now to the what do i need to retire.  You gotta do some reading around here man...

25x your expenses.  so righ now lets say you're spending 30k annually.  you need 750k to retire. 

good luck ... you're an engineer.  look around the site take it in do some math.

boarder42

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also if you like the SUV and feel like you have to have one.  since you said you have an hour commute over 18 miles i assume you're sitting or traveling under 40MPH alot.  get a ford escape hybrid i get 45MPG in the summer in mine and 38 in the winter. 

i know you said its non negotiable but that 440 tithe is 10% of your income.  is there anyway to donate your time right now?  If you were investing this now you could tithe more later in life and make up the contributions.

how can you have 0 expected expenses in ER.  are you planning to buy a farm and live a sustainable life as a hermit? 

Emergo

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Malum,

It's almost full coverage, without vandalism I think. What do you mean about "self insuring the cost of the car"?

I just did a quick research on bus routes. It takes approximately two hours going to work and two hours going back home. that's way too long...

Btw, so if I put in a lot of money in 401k, how does that help me in the future? Once it gets to 100k, I can retire? Sorry, I'm a newbie.

If I do put that $750 into 401k every two weeks. I'll only have about $500, maybe less, a month to do with what I wish. So this goes into Vanguard or house saving?

What about if I want to get married... Don't i need to save up for a wedding and a ring too?

Thanks guys!! Love ya!

i dont quite understand how you're an engineer and cant understand the math with all these questions you ask

the 1500 per month doesnt hit you at 1500 per month.  at 65k you're in the 25% bracket... texas doesnt have state income tax so you are only going to see an 1125 per month hit.

128 on car insurance is bat shit crazy on a monthly basis.  shop around find something lower.

400 on food for one person - bat shit crazy

250 for gas - bat shit crazy

even if we assume this and dont decrease your expenses posted one bit. you're at 1600 a month or 19.2k per year.  YOU HAVE MONEY GOING SOMEWHERE ELSE

so lets say youre spending 25k per year. give you some fluff

you make 65k - contribute 18k to your 401k now you're making 47k

taxes on 47k - 12k
FICA on 65k - 5k

so now you have 30k leftover after just maxing your 401k

now to the what do i need to retire.  You gotta do some reading around here man...

25x your expenses.  so righ now lets say you're spending 30k annually.  you need 750k to retire. 

good luck ... you're an engineer.  look around the site take it in do some math.

Lol, I like your post bro.

It's not the math that's hard. It's all the linggo and how those terms are applied, I find difficult understanding just yet.

But I'm learning.

As far as the car insurance, I already went through shopping for cheaper insurance. I might just follow the guy's advice and remove the other stuff and only do liability...


Emergo

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also if you like the SUV and feel like you have to have one.  since you said you have an hour commute over 18 miles i assume you're sitting or traveling under 40MPH alot.  get a ford escape hybrid i get 45MPG in the summer in mine and 38 in the winter. 

i know you said its non negotiable but that 440 tithe is 10% of your income.  is there anyway to donate your time right now?  If you were investing this now you could tithe more later in life and make up the contributions.

how can you have 0 expected expenses in ER.  are you planning to buy a farm and live a sustainable life as a hermit?

ER is early retirement, right? I'm not sure... what should I have in there? That's the 401k right?

Like I said, take it easy on me guys... lol

Yeah, the tithing is pretty much non-negotiable.

boarder42

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ER is early retirement

Retirement is leaving the work force

Early means doing something sooner than others in this case.

Expenses are the money you spend

so ER expenses would be the money that you plan to spend annually when youre no longer working at a younger age than 65

The ways in which you accrue funds such that you have 25x your expenses are numerous

Diffenent savings vehicles available to you
1. Tax Advantaged savings accounts are best your 401k is one of these accounts others include
    a. IRA - Individual Retirement Account (Roth - Post Tax maybe your only option based on income level)
    b. HSA - Health Savings account - you have an HRA at work so you can open one of these to avoid taxes on health related expenses

2. Taxable account - An account you put funds in after you have maxed out all Tax advantaged savings account.

what i would do if i were you.

1. Max your 401k
2. Max an HSA - see if your work has this as an option to come out of your paycheck as it will avoid FICA (FICA is the money the govt takes away from you for social security and medicare)
3. Max your IRA or Roth IRA depending on what you have decreased you taxable income to
4. fund a Taxable account.


Emergo

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ER is early retirement

Retirement is leaving the work force

Early means doing something sooner than others in this case.

Expenses are the money you spend

so ER expenses would be the money that you plan to spend annually when youre no longer working at a younger age than 65

The ways in which you accrue funds such that you have 25x your expenses are numerous

Diffenent savings vehicles available to you
1. Tax Advantaged savings accounts are best your 401k is one of these accounts others include
    a. IRA - Individual Retirement Account (Roth - Post Tax maybe your only option based on income level)
    b. HSA - Health Savings account - you have an HRA at work so you can open one of these to avoid taxes on health related expenses

2. Taxable account - An account you put funds in after you have maxed out all Tax advantaged savings account.

what i would do if i were you.

1. Max your 401k
2. Max an HSA - see if your work has this as an option to come out of your paycheck as it will avoid FICA (FICA is the money the govt takes away from you for social security and medicare)
3. Max your IRA or Roth IRA depending on what you have decreased you taxable income to
4. fund a Taxable account.

Noted, sir.

I'm assuming HSA is FSA? I guess HSA is one of those things I have to ask my HR.
IRA is something I have to speak to my HR too, I suppose.

4. Fund a taxable account... i think this is one I need more clarification on.

You are very helpful, thank you.

boarder42

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FSA's and HSA's are different

FSAs suck

an IRA is something you do on your own outside of work same as a taxable account

YOUR COMPANY DOESNT FUND YOUR RETIREMENT YOU DO

Malum Prohibitum

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Lol, I like your post bro.

It's not the math that's hard. It's all the linggo and how those terms are applied, I find difficult understanding just yet.

But I'm learning.

As far as the car insurance, I already went through shopping for cheaper insurance. I might just follow the guy's advice and remove the other stuff and only do liability...
Have you had a chance to read this one yet?  http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

Malum Prohibitum

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4. Fund a taxable account... i think this is one I need more clarification on.
Well, note that he listed that one last, but what he means is something like this, go to Vanguard online and open and account and start stuffing money in VTSAX like crazy.  That is, whatever extra money you have left over after fully funding tax advantaged accounts like your 401(k) at work and an IRA that you open (which you can also do at Vanguard online).  IRAs are limited to a maximum contribution of $5500 a year.

Take full advantage of your tax advantaged accounts first.  Then invest in taxable accounts.  Taxable just means no tax advantage.  You are investing with after tax dollars and any income from the investing is taxable.

Malum Prohibitum

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FSAs suck
  LOL!  What boarder42 means is, in an FSA you lose whatever your do not use each year.  An HSA can sit there and grow into your old age.  You own it.

turketron

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FSAs don't suck if you have a specific expense coming up that you know you'll be paying for, like LASIK, as he mentioned.

boarder42

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i just find it utterly astonishing we allow people to get thru a school system and know this little about money and taxes. 

i see you said your degree is from the philippeans meaning you may not have come up thru the school system here. 

but to make the comments that you have made (which i really think YOU DONT KNOW), its just crazy.  People spend 4-5 years getting an undergraduate engineering degree but there is no required class on what to do with the truck load of money you will be given when you leave school.  I mean even people who do personal finance for others don't really understand how all this works.

Malum Prohibitum

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i just find it utterly astonishing we allow people to get thru a school system and know this little about money and taxes. 

i see you said your degree is from the philippeans meaning you may not have come up thru the school system here. 

but to make the comments that you have made (which i really think YOU DONT KNOW), its just crazy.  People spend 4-5 years getting an undergraduate engineering degree but there is no required class on what to do with the truck load of money you will be given when you leave school.  I mean even people who do personal finance for others don't really understand how all this works.
  If I moved and took a job in the Phillipines I would have no idea about investing for retirement and taxes and such over there.  I would have to learn about PERAs and all sorts of new stuff.  These things have to be learned.
« Last Edit: November 07, 2015, 01:25:24 PM by Malum Prohibitum »

Emergo

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The thing about my commuting expenses... it basically offsets if I had been renting an apartment. Sure, it makes my vehicle depreciate more by the miles I put in it, but still...

Another thing I forgot to mention...
How come no one has mentioned saving up for a down payment on a house? Is that against the MMM rule?

I may need to save up for one for my dad... who is basically homeless and I may need to help buy him a small home. ($50k) is this too much and will put a damper on my plans? Or does anyone have an alternative on what I can do for my dad? Move into an apartment with him? He basically has nothing for his future and I am his only son. He works a 10 dollar security job. Please help.

Murse

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The thing about my commuting expenses... it basically offsets if I had been renting an apartment. Sure, it makes my vehicle depreciate more by the miles I put in it, but still...

Another thing I forgot to mention...
How come no one has mentioned saving up for a down payment on a house? Is that against the MMM rule?

I may need to save up for one for my dad... who is basically homeless and I may need to help buy him a small home. ($50k) is this too much and will put a damper on my plans? Or does anyone have an alternative on what I can do for my dad? Move into an apartment with him? He basically has nothing for his future and I am his only son. He works a 10 dollar security job. Please help.
This community will drastically change the projection of your life if you stick around to learn. Home ownership beliefs are split here, everyone thinks given the option it has to be a smart financial move, but many believe the non tangibles of owning a home sometimes outweigh the financials. The advice here is to know if the home is a good buy when compared to renting.
I prefer videos so here is this http://youtu.be/ZH_bIPkozjg
But here is the original Blog post as well http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

As for helping your dad many people feel differently about this too. My personal belief is that you have to help yourself before you help others. Personally, I feel that I have a future to protect but will help out where I can. In this case you need to find out what is better in your market, renting vs buying (you are never going to beat your current rental arrangement with mom,) and then decide what you can do for him.

SKL-HOU

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Malum,

It's almost full coverage, without vandalism I think. What do you mean about "self insuring the cost of the car"?
Just this.  Reduce the insurance coverage to the minimum liability coverage.  If you get drunk and drive off the road and crash into a tree, totaling your Rav4, you have enough cash to go out an buy a replacement used car. 

I realize the RAV4 is the largest asset in your life right now (but not for long!), but you are overinsured.  You can afford to replace it, maybe with a slightly cheaper car, but you can afford to replace it.  Losing the car to a crash you caused would not be financially devastating. 

So see if you can knock that insurance premium down from 128.04 (1536 a year) to less than fifty bucks a month.

Then you will have just that much more money to buy your future.

I would strongly recommend against this type of advice for a person who has no idea what pre-tax income, or any other finances are. If he gets in an accident that is his fault, he will not understand why the insurance is not paying for his car.

OP: i think before you do anything, you need to take a class, read up, whatever you need to do to learn and understand all of these very basic things.
Personally, i would not do anything internet strangers tells you without fully understanding the consequences.
« Last Edit: November 07, 2015, 03:09:55 PM by SKL-HOU »

Dee18

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I personally would keep collision insurance on my car with $1000 deductible.  I suspect you have a lower deductible to have rates that high...or a bad driving record.  As for those smoothies, get an immersion blender like this (currently $25 at Homegooods) and some protein powder and make your own:
http://www.amazon.com/Conair-Cuisinart-CSB-75BC-Blender-Brushed/dp/B00ARQVM5O
They will cost 1/5 as much.
For cooking, do it on the weekend and freeze/refrigerate enough for the week.  Planning ahead just a little bit will save you thousands.

MDM

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I'm going to follow the stickied topic's guideline on how to make posts easy for people to help me. If it's wrong in any shape or form, please forgive me. Also, I found the spreadsheet provided very intimidating, so I did not do it.
If, as it appears from previous posts, you are starting with almost no financial knowledge, the spreadsheet probably is intimidating.  I'll suggest, however, that you go back and give it another try, posting specific questions here as needed.  By doing so, it should help you understand
 * what your taxes - and thus your withholding amounts - should be.  For relatively simple cases (e.g., yours) it will do a very good job calculating 2015 federal, SS, and medicare taxes based on your inputs.
 * where your money is going (the spreadsheet itself won't tell you this, but does remind you that you should be keeping track)
 * opportunity for investing (i.e., how much could you be investing) and opportunities for tax savings
 * a rough idea of how long - given current conditions - it might be until you would be FI.

Quote
Adjusted Gross Income: Umm if this means how much I get out of my paycheck....
This is a term used for federal tax returns - see Form 1040.  We ask for this as a double check on what you have entered for gross income and pre-tax deductions.

Quote
Taxes: Federal, state/local, and FICA.  - I have no idea what this section is.
How much you pay for each.  For FICA, pay=withhold.  For Texas, state=0.  For federal, the spreadsheet (or TaxCaster, etc.) can tell you the annual amount you should owe, and you can compare that with the amount you are having withheld.

Quote
Specific Question(s):
So currently I'm close to achieving my goal of $10k emergency funds.
After that, what do I do?
See the 'Investment Order' tab in the spreadsheet.

Emergo

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Ok, thanks guys.

What do yall think of Dave Ramseys advice? Yay or nay?

Malum Prohibitum

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Ok, thanks guys.

What do yall think of Dave Ramseys advice? Yay or nay?
  For getting out of debt?  It's great for focusing on that task.  For investing for FI, I do not so much like his advice.  After getting rid of debt, he suggests 3-6 months of emergency savings, then investing only 15%, then college funding for children  . . .  Those with a focus on FIRE are going to have to do way better than that on savings rate and put their money to work.

Murse

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Ok, thanks guys.

What do yall think of Dave Ramseys advice? Yay or nay?

Dave Ramsey is great for the general population, especially those in debt. His advice is designed for the person that works from 20-60years old, and as will be noted by many his investing advice is sub par. Having said all of that, he is a great starting point, and likely started many here.

Malum Prohibitum

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OP: i think before you do anything, you need to take a class, read up, whatever you need to do to learn and understand all of these very basic things.
Personally, i would not do anything internet strangers tells you without fully understanding the consequences.
  Very good advice.  Of course, reading here and on MMM's blog should be a part of that.

Emergo

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So it's Monday, and im going to get started on doing the things with my 401k like you guys said. Question though,

I was told that i can talk to someone in my company about arranging where my 401k investments are allocated and put them where i want them? What does this mean?

So theres a penalty if i want to grab money from my 401k before the age of 60... how will i be able to retire early if this is this is the case? Theres a penalty of 50% i believe? And its taxed?

So does that mean my main source of income if i get to retirement early is the interest i gain from my investments in mutual funds? Is that how this works?

Btw, what do you guys think of news coming out of iran today ? That might mean bad news for the security of my job, yeah?

boarder42

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Its a 10% penalty and then you pay normal income taxes on it.

There are many ways to get your money out of your 401k avoiding this penalty.

Start with saving the max to your 401k then you can learn how to get it out but there are 2 main ways a Roth ladder, and SEPP.(yeah more acronyms but just know you can get it without penalty)

I expect you have a self managed 401k meaning you can go online setup an account and set your asset allocation.  You need to provide us a list of what you can invest in and what the fees are.  This will dictate where you money should go.  Look for the fund ticker symbol like VTSAX and the Expense Ratio this is what we would need to help you direct your investments appropriately

Emergo

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I found the ticker symbols, but i'm not sure which number is the expense ratios. Ill compile the list today once i know. You guys are a lifesaver.

boarder42

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there should be a tab you can go to which allows you to review investment options/research and it should have a column showing expense ratio.  its usually next to the 1yr, 5yr, 10yr annual percentage gains.

Malum Prohibitum

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Emergo,

Just enter each one of those ticker symbols into Google, and you will get all the information you could ever want.  For example, I entered your fist ticker symbol into Google and got this as one of the responses http://www.morningstar.com/funds/XNAS/WSMIX/quote.html showing a 1.15% under expenses (really high).

Just Google each one of them if the information is not readily available on the 401(k) web site (although it should be there, somewhere).

 

Emergo

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Domestic:

WSMIX, 4.16%

 

Global:

ARTIX, 1.17%

ODMAX, 1.33%

OSMAX, 1.22%

 

Mid-cap:

VEXAX, 0.10%

 

Large/Multicap:

ABSIX, 0.89%

PEYAX, 0.98%

PINVX, 1.08%
Putnam S&P 500 Index Fund (No Ticker symbol), 0.35%

PABGX, 0.98%

 

Income/bond:

PGBOX, 0.98%

PTTAX, 0.85%
PDINX, 0.97%

 

Capital Preservation:

PDDXX, 0.49%

 

Mixed Asset:

OAKBX, 0.74%

PABAX, 1.00%

PACAX, 1.04%

PAEAX, 1.07%

 

Right now, everything's in PABAX ($4,500)

Malum Prohibitum

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Right now, everything's in PABAX ($4,500)
  1% expenses

Emergo

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How did you get 1 when i got 4.16% on my 401k site?

Emergo

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boarder42

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i'm not familiar with VEXAX very much, (maybe someone else here is) but my top 2 choices for all of you money would be

VEXAX exp ratio .1% (lowest expense ratio you have)
or that Putnam S&P 500 looks like it has a .35% expense ratio

PABAX is awful at a 1% expense Ratio

what is an Expense ratio its the money the financial institution is taking from their profits and or losses each year

ie.

if the holdings in PABAX go up 5% this year you will only see PABAX go up 4%

Thats why this is a huge deal.

I'd probably do some research on VEXAX and the end up with all my money there or in the Putnam S&P index fund.

boarder42

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How did you get 1 when i got 4.16% on my 401k site?

the 4.16% youre seeing on your site isnt an expense ratio its likely your YTD profit on your investments.

PARedbeard

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Emergo: expense ratios will be key here as well as your long term plans. Go through each of those symbols, see their expense ratios, and look at their top 10 holdings. You want to knwo what you are buying into. If you are going with an index fund (which will have one of the lowest expense ratios, probably), make sure you know WHICH indexes you are investing in (i.e. which country and what type of stocks/securities).

 And just to add my two cents to the top discussion: for me, my 401k isn't my golden trail to FI (financial independence) or RE. I am hoping to live a frugal enough life that I will be able to achieve FI even without that money. Instead, it is my safety net. I know that by contributing to it now, it assures me financial resources when I get older (I'm also 27). That chunk of change waiting for my when I'm 59 1/2 means that I will have a continuity of whatever life I choose to lead in FI. Additionally, by contributing, I do two important things: 1) I limit my available spending power (a big thing for me, as I used to be a spendthrift), and 2) the IRS sees my "earned income" as being essentially lower, making me pay less in taxes. Those two combined effects are pretty powerful. It helps me discipline myself as well as limits my tax burden.

Good luck!

Emergo

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Okay... so research VEXAX.

Now I just have to wrap my head around IRA and Roth IRA and how im going to approach those.

Emergo

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But Redbeard, you can take your money out without any penalty before 60 like boarder said? Your golden trail is just spending less??
« Last Edit: November 09, 2015, 12:24:25 PM by Emergo »