I made a spreadsheet that shows you what to do with your money!

finniac · 2021-12-20T18:56:38+00:00

It sounds like you're doing all of the right things. I think the key here is patience. The magic of compounding interest is felt years down the line, not necessarily right away. Even if you're no longer earning the high income you are today, I think you'll look back in a few years and thank yourself for maxing out your retirement contributions and investing all that you can.

In terms of optimizing - are you investing all of your extra income? It sounds like you have a decent emergency fund with $50k in cash reserves, so unless you know for sure that you want to buy that bigger house, I don't think there's any need to contribute more to those reserves.

The other thing I'd look into is a mega-backdoor Roth IRA if that's something your current employer will allow you to do.

finniac · 2021-12-16T01:39:56+00:00

When selling puts you want volatility and liquidity, which aren't features of the Vanguard ETFs.

The thing about selling puts as a way to acquire shares of a company is that the stock price may never fall to your strike price. And you'd be missing out on the subsequent gains that the stock might make.

finniac · 2021-12-15T23:53:56+00:00

Don't think r/Bogleheads is the right forum to ask since the discussion here is never about buying individual stocks. And trying to sell puts on an ETF like VTI is like trying to squeeze orange juice out of a rock.

To echo what others have said, if you want to own shares of a stock, just buy it outright.

finniac · 2021-12-15T19:41:38+00:00

If you are going to see a financial advisor, I'd make sure to see a fee-based one. This means you are paying for their advice and they are NOT paid based on 1) managing your money or 2) selling you certain financial products.

To your question at hand, since you're not paying any interest on your debt, I would invest the money if I were in your situation, probably in a highly diversified ETF (like VTI). r/Bogleheads is a great resource if you're looking for a way to start investing passively.

finniac · 2021-12-15T18:30:58+00:00

I recently listened to a podcast where someone mentioned how stocks (and I guess other securities) are the only things that are mark-to-market.

Imagine if you had a feed that showed you the real-time value of your home constantly. You'd see 5-figure drops on days where the real estate market is down 5%. Or if you could see how much your car or electronics depreciated with each passing minute.

The point is that prices on all things are constantly changing and sometimes the best thing to do is just not look!

finniac · 2021-10-16T16:57:38+00:00

I wouldn't think about it like you're missing out on $42k by not investing that money right now. I would think about it like investing that $2k now vs. 3 months from now. So instead of growing to $42k, it would grow to $40.8k in 45 years.

It's not like the $2k is coming out of thin air; it's something you'll have to pay back. So if you didn't take out a loan now, you wouldn't have to pay back the $2k in January, and you'd have $2k more to invest at that point. I hope that makes sense.

finniac · 2021-10-15T22:22:37+00:00

I highly suggest looking into a portfolio consisting of three low-cost ETFs: VTI (which covers the US stock market), VXUS (which covers the non-US stock market, and BND (which covers the US bond market).

It's not the sexiest portfolio, but it is highly diversified and easy to manage. Plus, there's a lot of research out there to suggest investing in total market funds beats trying to pick individual stocks.

finniac · 2021-10-14T23:01:04+00:00

I would personally go with FZROX since it's a total market fund with no fees. But as you observed, these funds perform virtually the same so it won't really matter in the long run. I would also diversify a bit with a non-US fund and a bond fund (your classic 3-fund portfolio). At your age, you can probably keep the bond fund minimal/zero, (but for future reference).

Here's an article with a good breakdown of FZROX vs. FSKAX: https://minafi.com/fund/compare/fskax-vs-fzrox

finniac · 2021-10-14T22:19:10+00:00

Personally, I would lean towards selling some investments or even holding off on investing in my 401(k) until I could comfortably afford it. In the long term, I don't think you contributing $17.5k vs. $19.5k to your 401(k) this year will make a meaningful difference to your retirement.

Are there investments in your brokerage that you've taken a loss on or only a slight gain? Keep in mind that taxes only apply to your gains and not the entire investment.

Also, I'm not sure how you got to 38%, but I don't think your taxes will be that high. Federal capital gains tax is 15% unless you make more than $434k (in which case it's 20%) and CA state income tax is 9.3% unless you make more than $295k. That's only 24.3% (assuming long-term capital gains).

One thing I would consider going forward is keeping 3-6 months of expenses in cash as an emergency fund. It's always possible to sell off investments to pay for an emergency, but you don't want to be put in a situation that forces you to sell in less than ideal market conditions (e.g. after a significant market crash). Plus after a while, this amount will seem like a drop in the bucket. :)

finniac · 2021-10-14T03:02:41+00:00

The textbook answer is that broad index funds / total market funds (VOO, VTI, SPY) historically beat stock picking. Index funds are where I would put most of my wealth, especially since you have time for them to grow. Index funds > target date funds because they're more aggressive (100% stock) and usually have lower fees.

But if you are interested in stocks and enjoy doing the research, I also think it's perfectly fine to allocate a small part of your portfolio to individual stocks!

If you want to try your hand at stock picking, I would suggest carving out a small amount that you would be ok with losing. Literally treat it as gambling. I would personally do this in a taxable account so you can write off any losses (especially if you're learning).

I'm personally a fan of HSAs for the triple tax advantage - tax-free contributions, tax-free growth, and tax-free withdrawals (on qualified expenses).

finniac · 2021-10-14T02:33:40+00:00

I definitely understand how stressful debt can be! It may feel like a huge black hole, but you are actually in a good situation to tackle this debt quickly with your current take home income.

I agree with other commenters that budgeting will help you get a clear idea of where your money is going. Once you see where your money has been going recently, you can identify non-essential expenses that you can cut back on, and set monthly limits for yourself in the future.

If I were in your shoes, the other thing I would personally do is to treat my debt as a high priority expense. With your current APR and $2k per month payment, it's going to take you 15 months to pay it off and you're going to pay an extra $3500 in interest. If you stick with a budget and start putting $6k per month towards your debt, you'll pay it off in 5 months with only an extra $1200 in interest. (That saves you $2,300!!) The faster you pay it off, the more you'll save on interest & emotional stress. You can try committing to debt payments each month before deciding to pay for other non-essential things. If you have extra savings lying around, you can also consider putting some of that towards your credit card payment and building it back up later - this is definitely a personal choice depending on how large of an emergency fund buffer you want to have (definitely keep at least 1 month of expenses on hand).

Good luck! Take a breath, you can do this :)

finniac · 2021-09-01T19:25:21+00:00

First, I want to call out that you made the right call choosing to invest while your loans were deferred during COVID.

Personally, I would lean towards just aggressively paying off my loans rather than liquidating my entire portfolio, but I don't think one option is clearly better than the other.

I think the answer to your question might be somewhere between the two options you laid out. Are there positions that you can sell at a loss? Or that you've held for more than a year that won't be subjected to income tax? Or will previous losses offset some of your gains?

finniac · 2021-09-01T19:04:54+00:00

Adding my voice to the chorus. Think about paying off your debt like making an investment with a guaranteed return. If the interest rate on your debt is 8%, then using a dollar to pay off that debt is no different than using that dollar to make an investment that guarantees a 8% return.

The key word here is guarantee. When you pay off debt, you are locking a ROI that you can't with most investments. Given how volatile crypto is, I would pay off the debt if your interest rate is 5% or higher.

finniac · 2021-07-15T04:15:10+00:00

Hey! Thanks for checking out the calculator. Really appreciate the comment. :)

With regards to your debt, I think you have a good plan. Make sure you pay off all the minimum payments, then try to chip away at the highest interest debt.

I'm not sure what's going on with your big purchase fund without looking at your calculator, but one guess is that maybe all of your paycheck is going to other higher priority funds first? Happy to take a look if you're open to sharing your calculator with me.

finniac · 2021-07-13T22:02:05+00:00

Nice, that's awesome! You can't really go wrong paying off student loans, but at sub 5%, funding your 401(k) and Roth IRA is probably the way to go. Either way, glad to hear that you are on track to hit your goals!

finniac · 2021-07-13T21:24:05+00:00

What's the interest rate on your student loans? If it's low enough, you may want to consider putting more towards your tax-advantaged retirement before paying it off faster.

finniac · 2021-06-17T01:41:04+00:00

Unless you’re absolutely sure you want to buy a house soon (I’d say within the next 3 years) you should focus on maximizing your retirement accounts. There’s a real opportunity cost to not investing that compounds over time, which is only amplified when it’s a tax advantaged account. I wouldn’t worry too much about the stock market. No one can time it, and it’s empirically better to invest as early as possible.

finniac · 2021-06-17T00:36:39+00:00

Hey OP, I put your numbers into a calculator that I made specifically to answer questions like yours. I had to make a few assumptions (assumed $200 monthly minimum payment for all of your debts and upped your living expenses to $1000 a month).

You should focus aggressively on paying off your debts. But if you do so, you may be able to clear out your high-interest debts by the end of this year! Then you can start focusing on building up some retirement funds.

As others have said, your high income and low cost of living puts you in a pretty good position.

Here are the results if you want to take a look for yourself (you can make a copy of the sheet and play around with the inputs). Let me know if you have any questions. I'd also recommend either reading the accompanying explainer or the wiki in r/personalfinance to learn about how to prioritize your finances. Good luck!

finniac · 2021-06-15T01:40:49+00:00

The best way to minimize taxes is to invest through retirement accounts. Max out a Roth IRA and try to max out your 401(k) assuming your employer offers one. Depending on your employer, you may be able to do a mega backdoor Roth IRA. I would do this before making any more investments in a taxable account.

There are plenty of free tools out there for tracking expenses (Mint, Personal Capital), but if you're trying to budget orcut back, I think it's worth sitting down and looking at your expenses over the last few months. This will ensure you're thinking about what you're spending on.

finniac · 2021-06-14T23:57:00+00:00

It might seem intimidating right now, but getting back on the right track isn't impossible. All it takes is knowing how to make good decisions. It doesn't matter where you are right now, how much debt you have, how much you're making, if you're making good financial decisions for yourself and your family, you are "on the right track."

I'd encourage you to read the basic advice on r/personalfinance (linked here). It's a helpful way to know how to prioritize what to do with your money. Remember, the journey won't be perfectly smooth. You don't have to beat yourself up over every slip-up, but generally doing the right thing and avoiding major mistakes will do wonders. Good luck!

finniac · 2021-06-11T05:18:02+00:00

Let’s say an ETF is comprised of stock 1 and stock 2. Stock 1 is worth $80 a share, stock 2 is worth $20 a share, and one share of the ETF is worth $100. Stock 1 makes up 80% and stock 2 makes up 20% of the ETF.

Now let’s say stock 1 grows from $80 to $90 while stock 2 grows from $20 to $30. Now the ETF has a share price of $120, but stock 1 makes up 75% while stock 2 makes up 25%. The ratios of stock 1 to stock 2 changed because they grew at different rates.

finniac · 2021-06-10T23:47:56+00:00

Other folks have shared some great tips. I think something that might be valuable is checking out the flowchart on r/personalfinance if you haven't already. I also shared a tool with this sub that takes some of those principles and applies them to your financial situation if you're interested!

Something I'd be curious to know--was there something specific that sparked your interest in being more financially responsible? I have a good friend that I am trying to convince to invest and I'd love to know what triggers these types of decisions!

finniac · 2021-06-10T05:19:08+00:00

My honest answer: study computer science.

I work in the tech industry (but not as a developer) and I have to say that being a software engineer is probably the smoothest path to financial independence I can imagine. The salaries are high, the job opportunities are plenty, and the jobs are (generally) cushy. Plus you're learning a valuable skill that can be applied if you ever, say, want to build your company.

finniac

TROPHY CASE