Personal Finance Advice and Education! (2 Viewers)

[-OZ-]

#6 is start saving for the thing and buy it when you have the savings

We have it, it’s just in stocks.

 

[Nugget]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

Sell the stocks. Cap gains at 15% is likely better than the after tax money you will be using to pay on the car loan.

 

[pecorino]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

And we think Robin Hood will be solvent in 15 years? I really know little about it but I’m not eager to move upwards of a quarter mill into that outfit.

 

[thecatch]

#6 is start saving for the thing and buy it when you have the savings

We have it, it’s just in stocks.

I mean, if you are going to go so lean with the cash on hand, you should be prepared to have to sell some stocks when something like this comes up. If you could get a guaranteed 6% return on some of your capital you wanted to remain semi liquid, you probably would have done it. Not taking the car loan is essentially the same thing.

 

[-OZ-]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

And we think Robin Hood will be solvent in 15 years? I really know little about it but I’m not eager to move upwards of a quarter mill into that outfit.

It either will be solvent or a larger company will buy it.

 

[-OZ-]

Sell the stocks. Cap gains at 15% is likely better than the after tax money you will be using to pay on the car loan.

I mean, if you are going to go so lean with the cash on hand, you should be prepared to have to sell some stocks when something like this comes up. If you could get a guaranteed 6% return on some of your capital you wanted to remain semi liquid, you probably would have done it. Not taking the car loan is essentially the same thing.

Ultimately this is the logical answer which meets our planning. It’s just a psychological thing about spending money and selling investments. But if we aren’t willing to sell now while I’m working, selling after retirement is going to be harder. But that’s why we have the money in the first place.

 

[Nugget]

Sell the stocks. Cap gains at 15% is likely better than the after tax money you will be using to pay on the car loan.

I mean, if you are going to go so lean with the cash on hand, you should be prepared to have to sell some stocks when something like this comes up. If you could get a guaranteed 6% return on some of your capital you wanted to remain semi liquid, you probably would have done it. Not taking the car loan is essentially the same thing.

Ultimately this is the logical answer which meets our planning. It’s just a psychological thing about spending money and selling investments. But if we aren’t willing to sell now while I’m working, selling after retirement is going to be harder. But that’s why we have the money in the first place.

The psychology piece is going to be hard. I do find it easier to spend out of my MMF than to sell stocks. Having a larger "sinking" fund for vehicles or home projects may make it easier to spend when the time comes. I'm trying to split extra funds each month between an index fund and MMF.

 

[matttyl]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

 

[bcat01]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

Probably hoping the government will forgive it.

 

[stbugs]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

It’s going to come to a head at some point. The divide between the wealthy and poor is ridiculously large now. One the one hand wealthy people are making great returns on their assets and poor people are paying 25%+ extra on everything they need.

 

[Peggy]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

 

[gianmarco]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

Not on an island. I mean, still mostly invested, but have a sizeable chunk earning 5% that's liquid.

 

[GoBirds]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

Probably hoping the government will forgive it.

Sad but true.

 

[GoBirds]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

I’ve got a lot in Vanguard cash accounts and averaging in to some dividend stocks before it’s the cool thing to do when rates drop.

 

[NutterButter]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

I feel like I've read this story before

 

[matttyl]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

It’s going to come to a head at some point. The divide between the wealthy and poor is ridiculously large now. One the one hand wealthy people are making great returns on their assets and poor people are paying 25%+ extra on everything they need.

I also wonder just how these (and other) financial stats are created. Are they talking 1 in 5 cards, or one in 5 borr

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

I feel like I've read this story before

you did, pre pandemic. We’re getting g back to (and in some cases exceeding) those numbers.

 

[stbugs]

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

It’s going to come to a head at some point. The divide between the wealthy and poor is ridiculously large now. One the one hand wealthy people are making great returns on their assets and poor people are paying 25%+ extra on everything they need.

I also wonder just how these (and other) financial stats are created. Are they talking 1 in 5 cards, or one in 5 borr

A growing number of Americans are maxed on their credit cards. Roughly 1/5th of CC borrowers were using 90+% of their available credit in the first quarter of 2024.

I feel like I've read this story before

you did, pre pandemic. We’re getting g back to (and in some cases exceeding) those numbers.

With the language you used, I would guess that it means 20% of people who are borrowing money, i.e. carrying a balance. That said considering the average CC balances, I would suspect that a majority of the CCs do have a balance so 20% of that group at 90%+ is still a large number and heck most people have a handful of cards so you could be 25% of max with 1 out of 4 cards maxed out. If 20% are at 90%+, I’d think the average person is using 50-70% of their credit limit. That’s a lot of credit being used.

 

[stbugs]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

I’ve got a lot in Vanguard cash accounts and averaging in to some dividend options before it’s the cool thing to do when rates drop.

Are you saying you are buying dividend stocks? Just a weird sentence since the word options is a financial term but I don’t think you are meaning actual options.

 

[GoBirds]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

I’ve got a lot in Vanguard cash accounts and averaging in to some dividend options before it’s the cool thing to do when rates drop.

Are you saying you are buying dividend stocks? Just a weird sentence since the word options is a financial term but I don’t think you are meaning actual options.

Yeah sorry not sure why it corrected to that.

Been adding some O and others.

 

[Steve Tasker]

Random possibly dumb question, my lady friend's new job offers her participation in a "Capital Accumulation Plan (CAP), a 401(k) plan". They specifically phrase it like that several times in the start paperwork... 'Get started in your Capital Accumulation Plan (CAP), a 401(k) plan, today', 'Take advantage of your Capital Accumulation Plan (CAP), a 401(k) plan', and 'Enroll in your Capital Accumulation Plan (CAP), a 401(k) plan'.

That's just a normal 401k, right? I mean, is there any particular difference in what I think of as a normal 401k versus a "Capital Accumulation 401k"? I assume it's just some jargon this new company uses? Or are there any particular nuances or pitfalls I should be aware of before helping her sign up?

Look into the "net unrealized appreciation" (NUA) rules surrounding 401k plans. It could have something to do with NUA, based on the wording.

 

[pecorino]

Am I on an island? I have a bunch of cash not invested right now making 5%. Zero risk.

I figure when rates start dropping again the market might cool off at the same time and will move it back into the market then.

Not on an island. I mean, still mostly invested, but have a sizeable chunk earning 5% that's liquid.

I'm at about 75% invested and 25% earning money market rates at 5.3%. Usually it'd be more like 95/5. But, like you, I see a risk-free 5+% and want some of that action.

 

[SFBayDuck]

Credit score gurus - we're planning on paying off the student loans my daughter has taken out during school when she graduates. They're subsidized so no interest payments or accrual until then, and we've actually just banked much of it so we'd have the flexibility in case circumstances change. But would it be beneficial to leave a small balance, like $500, that she pays over time to help build up her credit? She only has authorized user on a couple of credit cards and an auto loan on her credit report so far. I'm going to have her get a credit card shortly, but wondering if the student loan could also help.

 

[SFBayDuck]

Also did a 529 and set up auto investing for it, and added to that when I had some extra. Now I'm at the point of making sure we get it all used for my Junior student. I barely drew down on it her first two years, but that's largely because she's gotten some grants and scholarships that I never know if she'll get each year, and I'm in tech sales so job security is always a potential issue. The good thing is they've added some more ways to use the funds the past few years. We have taken out some of the offered subsidized loans, some of which we've parked in a HYSA, and you can now use up to $10K to pay off loans. You can also roll over unused funds into a Roth.

Living in CA there were no state tax benefits to contributing. But now living in OR there is, so I've pulled out of the CA 529 each of the past couple of years and contributed to the OR to get that tax benefit. So be sure to check that in your state to see if any added benefit to the 529.

Quoting myself as I just uncovered today that while the feds allow Roth rollovers and student loan repayments from 529s, not all states have adopted this. In fact most states haven't, including the two states that I currently have 529 plans in. You can find details on what your state's plan does and doesn't allow here: https://thecollegeinvestor.com/529-plan-guide/

There are also state-specific rules on rollovers. It looks like I can do a rollover from both Oregon and California without penalties to another state. What I haven't found the answer on yet is if I can just roll $10K into a state that actually does allow student loan repayment and then disburse from there, anyone know?

There is also a once every 12-month rollover limit. So now I'm thinking I'll do a rollover from CA to OR in the next week or so of just enough to capture the OR tax credit for 2024 (OR does allow that, not all states count rollovers), and then possibly do another rollover of $10K in 2025 once 12 months has passed to a state that allows loan repayment, pending the answer to the above.

Quoting myself again.....found out that the Roth and student loan repayment options are tied to the state you file taxes in, not where the 529 plan is located. So I'm SOL on the student loan repayment option

 

[Hastur]

Not necessarily relevant to this discussion, but wanted to gripe about this without having to start a new thread.

I helped a local business out with some consulting, and they cut me a check. The check was a Wells Fargo check, so I go there to cash it. They said they had to charge me $7.50 to cash it. ON A CHECK FROM THEIR OWN BANK!

Needless to say, I took the check back and cashed it from my own bank.

What the what?

 

[Juxtatarot]

Not necessarily relevant to this discussion, but wanted to gripe about this without having to start a new thread.

I helped a local business out with some consulting, and they cut me a check. The check was a Wells Fargo check, so I go there to cash it. They said they had to charge me $7.50 to cash it. ON A CHECK FROM THEIR OWN BANK!

Needless to say, I took the check back and cashed it from my own bank.

What the what?

It’s not the old days.

 

[SFBayDuck]

Not necessarily relevant to this discussion, but wanted to gripe about this without having to start a new thread.

I helped a local business out with some consulting, and they cut me a check. The check was a Wells Fargo check, so I go there to cash it. They said they had to charge me $7.50 to cash it. ON A CHECK FROM THEIR OWN BANK!

Needless to say, I took the check back and cashed it from my own bank.

What the what?

What's a check?

 

[Peggy]

I still write checks for medical bills (as a record for cashing out HSA decades from now) and other one offs that I don't want to add to my electronic banking.

And for large purchases and taxes. Where banks watch cards and withdrawals for unusually high transactions, I was told once that you signature on a check is all the approvals needed when they are looking for stuff like that.

 

[Buckna]

Not necessarily relevant to this discussion, but wanted to gripe about this without having to start a new thread.

I helped a local business out with some consulting, and they cut me a check. The check was a Wells Fargo check, so I go there to cash it. They said they had to charge me $7.50 to cash it. ON A CHECK FROM THEIR OWN BANK!

Needless to say, I took the check back and cashed it from my own bank.

What the what?

I’m not one to defend Wells but you weren’t an account holder with Wells then. It’s been pretty standard to charge non- account holders at lots of places for cashing checks for a while now. In the digital age, banks carry very little cash on hand. FWIW, Chase would have charged you $10. Citi is free under $5k, but their catch is lots of their locations don’t cash checks at all!

 

[jm192]

Credit score gurus - we're planning on paying off the student loans my daughter has taken out during school when she graduates. They're subsidized so no interest payments or accrual until then, and we've actually just banked much of it so we'd have the flexibility in case circumstances change. But would it be beneficial to leave a small balance, like $500, that she pays over time to help build up her credit? She only has authorized user on a couple of credit cards and an auto loan on her credit report so far. I'm going to have her get a credit card shortly, but wondering if the student loan could also help.

I would just pay it all off.

The biggest factors are going to be age of credit and on time vs late payments. That's not to say balances are a non-factor. They are. But it's not going to be a big needle mover. Certainly not enough benefit to pay any interest or have the hassle of having to remember to make a payment.

Early on, you need to build your % of on time payments and increase the age of credit. Since they don't change overnight, the growth is slow.
As you get into the later stages--if the other two things are really strong, your score will be high regardless of the balances.

Best move: Get a credit card, but don't use it to finance things. Use it for normal daily spend and pay it off each month.

 

[Orange&Blue]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

say what??

 

[Desert_Power]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

say what??

It’s back to 1% now. Supposedly I will still get it in mine, but don’t have a call scheduled till 6/3 to do it with their conversion vendor

 

[-OZ-]

Might be a mistake but I went ahead and transferred my traditional IRA to Robin Hood for the 3% bonus. That will be over $10,000 and I’m not touching it for the next 15 years. Not contributing, not withdrawing. I’m also on the waitlist for the gold card (3% back on all purchases).

This account is about 1/4 of our portfolio. I’m probably keeping our Roth IRAs and regular brokerage in place. The ones were still contributing.

say what??

RH was offering 3% bonus in April. Everything transferred smoothly.
But yeah, it’s back to 1% now.

 

[-OZ-]

If you decided to buy something for $55,000 would you:
1. take a loan for 36 months at 6.5%
2. Take a loan for 72 months at 6.89%
3. sell stocks to cover the expense, and pay the capital gains.

#4 - not buy a brand new car.
#5 (and I know this won’t go over well here) - borrow out of my life insurance policy. 5% interest, I pay it back when and in whatever amounts I want.

I mixed 4 and 5 during covid and purchased a used Tahoe for $20some k. Loaned some money out of my policy, which at the time was only 3.5% interest - nearly half of used car rates at the time. Paid it back over 3 years in random chunks here and there.

Honestly, too many factors here to tell you which way to go.

4 - we can wait, and probably will for a bit. But we drive our cars at least ten years (bought the odyssey 13 years ago)

5 - TSP loans seem like a bad idea for us. No whole life.

We didn’t wait. A decent deal was made, we’re getting what we want. I sold enough stocks and bonds to cover the cost and will write the largest check of our lives in 30-60 days when the vehicle is delivered to the dealership.

 

[Judge Smails]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

 

[SFBayDuck]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

Find a fee-only or project-based FA, more and more of the industry is moving to that model. Unless someone is actively managing your investments, why pay them AUM?

It's actually what I'm considering going into over the next few years, focusing specifically on the 5-10 years before and then the transition into retirement, and approaching from a more holistic manner than only the financial aspect (even if that is almost always the elephant in the room).

 

[jm192]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

I manage ours myself.

We keep really simple.

60% S&P 500/Total Market ETF's/mutual funds
25% INTL ETF's/mutual funds
15% bonds (mostly I-bonds).

We're both mid 30's. I'll probably start upping the bonds in the near future. I should probably go up on the INTL ETF's a bit as well. I've considered dabbing in Bitcoin now that there are ETF's. But so far haven't taken the plunge.

 

[Peggy]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

I manage ours myself.

We keep really simple.

60% S&P 500/Total Market ETF's/mutual funds
25% INTL ETF's/mutual funds
15% bonds (mostly I-bonds).

We're both mid 30's. I'll probably start upping the bonds in the near future. I should probably go up on the INTL ETF's a bit as well. I've considered dabbing in Bitcoin now that there are ETF's. But so far haven't taken the plunge.

Why more in INTL? I haven't read anywhere that recommends more than 20-25%. Diversification? Remember companies that make up your total market and S&P, AAPL, GOOG, MSFT, etc, are all international companies.

 

[SFBayDuck]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

I manage ours myself.

We keep really simple.

60% S&P 500/Total Market ETF's/mutual funds
25% INTL ETF's/mutual funds
15% bonds (mostly I-bonds).

We're both mid 30's. I'll probably start upping the bonds in the near future. I should probably go up on the INTL ETF's a bit as well. I've considered dabbing in Bitcoin now that there are ETF's. But so far haven't taken the plunge.

Why more in INTL? I haven't read anywhere that recommends more than 20-25%. Diversification? Remember companies that make up your total market and S&P, AAPL, GOOG, MSFT, etc, are all international companies.

If you look at correlations over the past couple of decades of something like SPY and IEFA (largest int'l fund), they're at .87. VTSAX and VXUS have a correlation of .86. EFA and IVV are .88. Point being, you're really not getting much diversification. And returns of int'l funds have lagged for a couple of decades now. Doesn't mean that can't change, but I've gone from 25% int'l down to about 10% over the past few years - mostly just by letting them run so the underperforming int'l funds are now a much smaller percentage of my portfolio. I'll likely rebalance on occasion to keep it at about 10% for now, as there have been historical periods where int'l outperformed.

 

[-OZ-]

Anybody ditch their financial planner/fiduciary that has a pricier AUM model to completely self directed or an Advisor for a much lower fee. Strongly considering doing that now. Either Boglehead type 3 bucket approach by myself or use Vanguard Advisor which is I think .30% AUM? I'm thinking the latter since I will have questions nearing and in retirement. Recommend?

I manage ours myself.

We keep really simple.

60% S&P 500/Total Market ETF's/mutual funds
25% INTL ETF's/mutual funds
15% bonds (mostly I-bonds).

We're both mid 30's. I'll probably start upping the bonds in the near future. I should probably go up on the INTL ETF's a bit as well. I've considered dabbing in Bitcoin now that there are ETF's. But so far haven't taken the plunge.

Interesting. Seems too much in bonds in your 30s and I’ll agree with the others that there’s no real need to add to international. I keep about 15% developed, 10-12% developing.
We have 1% in Bitcoin. HODL has grown nicely but I don’t see it continuing to grow like it has this Year.