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Weekend Discussion and Victory Thread for the week of January 12, 2018

If you need help, please check the PF Wiki to see if your question might be answered there.

This thread is for personal finance discussions, questions, and sharing your success stories:

  1. Make a top-level comment if you want to share something positive regarding your personal finances!

Instead of posting individual threads for positive success stories of how you've funded your emergency fund, made progress on your debt, saved for a future goal, reached a certain net worth, or anything else you would like to share, let's consolidate everyone's stories into one weekly thread!

2. Please make a top-level comment if you want to ask a question! Also, please don't downvote "moronic" questions! If you have not received your answer within 24 hours, you can feel free to start a discussion.

A big thank you to the many PFers who take time to answer other people's questions!

For past threads, please search the Weekly Archive.

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[deleted]
1 point · 5 months ago(0 children)

So this is probably a small first step but its the first time in my life that my mind has even been oriented in this direction, so for me its a success.

I have a second job to pay off my debt, starts next week in the mornings.

I have about 8k in debt all told, Im a 26 year old married no kids artist type. I moved from CA to Portland for an internship with a small record label and work full time as a server. My wife stayed behind in CA to peruse her own goals, the plan is for her to move up here when we both fix our credit/debt enough to get a place together.

My debt.

$2100 old eviction in collections (lost my job, was a dumb kid) $2000 car got repoed at same time as eviction $2000 medical bills $2000 credit card

Plus I also have some tickets that I nees to pay for driving a friends car, no knowing they didnt have insurance at the time.

My plan is to literally take every check I make at this side job and put it right on the eviction debt first then knock everything else off. Gonna come back here in a few months and post another success about how I got it done.

Pretty sure I opened a Traditional IRA when I should’ve opened a Roth. Paid off my student loans this year and decided to contribute more toward retirement in addition to my already-in-place 403(b).

I’m 26, single, work FT, and contribute to my 403(b). My AGI was $86k for 2017. Didn’t realize that tIRAs had a “phase out” which I’m clearly over ($71k for single filers with employer-sponsored retirement, correct?). I only contributed about $2.7k total, but all of which is post-tax.

Since 0% of that is deductible, 100% of it was contributed with post-tax dollars, and it’s in a TIRA - so it’ll be taxed again on the way out, I want this in a Roth instead, correct?

Is the thing I’m looking to do (move all of it into a Roth) a conversion, a recharacterization, or a Backdoor? Just so I don’t sound like more of a derp when I call Schwab on Tuesday.

1 point · 5 months ago · edited 5 months ago

Nondeductible contributions to a Traditional IRA are tracked via Form 8606 and are not taxed again on the way out. Only the earnings would be taxed in that case.

However, it's true that a Roth IRA is better than a nondeductible Traditional IRA since both the contributions and the earnings come out tax free.

In this case I think a conversion or a recharacterization would be equivalent. Edit: Actually I think a recharacterization would be better. If you convert you'll have to pay income tax on any gains the tIRA has accrued since you made the nondeductible contribution. If you recharacterize it should be as if the contribution was Roth all along, and no tax should be due on the earnings.

I bought a crockpot today and learned I can make hard and soft boiled eggs in my electric kettle. Small first step for 2018.

Thanks to this sub for educating me on expense ratios and fees for retirement funds! I realized that the ER on my Simple IRA Fidelity fund was 1.4% (plus fees) and decided to transfer all of my money to a Vanguard IRA where I put the money into a target date fund with an ER of .16% (no fees). I now have my the money transferring from Fidelity to Vanguard on a monthly basis which will save a lot of money over the life of the fund.

Wiki Contributor
1 point · 5 months ago

Congratulations!

A few questions:

  • Your SIMPLE IRA lets you transfer money monthly?

  • There's no load on the 1.4% fund, right?

4 points · 5 months ago · edited 5 months ago

The last 10 minutes was just a huge "whoo".

I was doing the budgeting for the next few months and my balances keep going negative. I knew these numbers had worked and had no idea why we were seeing a future negative balance. I accidentally clicked into a parent account i use for totals and there was a $100 paycheck for my fiancee, in the wrong account all by itself, transferred it and now we are back to positive! Thank the world!

My wife and I finished our emergency fund, $8000. We were also with a bank that only paid .01% APR, and switched to a bank that will give us 150x that amount.

Protip: Ask for a cashiers check when transfering money, that way you're not in a new bank scoping out every customer as a threat.

Comment deleted5 months ago(3 children)

That's awesome, congrats!!

One bit of advice with the AMEX Blue Cash Everday. I have found that after using this card for three years that the Blue Cash everyday Preferred is actually quite a better deal.

It gives 6% (yes, 6%) on groceries. This is a deal within itself. The $95 fee is surely made back with this alone for me. Anyway, good to hear about your success. Woo hoo!

Depends on how much one spends on groceries. And if one's grocery stores actually count for Amex. For example, Fred Meyer codes as "Wholesale" for Amex and therefore doesn't get 6%. One could spend $6k there any only get 1%.

Of course, even more valuable than either of these cards is consistently putting spend on a new card and getting lots of signup bonuses.

Dumb question: How do I know when to contribute to my tax-advantaged accounts for 2018? I maxed out my 401k and IRA last year, so I'm wary of just going in now if that has tax implications.

Is the answer as simple as Jan 1, 2018?

Yep, you can start contributing to the 2018 limits on Jan 1. Many people like to max their IRA on Jan 1 of each year.

Got my total savings to $5k. :)

Good job. Keep going.

1 point · 5 months ago

I put $5500 into USSBX, a short-term bond fund, about 3 months ago and set the dividends to reinvest. The value of the fund is about 5501 now. This is a much lower return than I’d like. Can I expect the value of the bond fund to rebound any time soon? Or should I just sell and move the money to a different investment? I’ll need the money some time in May.

Don't expect it to rebound in the short term (definitely not over the next year at least). Interest rates are going up, which drives down the rates of existing bonds. The net impact is that your bond fund won't be showing strong returns in the near future. Bonds are good as part of a whole portfolio. Bad on their own.

To address the rest of your question, I gotta go into a bit of a rant. Not to nag, but this action sets off two flags for me.

First, you should research an investment before going into it. If you don't want to do that, you should pick a vehicle specifically designed for people who don't want to conduct the research (such as target date funds). The interest rate is the biggest factor on bond returns in the short term in a stable market, so it would have been good to understand that before going in.

Secondly, needing money in May is pretty short term. The market is not a good place for short term essential needs. Even in bull periods, it's very easy to pick out three month stretches where the market is down. If you need the money in May, you don't really have the option to grow your money much. You should be focused more on saving that.

2 points · 5 months ago

Thank you for taking the time to write this. Based on what you’ve said, it seems it’d be wise to move the money into a high-yield savings account.

How long after paying a collection agency does it take to show on your report that the debt has been paid? I understand it will stay on the report for 7 years but will it instantly be marked paid or is there something like a 30-day period?

Wiki Contributor
1 point · 5 months ago

Did you already pay it? It can take a month or two.

Thanks. I have not paid it but just checked my credit report and saw that a hospital bill from 2016 has been sent to a collection agency. It's something I can pay off but I'll want to check and see why it never made it to my insurance, as that should have covered most of the bill.

Wiki Contributor
2 points · 5 months ago

Check out the collections wiki and try the steps it recommends first.

This Sub Is Rubbing Off On Me

Watching the new show "Child Support" and when they ask people what they are going to use the money for I am always rooting for them to say:

"Max out mine and my wife's Roth IRAs and 401Ks, and invest in whole market funds with good returns, staggered with various levels of bonds and other smart investments, followed by paying off our debt, investing in a 529 plan for our kids education, and the rest probably in an emergency fund"

Then the disappointment sets in... "Lakers Season Tickets"

I'm looking for new places to park my money. Two questions.

I've only ever used bankrate.com to compare rates. Are there other sites this sub also uses?

Second, according to their site, Northpointe Bank offers a 5% checking account!!! However, when I look at Northpointe's website, it's nowhere near that. Is bankrate wrong, or am I looking at the wrong place on Northpointe's website? Am I just misunderstanding something?

2 points · 5 months ago · edited 5 months ago

So I have Northpointe’s 5% checking account and they paid me he 5% last month and the 6 mo prior and I have jumped through all the hoops for this month assuming it was still continuing. They never reached out to say it was stopping (I’m guessing they don’t have to). I left an email with their customer service to see if it has ended. If it has, my money will quickly be withdrawn.

Edit: Just checked my account and it looks like they will be paying me 5% this month too. Maybe they stopped doing it for new customers and are continuing it for older customers? If that is the case, sorry about that, that sucks! Free $40 is awesome and nice to see a bank that values you keeping ~$10k with them.

If you stay on the ALL tab, and go to the bottom, it's there. However, it also says, "(No longer available as of 11/20/17)"

Probably a dumb question, but why don’t people with traditional 401k’s and IRA’s just take a lower paying job for a short time before retirement to lower the tax rate they will pay on the withdrawals?

Maybe not where you were going with the question but you should look into the Roth IRA Conversion ladder.

One way to lower you "income" is to have a good amount of money that will not be taxed as income (this includes original contributions to the Roth IRA, taxable brokerage accounts, regular savings and checking account, CDs, HSA funds where you've horded qualified expense receipts, etc.) to live off of while you convert Traditional 401k and IRA funds into Roth IRA.

If you have enough "post-tax" income to cover your expenses for 5 years (the importance of keeping your expenses down) you can start to draw down the conversions at the end of the 5 years, and you could potentially convert a lot or all of the traditional funds into Roth funds tax free thanks to the standard deduction

Your tax rate will always be based on your taxable income for that specific year without reference to your tax rate in any previous years.

So if you retire on Dec 31, 2050, then your first retired year is 2051. Your 2051 tax rate will solely be based on the taxable income you have during 2051. It won't matter if you earned $10k or $500k in 2050. None of that will matter to your 2051 tax rate.

When you withdraw from a 401(k) or a traditional IRA, that is taxable income. If you withdraw $50k from it and have no other taxable income, then your income taxes are just the same as if you earned $50k from a job that year.

Has anyone tried using this year's TurboTax Freedom edition? I have some 1099 income and so can't use the Absolute Free version I normally use. I've been having some technical issues and want to see if anyone else is running into similar problems.

From my experience, I had good luck with Credit Karma. I went to them because the forms I needed weren’t free with Turbo Tax. Give them a try?

I will take a look. I used Credit Karma last year and ran into some issues, but I'm willing to give it another try. Turns out Lyft partnered with TurboTax this year and is offering free TurboTax self-employed tax software online, so that will solve my issue. Thanks!

I’ve been running numbers and for 2018 I have finally upped my 401k contribution to 10% of my income. With employer match I am at 14%!

Wiki Contributor
2 points · 5 months ago

Excellent!

I have enough in my bank to cover some pretty hefty fees coming up (related to work visas and immigration) and not make a dent in my e-fund which is currently sitting pretty at about 5mo worth of expenses :)

That must be a heck of a feeling of relief.

I plan to be married this year and also plan to max out a Roth IRA. My fiancee makes considerably less then me.

Is there any issue with funding my IRA beyond the 5500 contribution and not funding hers? I am a few years older so it makes sense to me.

Is there any issue with funding my IRA beyond the 5500 contribution

You can't do that. It is a contribution limit, not a contribution guideline.

So I would need to contribute to my Wifes IRA?

You cannot contribute more than $5,500/year to any combination of your own IRAs.

If you, as a family, want to contribute more than that to retirement accounts, then yes, it would make sense to have contributions to your wife's IRA. The limit for her is also $5,500/year. Most married couples take into account both partners tax deferred space when making savings goals.

If you don't want to contribute to something not in your name, then go with filling up your 401(k). If you already have, or don't have one available, then you could contribute to a taxable brokerage account.

if you are one day late on a cc payment will they automatically hit u with the apr? i am on site for work these past two weeks working crazy hours, just realized my payment is due 1/16 which is tuesday. and monday is a dang holiday. it's a new cc, never been late before. can i call support and beg for mercy?? any idea on this?

If you have a good payment history, you can ask them to waive the late payment fee and they usually will. 25 bucks is 25 bucks, its something anyway. They usually require you pay the interest.

Yes they will. You can just pay off the full balance (you may have to call for the payoff balance) and you'll stop accruing interest. If you didn't even make the minimum payment then they probably also charged a late fee, you will probably be able to get them to waive that if you call them.

I'd advise setting up an autopay so this doesn't happen in the future.

i paid the balance in full (for december) it just won't post until 1/17 instead of 1/16. so you don't think the interest will hit automatically for that december balance since it is a day late? i'm going to call still just in case just would like some feedback first

Interest accrues on a daily basis so it won't be a lot. But you can ask on the phone and since it's just one day they'll probably waive it.

thanks for the response. should i try calling the 800 number today? or wait until after it's posted on tuesday?

Might as well call today. I think most of those numbers are available 24/7.

so the apr that i'm gonna be hit with is for the amount of the december statement? i'm trying to understand still your first reply. i paid my statement in full, but it will just post a day late. will that apr then go on the next statement if i dont call to ask to have it removed?

How credit card interest usually works is that you get charged a daily interest rate on the outstanding balance every day until the balance hits $0, once you have lost your grace period (which you have, if you paid a day late). The daily interest rate is going to be something close to whatever your APR/365 is.

The thing you should be more worried about is the late fee, usually $25 to $35.

But the exact mechanics for how all this works will be spelled out in your card's disclosure statement.

But assuming you've never been late before I think you will 9 times out of 10 be able to get the late fee and any interest waived as long as you pay in full and ask nicely on the phone.

ok thanks. so the interest charged daily is the apr/365, then multiplied by the current balance owed, each day, and added up daily until you pay that balance off in full.

Sounds like you got it.

(36, late bloomer)

Pro: We hit 450K in my varying accounts and 220K in spouse's accounts.

Con: Due to a really shitty upbringing and other factors, I have severe paranoia about dipping my toes into individual brokerage / investing options. I've hoarded a lot of liquidity and excess single stock. I need to change this and diversify / rebalance the portfolio... Are there financial psychologists out there who can help people get over these specific fears? Are there books to help you get less panicky about losses?

2 points · 5 months ago

I don't know about books, but advice I'd give would be to invest in a total market fund. Your performance is then tied to the performance of the overall market.

As for getting better about losses, there are a couple different ways to look at it. First: You haven't lost anything. You spent money on an asset, and you still have as much of the asset as you always did. Second: losses don't mean anything until you realize them (i.e., sell your assets). If you aren't planning on selling them soon, then their value is irrelevant. The upside to this thinking is that if you keep buying, you get more assets while the price is lower! Think about the things we buy every day that have highly eccentric prices: gas, milk, etc. When prices go down, people tend to buy more of them! Nobody starts to sell the gas in their tank when they see the price drop.

That being said, you might be getting to the age where your risk profile is starting to shift, so you might want to think about shifting more of your investments into bonds rather than a total market index.

Victories:

  • I paid an additional $1,800 on student loans today (in addition to the $363 monthly payment. I paid off the two smallest loans ($262/$~1,500) using the debt snowball method. I have $34,000 on my student loans and $54,000 on my husband's. We bring home about $50,000 per year.

  • We have seriously gutted our food expenses so far in January. We've gone from eating out twice a day every day almost to $320 food budget for the month (we're aiming to spend as little as possible though.)

  • We've been doing a "no spend spree" where we are only allowed to spend money one day per week (other than bills when they're due). So, we get groceries, gas, or any other errands one day a week to curb impulse purchases. It's mentally satisfying to go on a 13 day streak of not spending money (except on Spend Saturdays).

  • We've converted to a cash envelope system. system. It's been SO. HARD. being one of those people with a calculator in the grocery store, but worth it.

Other thoughts & things

  • Dealing with student loan companies and making sure money is allocated appropriately has been a journey. They're so difficult to work with and it's taken some strategy to get things done right. I've been dreaming about doing a financial segment on my blog to really help others similarly situated to get out of debt when you don't make much money.

  • I am very thankful for this subreddit and the others like r/Frugal and r/EatCheapAndHealthy

I'm not sure how I did this last year but I paid $41 for TaxAct federal plus 2 state returns. This year it looks like it's $25 federal and $37 per state return. I had schedules A, B, D, E, and forms 8606 and 8889.

I'm looking for a more reasonably priced option this year. I should have just 1 state return (Pennsylvania). Maybe Taxslayer? Any other reasonably priced Federal + 1 state options?

I like FreeTaxUSA.com. Free federal, $12.95 per state.

You can print the forms, fill them out by hand, and mail them in for the price of a stamp. Or, do the federal for $25 and that's state returns by hand. If your situation hasn't changed from last year, use last year's returns as a guideline, with this year's numbers.

You can fill them out online and see if the numbers match. You only pay when you file them.

I am 34, and employed for 14.5 years with my current employer. I have been co tributing to 401k since pretty near the beginning. I started around $38k, and have more than doubled my salary in that time. I contribute 6%, and the company matches 80% up to 6%. As of right now, my 401k sits at a value of $100k, with about $27k in outstanding loans ($21k left on a $35k principal residence loan, and $6k left on a $11k loan.). I feel like my funds aren't nearly what they should be at though. Unfortunately do to debt not including the 401k loans, I am NOT able to contribute any more towards the 401k at this time. Once we dig out of ~$40k in loans including the 401k loans, debt consolidation personal loan, and credit cards, I am HOPING to increase my investments towards 401k. Mine is through Fidelity, and I know they have an automated option to automatically increase contributions by a fixed percentage over a period of time. My plan is to get it to 10% after the debt is wiped, then increase it 1% every year around the time of year our raises (of we get one) go into effect.

Is this a sound plan?

Is my 401k balance good for where I am at right now as far as age and time with the company?

If rule of 75 is still the case, I could possibly retire at 53. (Obviously not withdrawing 401k at that point, just noting that would be a 'milestone' and possibly a time I could look at a different employer depending on how climate is with current one. (Heavy layoffs after the new year traditionally, have had the ax over my head for 14 years, manage to dodge it every time thus far.)

It's a sound plan in the sense that it'll improve your situation, but the suggestion is to save at least 15% a year for retirement at a minimum.

Why are you only upping your contribution by 1% a year instead of a % equal to the full amount of your raise so that you hit that 15%, especially since you're not planning to increase your contributions until after you pay off your debt.

Thank you for the tip. I will see about doing that once we are in a good spot. I want to really get an emergency fund in place, because sadly we are 2 pay checks away from total loss if spmething happened. I have made strides in that department though. I have 2 savings accounts, one for emergencies at $800, and one for my kids tuition in case of a shortfall there at $1,400. The tuition savings has helped a few times to be able to cover tuition in tight spots. (The reason being it is due every 4 weeks, not on a set monthly date, so it crosses paycheck barriers and eats into utilities as the year progresses. If i end up using the savings, the first check of the month adds bavk what was removed, or tries to. Unfortunately, I haven't a clue what I am doing when it comes to 401k.

Thank you!!

Two minor victories for me this week:

I managed to put like $650 towards debt this month. Usually I'm more in the $300-$400 range. Paid off a credit card (which is supposed to be the card I pay off every month for points, but a minor shopping weak moment and Christmas put me behind, and I've had a balance on it since October), and got a personal loan balance from $1200 to $850. Seeing that loan get down into the triple digits makes me REALLY EXCITED to get it paid off. My paycheck at the end of the month is going to go to rent and car repairs, so I don't know how progress I'll make in February, but I feel like I'm making progress. The snowball is ever so slowly picking up speed.

Also, in December I finally got around to investing the money in my Roth IRA instead of just letting it sit there. So December was watching my retirement account actually go down a little bit because of the fees involved in setting up the investments, but I went and checked it this morning for shits and giggles, and it's already gone up a little bit!

If this was a game of Candyland I wouldn't even be as far as the Peppermint Forest, but at least I'm somewhere on the board now.

Got approved for the CSR card. Totally elated.

This is a great card, if used wisely. Combined with Freedom and Freedom unlimited, so far no other card has come close to the returns.

Yeap. I already have the Discover card, and Freedom Unlimited. But I also applied for the Freedom so that I can just pool everything into UR points.

Probably a dumb question, but how does anyone save enough money for retirement?

I'm only 23 but am also a worrier and I really, truly don't understand how someone can save enough money to retire.

The common number is that you need 1,000,000 to retire. Say I want to retire at 63...I would need to save 25,000 a year, every year starting now until then?? How is that feasible?? I make 56K now, that's more than 50% of my pretax income.

Help me calm my worries that I'm going to be working until I die 😭

6 points · 5 months ago · edited 5 months ago

Slow and steady, over a long period of time. Invest in domestic stock market index funds and don't panic during the downturns.

I've been saving for a little over 24 years, and that has been my philosophy the entire time. Here's a post I made a few months ago that shared my 401k balances over the prior 20 years.

That's a real person's real returns. You can see it took me 7 years to save my first $50k, and another 5.5 years to get my second $50k (weathering the 2008 market downturn in the process). But then it started building a lot more quickly. That 401k is up an additional $40k since I posted 3 months ago.

I actually started saving a few years prior to that, near the end of 1993. My combined 401k/IRA savings hit $600k as of last Thursday, which is up $100k in a little under 12 months.

I was able to reap $100k over the past 12 months because I already had $500k in the market. And I had $500k because I started saving what seemed like an insignificant trickle when I was young.

Whoa, that's pretty impressive! Can I ask what percentage of your income did you put away? And what was your income starting out? I ask because I feel like I see a lot of posts like this and the person posting makes ridiculously good money and that's why they were able to save so much.

I guess because it's so far out and such a huge amount that I need to have, it feels really daunting. I have about $8,000 total in retirement funds right now so it just seems crazy to me and I can't see how I can contribute more when COL in my area is so high (I'm a CA person).

And I think about my parents, who are in their early fifties and have absolutely zero saved for retirement. I guess they'll still get to reap the benefits of social security, so there's that, but it's also pretty worrisome.

Anyways, I rambled a bit here but thanks for showing me that it's possible!

You're forgetting about the power of compounded interest. At $56k/year. Assuming 1% salary increase/year, 10% saved/year, 0% employer contribution, and 6% return, you'll have $1,000,000 in 40 years. You will have contributed ~$250k and earned ~$750k

2 points · 5 months ago · edited 5 months ago

Need some advice on possibly investing:

31 years old, married, no kids. Have ~$350k in student debt at 5.8% weighted average, $5k car loan at 3.5%, making ~$170k/year between the two of us. All extra money is going towards extra student loan payments.

403b maxed out, saving $750/two weeks for house down payment. Plan on buying a house in either 1.5 years or 3.5 years depending on career paths. Currently have ~$20k saved for down payment/emergency fund.

Should I start investing some of the money I have saved? Looking at USAAs new ETFs. Don't like the idea of a bunch of money just sitting in a savings account for 3.5 years.

Why not tackle the student loans? Guaranteed 5.8% return seems to be a no brainer for me.

I'm assuming you're already investing the 403b money in some index funds? Beyond that, you can look into a Roth IRA, but I wouldn't invest in a taxable account before paying off those student loans

Right now the 403b is 100% Vanguard target date funds

Then yeah, a Roth IRA is the other tax advantaged account you can consider, but beyond that student loans should be the priority

I'm recently taking control of my finances. I got my first credit card (secured) a few months ago and opened a saving's account with Ally where I'm working on my emergency fund/longer term savings. I make 33k and just about half my take home goes towards fixed expenses, not including gas, groceries, etc. I want to set aside money that's for more short term expenses, such as any car repairs and an upcoming vacation. I wouldn't imagine the only being in there more than 6-9 months. Is there any reason to opt for a higher yield account (maybe a separate savings account with Ally?) vs opening a savings connected with my checking account (TD Bank) when the money wouldn't be in there very long? I just want it put off to the side from my checking account.

I think that, if you need it very soon, you won't get enough interest in a savings account to warrant that. Put it in ally or just leave it in Checking.

Shortly after I started my job in October I started contributing to my company 401k. I’m currently invested in an index fund that tracks the S&P 500 as a whole. Now I’m starting to look at opening an account at vanguard, and trying to figure out what to do. I was looking at VFINX as well as VOO. I’d like to avoid a target fund because of the higher expense ratios. I also don’t have enough for the admiral shares yet. One downside is I wouldn’t have any exposure to international markets. For reference I’m 24.

Don't worry about the admiral shares thing. With the amounts of money you're investing at the beginning, it's better to get the money in play. The difference will be minimal and you can upgrade to admiral shares for free when you have more moeny.

Main thing to do is determine an allocation. Figure out what percentage of stocks-bonds-real estate you want. Figure out the ratio of domestic to international for the stocks. Once you do that, buy the mutual funds if the amounts meet the minimums (assuming IRA). If not, just buy the ETF versions. Let us know if you can't find the ticker symbols, but they shouldn't be that hard to find.

A few months out from being ready for our first mortgage. How soon should we get prequalified? How do you go about shopping around for the best offers without your credit being impacted by the hard pulls (lowering your credit as far as other banks are concerned)? We have very young credit so pulls have a big impact on our scores in the short term. We're both sitting around 730-745 so right on the border of good credit.

When I got my mortgage I called a few places to find out what they had available. This shopping around does not require a hard pull.

Only after I picked the lender I wanted did I start the application process with them.

They pre-approved me based on the info I gave them and what they found on my credit report, but when it came time to actually buy the house I had to cough up additional paperwork (like copies of paperwork showing my vested retirement balances).

A word of advice: a lot of people just look at lowest interest rate when choosing what they consider to be the "best offer". But there are pretty regular threads on this sub from people whose mortgage loans were sold to a new mortgage service company, and that company is causing them hassles.

I chose a bank that had competitive rates, but not the absolutely best rates, because that bank serviced their own loans (meaning they did not sell their mortgages to another company). Sure, that policy can change at any time. But it still gave me a level of comfort that I knew who I would be dealing with down the road for the biggest financial decision I ever had ever made.

Just a clarification, it's possible for a mortgage company to sell your loan, but retain the servicing.

Last year was the first year I had taxable investments. In your experience when does Vanguard dispense 1099-DIVs?

I feel the need to plan tax preparation situation because of this new added complexity. What should I be expecting?

Comment deleted5 months ago(1 child)
2 points · 5 months ago

I would do traditional since you're in a pretty high bracket right now. I make almost as much as you and I do a traditional 401k and Roth IRA, just to hedge my bets a little.

14 points · 5 months ago

After 5...6?...7? years carrying credit card debt I'm finally paid off! After switching one of my cards to a no-fee card they actually owe ME $67!

My pit of debt went down to $15k I believe at one point and it felt like a true slog. I was frustrated yet again because my resolution last year was to pay it off in full. Well I'm 12 days late but I made it and it feels amazing.

Just keep hacking away folks and lower those expenses where you can. For me cancelling subscriptions I really didn't need and eating out less got me to the finish line.

I paid off my credit card today!! My stupid card I got when I was 22 and absolutely clueless. Feels like I closed that chapter in my life now. We are still $10k in debt but should be debt free by July and currently have a growing emergency fund as well. thanks a lot to this thread, r/frugal and Dave Ramsey as inspiration!

2 points · 5 months ago · edited 3 months ago

Deleted

Take a look at your 401k and see if you can do a megabackdoor (contribute after-tax above $18.5k, convert to Roth IRA/401k). That could net you another $20-25k of tax-advantaged savings. Note that you can't contribute cash money to a 401k. It has to come from payroll, but money is fungible so you can offset the reduction in net monthly cash flow by using your $200k in liquid savings.

Do a Roth IRA backdoor to get another $11k per year (you and your wife -- she can use your income for a so-called "spousal IRA"), and do it for 2017 and 2018. This can come from your pile of cash, so that's $22k you can invest ASAP. Note that when doing the backdoor, you get one conversion per year. So put in the 2017 contribution, then put in the 2018 contribution, then roll it all over. Next year, you'll just do it one for 2019 (you're catching up here). Also note that your wife's IRA is a separate account owned by her (it's in the name, Individual Retirement Account), so you'll have to do two accounts, $5500 to each, for 2017 and 2018 (that is, four separate transactions).

Do you have access to an HSA? If so, max it out.

Are you paid off on med school loans? If not, that should be priority number one. If you intend to stay in your house for a while, there's also value in paying extra against principal every month.

You could look at some sites focused on investing for medical professionals (not endorsing that site, just one I found via a bingle search), or find a fee-only fiduciary financial advisor, but if it were me (I don't make doctor money, just software developer money) I'd keep it simple and boring. Hit all the tax-advantaged savings you can, pay off any significant debt, stay out of new debt, and do a lazy 3-fund portfolio in a taxable brokerage account for the rest. Some people will tell you to get into real estate investing, or other physical investment schemes, but I assume you're busy being a doctor and don't want to add being a landlord or non-medical practice business owner to an already full doctor workload. If you have extra time after being a doctor, spend it with your wife and kids and/or get a hobby. Don't add more work.

Thanks.

Will do the Roth IRA backdoor for sure. No student loans. I have a financial advisor through work who is fee-only, but he is not aggressive at all and gets so little commission (0.25%). He is a pretty passive guy. Didn’t even mention Roth or other strategies.

You were right on with your assumptions about being busy and saving extra time for family. Simple and boring for sure, but have some desire to be more aggressive in the market but, like many docs, this is not my area of expertise.

Appreciate your response

but have some desire to be more aggressive in the market

IMHO, "aggressive" would be adjusting your 80/20 stocks/bonds split to 90/10. If you build a solid base with a practical allocation and maximizing available tax advantaged savings, you won't need to be aggressive. Just follow the market and you'll do fine. Once you've got that in place, then feel free to use "fun money" for other investments just to play around. With your income, "fun money" could still be like $50k (I tend to cap my "fun money" amounts between $3-5k, but my income isn't as high as yours). I'd still caution against investments that require active participation, simply because of time constraints and priorities.

If I were you, though, I'd probably focus on hobbies and other experiences rather than trying to make significant gains through investments, because you've already got a solid base which should be more than enough for a comfortable life.

That makes good sense. Thanks.

I followed my company's advice to check my withholding for the first paycheck, and I decided to check on my retirement and stock accounts that I haven't been paying attention to. Wow! I didn't realize I am closing in on $10k. I mean, I'm 30 now and should have gotten this together earlier, but I really struggled for a lot of my twenties to make enough money just to get by. It's SO nice to realize that not only are we in the green, but being thrifty and thinking long-term means that we've been able to start increasing money for the future.

I feel like I'm kind of doing this backwards because I still don't have 3 months of income in the bank, but we're getting there. Anyway, thanks for all the good info in this sub!

Wow! I didn't realize I am closing in on $10k.

Congrats!

I mean, I'm 30 now and should have gotten this together earlier, but I really struggled for a lot of my twenties to make enough money just to get by.

You still have 30 years or so of saving ahead of you. You have plenty of time to reap the magic of compounding.

I didn't start saving until I was 27. It's 25 years later, and I'm on track to retire at 62, with a possibly of retiring at 59.

Here's an older post of mine that gives a real world 20-year snapshot of the 401k savings of a regular guy making OK but not spectacular money.

I feel like I'm kind of doing this backwards because I still don't have 3 months of income in the bank, but we're getting there.

You're fine. Having an emergency funds bring peace of mind, for sure. But so does having retirement savings.

Yeah, I mean, we have the kind of emergency money to cover anything up to like $3k unexpectedly, but anything beyond that would need some credit or creativity. Thank goodness my husband has worked so hard to fix his credit score, too! Man! We found out recently that we're both about the same now, so at least in an emergency, we know we could borrow.

Anyway, thanks for the further info!

I bought a house several years ago and was left with about $3k in the bank after closing.

Pretty soon after that I had to replace one of my air-conditioners. I didn't have the cash so used a credit card.

It sucked, but it didn't kill me. My finances are really solid now. I've built up $100k of home equity from nothing, my retirement balances have more than doubled since then, I have money in the bank set aside for my other air-conditioner and a new roof, and my FICO is 843.

We can't always follow the optimum financial plan. But that doesn't mean disaster is coming our way.

My credit score is good (740) but I was recently denied a credit card for “a lack of recent installment loan information”...in addition to too many inquiries (I churn, so this was to be expected). While I have no plans to purchase a home or a car anytime soon, I was offered a small ($1400) Stafford subsidized loan which I have not accepted. I don’t need the loan, as my family gave me a gift to fund my college education after my financial aide was processed. I also have a substantial amount of money saved for a rainy day. My question is, what are the pros and cons of taking out the stafford loan, plopping it in a savings account and paying off the balance after college? My goal is to obtain a healthy credit line mix.

Just passed $100k of total net worth at just shy of 24!

That's awesome! Do you mind if I ask what your profession is?

I'm a petroleum engineer, but only 15% has been since i graduated college.

1 point · 5 months ago · edited 5 months ago

Quick sanity check and a follow up question:

  1. I fully funded a traditional IRA in 2017, but made too much to deduct it. There's no situation where traditional is better than Roth for me, right?

  2. If this is the case, I'll want to convert it to a Roth. This was my first year with an IRA, so I've never deducted any of it before. If I convert it, will I have to pay taxes on the balance/what I put in?

Thanks in advance!

Edit: here are the instructions from the IRS that explain my situation and other similar ones.

https://www.irs.gov/pub/irs-pdf/i1040x.pdf

I fully funded a traditional IRA in 2017, but made too much to deduct it. There's no situation where traditional is better than Roth for me, right?

Right.

If this is the case, I'll want to convert it to a Roth. This was my first year with an IRA, so I've never deducted any of it before. If I convert it, will I have to pay taxes on the balance/what I put in?

No you won't have to pay taxes on what you put in. You actually want to recharacterize your IRA from traditional to Roth, not convert. You'll need to contact your IRA provider to do this. If it's one of the big three (Vanguard, Fidelity, Schwab) then you shouldn't have any problems as this is a pretty common maneuver.

You actually want to recharacterize your IRA from traditional to Roth, not convert.

Careful with that. If he made too much to deduct a traditional, it's possible he made too much to directly contribute to a Roth. In which case leave the contribution as-is and convert to Roth (backdoor). Either way, you're going to pay taxes on any gains, whether you recharacterize or convert.

I had my terminology off, but yes I have Fidelity and it seems to be straightforward enough. Thanks!

Well you could convert too. Recharacterizing lets you treat your traditional contributions as if they were always Roth. Converting is more complicated as you treat your contributions as non-deductible traditional but then convert to Roth. It requires extra work on your tax return (filing form 8606).

Oh I see. Definitely should be able to keep it simple. Thanks for the info.

I passed $75,000 in my retirement accounts, yay! Probably $76k after today. That's what I made last year from salary, bonus, and OT and I'm 29 so I'm on track according to that salary-by-30 rule of thumb.

My wife and I fully funded our emergency fund today - six months’ living expenses. I’m two years into my career, and she’s a funded PhD student. We dipped into our emergency fund to buy our house eight months ago and have been saving like crazy to get it back while continuing to contribute to retirement. Feels great, man.

I see all these stories and feel inspired. Then I see the income everyone makes and feel so defeated. I make $19,000 with poor benefits.

I've tried applying to the high paying place in my town, and I keep getting denied. I will continue trying, but I sometimes feel like I will continue to earn $2 above minimum wage for the rest of my life.

I just wanted to vent. Thanks for reading.

5 points · 5 months ago · edited 5 months ago

Yeah, there are a lot of young people here who got good jobs right out of college and have good habits. And have also benefited from a pretty solid stock market for the past decade.

FWIW, I'm and older guy (52) whose first job out of college was a data entry job making $6.75/hour. Minimum wage at the time was $3.35, which would barely have bought a Value Meal at McDonald's. I lived with my mother for the first few years out of college. I hated my job, my living situation, and pretty much everything for most of my young adulthood.

I never had a big event where stuff got better all of a sudden. It just slowly got better over time.

Wish I had something concrete to tell you before you get the flood of "pull yourself up by your bootstraps" responses. I luckily developed some good habits when I was young, mostly as a reaction to the bad examples my parents set, rather than a conscious decision on my part. I also worked hard on just making myself not hate everything all the time.

Other than that, I just slogged through work, making more money by working overtime and getting the occasional new position with whoever I was working for at the time. I only moved to new companies a couple of times. I worked at my first employer for 3 years, my second employer for 6.5 years, and have been with my current employer 21 years.

I'm now 52 and on track to retire at 62. Most of the people I know, almost all of whom made more money than me throughout the years, will probably still be working after I retire.

Don't know if any of that helped. The World Wide Web didn't actually exist when I first started working, but if it had I'm sure that reading r/personalfinance would have made me feel like you say you do.

edit:

I saw in another post that you said you have a BA in Sociology/Anthropology. No lie: I have a BS in Sociology. I graduated college right at the dawn of the Internet Age. To this day I still kick myself for not trying for a CS degree back then.

Like you, I also moved into technical stuff over time. I worked in the health insurance industry paying claims. When that burned me out, my claim payment background got me a job at a new company doing some claims-related financial reporting. They used MS Access for that reporting. I had no background with it, but dove in and within 6 months was the MS Access guru for our unit (partially due to hanging out on usenet in comp.databases.ms-access). I also took some programming classes and was eventually building .Net apps.

Now I work with Salesforce. If you're looking for a growing technical field, it might be worth checking out. I work for a Fortune 50 company and we're moving more and more stuff to it.

Thanks for that. It takes time and sometimes I forget.

It's just tough being in the rural Midwest with limited possibilities.

I take over time when I can, but it's 24 hours where I work. It is only available of someone calls in sick, which does not happen often.

I just feel behind the game bring in my late 20s. But better late than never.

Thank you.

2 points · 5 months ago

One thing to consider is that where you live is not a permanent thing. As a fellow midwesterner, I've seen how bad it can be in the rust belt towns. See if you can get an in to move to a bigger town (doesn't have to be Chicago). University towns can be good choices, as universities are usually always hiring in some capacity or another.

I know how you feel. I'm cleaning up a lifetime of assuming I'd be dead 'soon', but here I am at 30 with the aftermath.

Keep going. Kick the darkness until it bleeds daylight.

I'm sorry about the aftermath, but glad to hear you're still here. Thanks for the encouragement. I hope all the best for you.

Aw, thanks :) If you want or need someone to talk to about the emotional/psychological side of PF, my inbox is always open.

Aw, thanks

How old are you? What skills/education do you have? Are you willing to move?

Jobs rarely come to you. If you don't live in a thriving area, your best option to increase your income is to find a job elsewhere and move to it instead. That sucks, especially if you have family you don't want to leave, but inflexibility in location will reduce your earning potential.

2 points · 5 months ago · edited 5 months ago

I'm 28. I currently live in a rural town. I previously lived in other states looking for opportunity, but things didn't work out and I'm back at my hometown.

I have a BA in Sociology/Anthropology. I currently work as technical support, but the skills needed are very basic.

I eventually want to move again, but this time with a better plan and more stable. I'm currently working on paying off student loans (approx $14,000) and having savings.

Edit: I also wanted to add that I am studying for A+ certification to help strengthen my IT skills, but the test is $200 each for the two required texts. And if I fail, I would have to repay fees. So I can't afford that just now within taking the small savings I currently have. I feel stuck.

Please let me know if you have any questions about IRS payment plan terms or conditions.

Topped off my Roth IRA contribution for 2018! Now to just let it sit barring any rebalancing that needs doing, but I anticipate not having to touch it this year.

I'm paying for my Masters out of pocket (well, with a scholarship) and currently have it so that my payments are billed once a month (for three months) to my credit card which I pay in full. This works so far, but I was wondering if it might be safer or advisable to take out a small personal loan (<2k) instead and pay that back. Would there be any benefit to doing so?

There would be zero benefit to doing so, and potentially a negative to doing so (hard credit pull, new account bringing down average age of accounts, paying unnecessary interest), assuming you can keep paying off your CC immediately for your installments.

Got it. Just wanted to make sure I'm not missing anything. I'm salaried and incredibly difficult to fire so assuming I don't go off and buy a Massarati I should be fine.

Is the credit card a rewards card? Seems to me like you could be missing out on some "reverse interest" if you catch my drift. Those tuition payments have to be pretty sizable I'd imagine.

Yeah, VISA 2.5% cash back @ about $3200 a semester before books. Not bad at all. Free money anyway.

I've been supporting myself and fiancee on 40k annual which is decent, but not a lot if trying to support 2 people. Anyways, she's back working now and even though I am on my last penny for a few days (I am okay though, no bills scheduled and plenty of food stocked away with no plans this weekend), when payday hits I'll be depositing $500 into Savings for the first time in forever. Starting in feb, it will hopefully be about $1k a month into savings.

Edit: I am at the beginning of my career, so I wasn't trying to complain about my salary. It is good starting pay for the industry and location I am in.

I got a new job within the last few months making 45k per year. My company offers a 401k plan of matching 50% of the first 6%, which I have been doing. I have room in my budget to save more money on top of my monthly expenses. My question is: does it make more sense to contribute more to the 401k or leave it at 6% and max out a Roth IRA?

Take advantage of the 401k, then max the Roth IRA. If there's more you want to contribute, you can up your 401k contribution then.

I'd max the Roth IRA. The main reason being that you can withdraw contributions penalty free. Not that I advocate doing this, but it can serve as a "super duper last line of defense emergency fund". Plus you're virtually guaranteed to have fund options in your Roth IRA that are at least as good as your 401k, and probably better.

It depends on the investment options in your 401k. If you have access to good low-fee investments, then feel free to add more to your 401k. If you don't, then you're better off contributing to the 401k just up to the match and then doing your next $5500 in a Roth IRA where you have more control over your investments. If you still have capacity to save after the Roth IRA, go back to the 401k and take it up to max (or beyond, if your 401k offers a megabackdoor option).

Just a question that's been on my mind lately. Which industry is more "reliable" during economic downturns e.g. recession: Auto Manufacturing or Aerospace Manufacturing? I recently changed career paths from Auto Manufacturing to Aerospace manufacturing (specifically as a Quality Engineer). Hopefully looking for some other opinions on the matter. Thanks

When you say aerospace, are you talking about making the targets or the weapons (aka civilian or military/government).

Both actually. Our division produces fuel pumps, motion control systems, etc for military aircraft (DOD contractors) and commercial civilian airlines.

Well, then I'd say you are better off than you were. My wars have a tendency to depress civilian spending... But having mil.gov as a client is a good hedge. I think you are more insulated from the business cycle than before. Not perfectly, but better.

20 points · 5 months ago

I hit $2k in my savings account as of today! I transfer $15 weekly and contribute a few hundred dollars every off-paycheck. I hit some roadblocks last year (was still getting a handle on making actual money and not grad student pittance) but have since switched from BoA's awful savings account to Synchrony where a) I can't touch the money and b) I actually make money on it.

Lurking PF since last May has really caused me to reassess my relationship with money and how I learned to handle (or mishandle) money throughout my lifetime. My boyfriend has always been incredibly responsible with money, so having him around to teach me about things that would seem basic has been very helpful too.

I'm so excited! This $2k isn't even close to what I'd need for a comfy emergency fund in this area, but it's much closer than $0.

Edit: Also hit $3500 in my 401(k) (maxing employer contribution) so I'm pretty hyped about that too.

10 points · 5 months ago · edited 5 months ago

Where to go next? (32 yrs old... I was a late bloomer)

  • Net Worth: $93K

    • Savings: $35K

    • Checking: $6k

    • HSA: $3K

    • 401(k): $5k (maxing the employer match)

    • Roth IRA: $45K

    • Salary $65K / Rent $1200

Debt: $0 (I pay off my credit cards in full every month, Car is paid off)

Saving for a house in L.A. seems impossible. So I'm just racking up the experience and living the rental life... since it took years to find a decent job.

Next step would be to max out your 401k and HSA. If you get past that, either save up for a house elsewhere if you want it, or open a taxable account.

Seems like a lot of money 😑

I recommend slowly getting to the max out point. Maybe start at 7% instead of 5% or whatever, then slowly increase each month til you get to the desired level. It was a way for me to learn to do with less without me feeling a drastic change in my routine.

That's because it sort of is. Thing is though, what else are you doing with that money? Besides, the more money there is in there, the more growth potential there is.

The other thing is that you deposit those steadily over time via paycheck contributions. The psychological impact is reduced for most people because of that.

Spend it until I make enough for it not to cost-burden me? But yeah...it's also a 'yolo' thing. You're only young once... I doubt many people @ $60k/yr are maxxing HSA/Roth/401(k)

When you make principle-only payments outside of your normally scheduled payments on a mortgage, the amount you're being charged interest on goes down and thus the amount of interest you pay goes down. Does the amount of money you pay each month change or does the length of your mortgage get shorter?

Monthly payment stays the same and you're shortening the length of the loan. Doesn't take a lot of extra money to shave 5-7 years off a 30 year loan.

Doesn't take a lot of extra money to shave 5-7 years off a 30 year loan.

Put your details into a calculator like unbury.us and then play around to see how just a couple hundred dollars a month can shave years off your mortgage. Note that when putting in your monthly payment amount, you should only consider the PI part of PITI (taxes and insurance don't touch the principal, so they shouldn't be counted in this calculation).

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