Financial Independence Why invest in a roth 401k when a traditional 401k can be later converted into a roth? |
- Why invest in a roth 401k when a traditional 401k can be later converted into a roth?
- Getting a "fixed cost" lifestyle.
- Daily FI discussion thread - March 05, 2018
- High-paying high stress job vs more routine okay-paying job with part-time-option?
- Fortunate
- Is umbrella insurance policy necessary
- I find it easy to plan my budget. But how do you guys plan your career/future earnings?
- Weekly FI Monday Milestone thread - March 05, 2018
- Worried that I made a stupid decision by buying a house. Help.
- Single-income saving for FIRE in Canada
- Any UK folks in here?
- Feedback for RE
- Becoming Financially Literate
- Sell, Stay, Rent? What can I do to put myself in a better financial position with my house. My idea is to eventually buy cash flow properties out of state(live in Ca).
- Investing in stock with the weird capital tax in my country
- Could we be considered FI? Summary of accounts inside...
- Crap or Get off the potty
- Best retirement plan for low profit LLC?
- Take Loan out on Car to Pay down MTG
| Why invest in a roth 401k when a traditional 401k can be later converted into a roth? Posted: 05 Mar 2018 03:37 AM PST |
| Getting a "fixed cost" lifestyle. Posted: 05 Mar 2018 10:58 AM PST I'm relatively new to the FIRE community(about 2 yrs in), so forgive me if this is common knowledge. Over the last two years, my wife an I have dramatically increased our incomes (over 2x). And I became seriously concerned when I saw our spending begin to match our salary increases. It got me thinking, "how do I not only reduce our crazy spending now, but also prevent this lifestyle creep to continue when we get additional promotions"? My best solution was to find ways to automate and fix the cost of as many things as possible in our lives. This hasn't always meant the "cheapest" way of living, but at least I feel comfortable that we won't be spending more in the future, and it gives some stability to our budget. As an example, one huge factor of spending for my family is food. We love food. We like eating out, cooking fancy food, and generally over indulging. After promotions, I saw our monthly food spending shoot from $1k/mo to almost $2k/mo. To automate (and reduce) this food spending, I signed up for a meal delivery service to cover 6 dinners a week for our family. It averages $10/meal, which is anything but "cheap", but it's good food. We could absolutely spend less than that on food, but this works well for us. We are also meal prepping for lunches, and already have a cheap and healthy staple for breakfast (apples and peanut butter). Mortgage is another area that this feels applicable. We have been renting, and I noticed that each time we move (quite frequently), we're renting fancier, more expensive apartments. Instead, if we chose to buy a house (and not move out for a long time), we could fix those housing costs and prevent housing lifestyle creep. Makeup was a big one for my wife. So, instead of going makeup shopping, we subscribed her for monthly makeup bags that are both cheaper, and sometimes more enjoyable to get than shopping. I'm just waiting for self driving taxis to become ubiquitous, and then I'll happily dump my car for a fixed cost transportation service. That's probably our biggest expense besides food/rent right now. Are there any other ways that you guys have been able to fix costs in your lifestyle? How has it worked out? [link] [comments]  |
| Daily FI discussion thread - March 05, 2018 Posted: 05 Mar 2018 03:09 AM PST Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked. Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| High-paying high stress job vs more routine okay-paying job with part-time-option? Posted: 05 Mar 2018 09:26 AM PST Dear community, I am right now deciding between two options and I wanted to hear your thoughts. One job is very high paying and would - if I stay on the job and live frugally - probably allow me to become financially independent in the next 10-15 years (I am 30 now). The job is interesting and challenging, but also high-stress, long hours and requiring a bunch of travel. It would also teach me new skills which might open up further doors for good jobs in the future. The other job is a little more routine. It is in government. It has controlled hours and presumably not so much stress. It pays ok, so that I could easily cover my living expenses and save a little. I would probably not reach financial independence before normal retirement age. However, because it's a government job (in Europe) it would allow me to go parttime (down to 50% if I want) with a proportional reduction in gross pay, while keeping health insurance. Moreover, the job would be totally safe and there is basically no risk of losing it. So, what are your thoughts? Power through for like 10-15 years and become FI? Or take the less stressful job and maybe go down to 50% or 66% working time in a few years? I should still be able to support myself on the part-time salary, since I can keep all benefits. If it is important: I already have some savings now and will likely inherit a substantial amount in the next one to two decades. [link] [comments]  |
| Posted: 04 Mar 2018 06:27 PM PST I feel so fortunate. I often find myself reading this sub and feeling so far behind others my age, however, as of recent, I have come to realize that for many of us who feel behind, we are still more financially fortunate than probably 95 or more percent of the population. Many of my friends graduated college, an already fortunate life step for most, and more than not seem to be hit with growing debt/unemployment at a young age. This sub is filled with amazingly successful people, which is awesome and exciting to read/learn about, and I need to remember than in my comparisons. How do you deal with comparison? I know not supposed to, but it seems impossible at times, so this made me feel solid overall! [link] [comments]  |
| Is umbrella insurance policy necessary Posted: 05 Mar 2018 12:13 PM PST Hi All, Someone was telling me last week that an umbrella policy is a must have if you have significant assets in the event that you get in a car crash and they try to sue or claim penalties beyond your insurance limits. I'm curious to get your take on whether you think it's necessary or if they're just trying to sell me on a policy. I looked into it, it's like $200 a year for $1-2million worth of umbrella policy so just curious to get your take. [link] [comments]  |
| I find it easy to plan my budget. But how do you guys plan your career/future earnings? Posted: 05 Mar 2018 02:56 AM PST |
| Weekly FI Monday Milestone thread - March 05, 2018 Posted: 05 Mar 2018 03:09 AM PST Please use this thread to post your milestones, humblebrags and status updates which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply! Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts. [link] [comments]  |
| Worried that I made a stupid decision by buying a house. Help. Posted: 04 Mar 2018 10:52 PM PST I recently bought a house in Seattle for 680k(average for my area). It's a fixer but the land alone is around 500k. It was also a decent deal - off-market purchase, 44k below appraised value. My reasons for buying were: 1 - Assumption that Seattle market will keep going up and it is a good investment. 2 - I've been living here as a renter for two years and it's been my best living situation yet. I'm extremely happy to come home to this place even after visiting very beautiful places or staying at various airbnb homes. The neighborhood, location, view, etc - everything is excellent. Unfortunately, some issues came up during the purchase - I began investigating some things and doing a few minor repairs, and the house turned out to be in critical need of extensive work(plumbing, heating, etc). Ripping up the walls is involved, at which point it makes sense to do interior fixing/remodeling as well. It's a small house but it will still run around 100k, which is basically all my savings. My options are: 1 - Do the remodel. If I can get 70% ROI on that and the market appreciates for a few years, this is a decent financial move. 2 - Sell very soon at a slightly higher price, perhaps this summer when the bidding wars begin? I should be able to break even. I decided to pull the trigger anyway, but I keep wondering if I made a mistake. At this point, I should give a small background about me to explain why this is in the financial independence subreddit. In my early 20's, I was focused on my creative pursuits. However, I couldn't make money to support myself, and I didn't have more time to work at it, so I went into the field that will give me the highest salary with the lowest barrier to entry - software engineering. 4 years in and I'm making 170k + 100k in RSUs, though the RSUs are not tradable until the company IPOs, which I believe is quite likely within 2 years, but it's a gamble. I'm kind of ashamed to admit that I was too afraid and broke to keep working on my creative pursuits, but my hope is that the money from tech will fund extended time off so that I can focus on the creative work again. Also, eventually I should be able to switch to working in tech half time and fully remotely, which will allow for a lower cost of living and plenty of time for the creative work. That is my possibly naive plan. There main thing I'm concerned about - if a recession hits, the house just becomes a terrible investment, and with the remodel, everything I have will be in that. Recessions always recover, but this is a huge short term risk. In this case, I would be much better off selling the house right away. On the other hand, if I do a good flip and the market keeps going up at 5%, I will more than break even by selling in a couple years. I would even guess that this is the more likely scenario. Still, I feel I should not be taking such a risk. I'm terrified of getting locked in to something that will just keep me away from my creative work for longer. Do a Google image search "Expedition Happiness". That bus is a dream of mine. I don't want anything fancy or a lot of space, and if I had a good plot of land in the city where I could legally live out of that, I would do so. Unfortunately, very few open lots remain, and it's illegal to live in an "rv", including tiny houses, unless you build a foundation and connect all utilities, which is a very expensive job. I've looked into the idea of renting the house out as well, but factoring in the income taxes on the rent, it doesn't seem to be worth it unless I spend another 70-100k to finish out my basement and rent the house at twice the current size. No matter how much I think about this, the only two viable options seem to be remodeling and living for a few years and hoping the market does well, or selling right away and finding an apartment. (I hate apartments.) Sorry this is a bit long and scattered - I feel like I sound like an idiot and you are probably wondering how I ever became an engineer. Let me know what you would do in my position. [link] [comments]  |
| Single-income saving for FIRE in Canada Posted: 05 Mar 2018 01:34 PM PST After reading various blogs related to financial independence, I frequently read about people stressing that "50% of income" must be saved to RE. I assume that this usually refers to the saving of an after-tax income, but I'm not certain. But I must ask, for those that do not have high incomes (and in Canada where the income tax is high), how are they possibly saving for FIRE? For example, with a decent income of $80,000, 22.5% will typically go to the tax man, and another ~$3000 goes to EI/CPP premiums, leaving you with $59,000. Saving 50% of the original 80k leaves you with $19,000. Rental/mortgage rates will often cost >$1000/mo. So now you are left with $7,000 for the year ($583/mo). Between the high Canadian food costs, typically expensive cellphone plans, alcohol to survive the winter, insurance/gas for your (assuming) paid off car, how does anyone survive on just $583/mo??? Sure, you can get some money back from your RRSP contribution, but that money is now locked in and if you want to plan to RE, you're going to pay up to 30% withdrawal penalties when in comes time to use them, so you're incentivized to retire as late as possible there. Plus, if you're thinking about doing the Smith maneouvre on your home, you don't have this cash ready. I think a Canadian will really struggle to hit the FI/RE goal. Even the great Mustache abandoned his mission in the Great White North. Unless... One has a significant other, which changes everything. Sure enough, 95% of the FI/RE blogs out there are run by couples. Can the FI/RE strategy just be summed up as "get married and live on one income"? What's a single-income to do? Saving 50% seems to be impossible. [link] [comments]  |
| Posted: 05 Mar 2018 02:57 AM PST Hi all, always have enjoyed reading the posts here though at times can be a bit disheartening due to the massive difference in salary here in UK compared to USA. As an example I earn a decent salary for where I live that is well above the national average. However this is £35000 a year which is a pittance compared to some of the figures here! Having said that out of the roughly £2000 I get after tax per month I allocate £800 to mortgage overpayments, £200 to savings and £200 to pay off credit card debt (currently £1000). So really I live off £800 with which I run a car and pay all my bills. I've been living the same lifestyle I've been used to when I was earning £13000 about 15 years ago and it's served me well. I'll never be rich (unless my bitcoin goes to the moon - bought in 2014) but I hope to have mortgage cleared within 10 years. I'm 41 and have £11000 in savings. For me FI means choosing not to work if I don't want to. [link] [comments]  |
| Posted: 05 Mar 2018 03:57 PM PST Looking for feedback on my current path... I'm not sure how to make RE attainable. Any pointers/direction from this community would be much appreciated. For frame of reference, my wife and I live and work in the Bay Area. Right now we have been maxing out our 401(k)s, backdooring Roth IRAs, and taking advantage of mega-backdooring Roth IRAs. With company matching, we put about $80K per year combined across those retirement accounts. But this seems to us to be the slow road to retirement since we can't touch that money until we're much older (we're both 29 years old). We don't end up saving much given our current save vs. earn vs. burn rate. Finances: Earn
Burn (~$11K/mo... $131K annual)
Debt
Savings
Should we stop contributing so much to retirement funds and look into something else? Should we pay down our mortgage ASAP (or sell the house and move)? We've thought about investing in real-estate, but don't think we can compete in our area and don't have much exposure to other regions (nor do we really have the time with newborns at the moment). Neither of us are developers/coders, so we wouldn't do any coding-on-the-side projects (nor do we like coding in general). We also want to fully pay our kids' education (possibly in the form of 529s), so that's a lot more money going somewhere else over the years. Should we just continue the grind to make that happen and wait to be FI once we hit 59 years old? [link] [comments]  |
| Posted: 05 Mar 2018 03:50 PM PST This is probably a basic and popular question, but I couldn't find the answer I was looking for. Here's the question: As I work towards financial independence, what should I learn and understand about finances to become financially literate? For example, a big topic for me is 'minimizing tax liability'. I want to learn strategies for minimizing tax, especially in 'retirement' planning. I hear terms like 'Roth conversion ladder', and I don't have a clue. Plus, there seems to be so much crucial information that I'd be grateful to hear what you think the 'most important' concepts, strategies, terms, etc. are to learn and understand. thank you! [link] [comments]  |
| Posted: 05 Mar 2018 03:43 PM PST Cross-Post from Personal Finance. https://www.reddit.com/r/personalfinance/comments/828hf3/sell_stay_rent_what_can_i_do_to_put_myself_in_a/ [link] [comments]  |
| Investing in stock with the weird capital tax in my country Posted: 05 Mar 2018 06:53 AM PST So in my country there is a yearly total net worth tax including stocks at 1.6%. How bad is this vs capital gains tax at 15-20% as in most countries? Should I be investing in stock at all? Need some insights [link] [comments]  |
| Could we be considered FI? Summary of accounts inside... Posted: 05 Mar 2018 11:06 AM PST Married couple-- I'm 40, husband is 39 2 children ages 10 and 2 Current annual income: 125,000 He makes 80k/year at a stable corporate job. Not planning on retiring anytime soon because insurance/benefits are good, but might look for different jobs if an opportunity arose. I am self-employed, so my income varies but I've been holding steady at around 55-60k per year for the past 3 years. We do have to pay hefty taxes on that but we put as much into our SEP as possible each year to avoid paying so much on taxes. I work part-time hours with a full-time income which is excellent with a 10 and 2 year old. We live in a relatively LCOL area in the South (US) and don't plan on moving anytime soon. We pay cash for cars and pay off all CCs each month. Liabilities: 180,000 (on a 3% mortgage with 27 years to go. Not really in a huge hurry to pay this off since the interest rate is so low.) Assets:
Total Net Worth: 825,000 Would you consider us to be FI? Neither of us is ready to retire just yet but I'd like to know how we stand and just how close we are to FIRE. If this is too vague or more info is needed let me know. I've been lurking here for a while and this is my first post (on a throwaway). Thanks. Edited for formatting [link] [comments]  |
| Posted: 04 Mar 2018 07:12 PM PST Have been thinking of pulling the trigger for a long time now. 44 Male, hcol, NW: 1.3 m; do not own a house; annual expense: 28k-30k. Stressful week at work last week. Loved the 10-day xmas break. Relaxed this entire weekend. Loved it. I think I will live longer and better if I retire now. After all, isn't that the goal of life: living longer and better? [link] [comments]  |
| Best retirement plan for low profit LLC? Posted: 04 Mar 2018 07:04 PM PST For a LLC with no employees and low profit (10-20k yearly) is the best option the solo 401k if already maxing the 401k at work? As far as I can tell profit sharing is the same for the SEP IRA but the solo 401k gives the ability to:
I looked at the SIMPLE options as well as even the defined benefit options and didn't think those really made sense. I figure there are a lot of people looking to doing something similar where they are already maxing their 401k at work and are generating 1099 income in a side hustle. Oh and I never plan to have employees but income could go up eventually if that is an important update. 26M. [link] [comments]  |
| Take Loan out on Car to Pay down MTG Posted: 05 Mar 2018 11:19 AM PST Long time lurker, first post. Like title states I'm interested in paying down my mtg of 71k (at 4% APR/27yrs left) outstanding on a 200k home. Bought home 3yrs ago and took out a loan of 141k on it. Have since paid it down to 71k. As of today, I'm paying 800 extra a month on it. So this will go down with car loan if its a good idea. Also reamortized the loan so the payment is 474 a month without taxes/insurance. I pay those outside the mtg. So I just bought a car 9 months ago. 2017 Golf and its paid off. I can take a loan out on it for 32k easy, probably 35k if I wanted. Was thinking of doing this because I can get a loan at 3.19% through lightstreamloans.com (best site for loans, backed by suntrust). So I will save marginal money on the interest difference. I'd save like 3500 over the life of loan. I will no longer itemize my deductions this year since the standard is 12,500. Other info, 35m I'm fully maxed on HSA and 401k. 1yr income in the bank. The only downside I see is that my monthly expenditures minimums will double and wont have the flexibility to pay just 474 a month if shit hits the fan... I know its a risky move but the 3500 in gains on the table has me thinking... What do yall think? [link] [comments]  |
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