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Are you middle class?

tiltdeac said:
Don't you have a super low rate mortgage? Put the extra payments in the market (or pinball machines or whatever) instead, especially if you are itemizing.
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So what you're saying is I thought I was being smart but I'm not? We already max out our Roths every year.
 
See this is why I'm still middle class.
 
mako1331 said:
So what you're saying is I thought I was being smart but I'm not? We already max out our Roths every year.
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There are people on here would could give you way better advice than me, I think a basic order for where you should put extra cash would go something like:

1. Contribute to your work retirement plan (at least up to your employer match, if you get some sort of match, but maybe they give you comp time instead?)
2. Pay off any high interest rate debt you might have
3. Max out retirement accounts including beyond employer match
4. Put the rest in a taxable investment account (mostly or all stock market index funds since you are young, more bond funds as you get older and need less risk).

Paying off your mortgage early is fine, but that's super cheap money that would likely do better in an index fund, imo.

Finance bros can chime in a tell me why I'm dumb.
 
So like individual stocks? Tell me more. I want to be upper class like palma and Cata
 
mako1331 said:
So like individual stocks? Tell me more. I want to be upper class like palma and Cata
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I posted this after you posted. Sorry.

What I got from your advice is buy a taco cart. Done.
 
mako1331 said:
So like individual stocks? Tell me more. I want to be upper class like palma and Cata
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No. Index funds. All of the major brokerages have them now. Basically you want most of your investment cash (assuming you have a long time horizon) in a total stock market or S&P 500 index fund. Something like the Vanguard Total Stock Market Index (VTSAX). Schwab has one too (SWTSX). Fidelity as well. They have super low expense ratios and are designed to just give the return of the market, which in the long run tends to outperform actively managed funds. You could do ETFs too, but in my limited knowledge I don't think it makes too much of a difference for a passive investor.
 
If you took the 50 dollars a day they aren’t paying you to drive a bus and put it all in the market you would have an extra half a million in like 20 years, caveat you have to keep driving the bus, other point you need to actually get paid. Your county is stealing your families potential generational wealth!
 
the nice thing about being in index funds is that the evening news and NPR will tell you how your portfolio did every day without you having to follow shit. I just look at my etrade account once every couple of weeks to bemoan how poorly some of my investments have done.

also don't subscribe to Motley Fool as a) they will spam the shit out of you and b) their recommendations suck
 
tiltdeac said:
No. Index funds. All of the major brokerages have them now. Basically you want most of your investment cash (assuming you have a long time horizon) in a total stock market or S&P 500 index fund. Something like the Vanguard Total Stock Market Index (VTSAX). Schwab has one too (SWTSX). Fidelity as well. They have super low expense ratios and are designed to just give the return of the market, which in the long run tends to outperform actively managed funds. You could do ETFs too, but in my limited knowledge I don't think it makes too much of a difference for a passive investor.
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The ETFs work the same and can be a good option if you’re unable to buy the mutual funds he mentioned above in your specific brokerage account. For example the ticker for the ETF version of that Vanguard fund is VTI.

Short answer the ETF (exchange traded fund) version of these funds is functionally the same, it’s just a different share class/ownership mechanism for the same mutual fund. Same low expenses and all that. So if you can’t buy VTSAX then buy VTI.
 
DeacDiggler said:
the nice thing about being in index funds is that the evening news and NPR will tell you how your portfolio did every day without you having to follow shit. I just look at my etrade account once every couple of weeks to bemoan how poorly some of my investments have done.

also don't subscribe to Motley Fool as a) they will spam the shit out of you and b) their recommendations suck
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I’m guessing you’re not subject to the same independence rules as your audit colleagues across the hall. That’s some burdensome shit
 
tiltdeac said:
There are people on here would could give you way better advice than me, I think a basic order for where you should put extra cash would go something like:

1. Contribute to your work retirement plan (at least up to your employer match, if you get some sort of match, but maybe they give you comp time instead?)
2. Pay off any high interest rate debt you might have
3. Max out retirement accounts including beyond employer match
4. Put the rest in a taxable investment account (mostly or all stock market index funds since you are young, more bond funds as you get older and need less risk).

Paying off your mortgage early is fine, but that's super cheap money that would likely do better in an index fund, imo.

Finance bros can chime in a tell me why I'm dumb.
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I think this is fair. This order maximizes your guaranteed return for every dollar invested, not just potential market returns.

1. Gives you a guaranteed 100% return on your investment (free money) from where your employer matches you, and guaranteed preferential tax treatment down the line
2. Gives you a guaranteed return equal to your interest rate on that debt, so if you’re paying down credit card debt at 15% you just got a 15% return on that
3. Gives you guaranteed preferential tax treatment down the line.

After this then you have the tradeoff between things like paying off low interest debt like a 3.5% mortgage vs investing in #4 from that order and at that point it’s less of a black and white comparison since it’s comparing against hypothetical market returns. I’d figure a market investment will beat 3.5% over time so I’d do #4.
 
tiltdeac said:
There are people on here would could give you way better advice than me, I think a basic order for where you should put extra cash would go something like:

1. Contribute to your work retirement plan (at least up to your employer match, if you get some sort of match, but maybe they give you comp time instead?)
2. Pay off any high interest rate debt you might have
3. Max out retirement accounts including beyond employer match
4. Put the rest in a taxable investment account (mostly or all stock market index funds since you are young, more bond funds as you get older and need less risk).

Paying off your mortgage early is fine, but that's super cheap money that would likely do better in an index fund, imo.

Finance bros can chime in a tell me why I'm dumb.
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Mostly consistent with this, via r/personalfinance:

lSoUQr2.png
 
all this is good advice, but it does leave out some of the human psychology

it's very satsifying to pay down debt, even low-interest debt like a mortgage

and self-discipline is key -- if you're disciplined enough to keep your cash in the market then that's going to be better than paying down the mortgage, but since it's typically a lot more liquid than home equity, it's more tempting to grab later


also, there may be some credit implications to reducing your debt load that outweigh the difference in return/interest rate
 
JuiceCrewAllStar said:
all this is good advice, but it does leave out some of the human psychology

it's very satsifying to pay down debt, even low-interest debt like a mortgage

and self-discipline is key -- if you're disciplined enough to keep your cash in the market then that's going to be better than paying down the mortgage, but since it's typically a lot more liquid than home equity, it's more tempting to grab later


also, there may be some credit implications to reducing your debt load that outweigh the difference in return/interest rate
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I'd argue it's less psychology, and more personal preference, individual risk tolerance, and stage of life. Discipline is certainly part of that, as you mentioned.

If you're fairly responsible and just trying to optimize your finances without getting too sophisticated, then it's more a matter of what you value most given your circumstances.

Some prefer to take the guaranteed 3-4% by paying down their mortgage because it gives them peace of mind, and maybe the ability to say "fuck off" to a job they hate. Others will keep the debt and direct their money to the market, where they'll typically get significantly more than 3-4% (with no guarantees) and an account balance that grants them the ability to pay off debt, should they elect to. Both approaches yield satisfaction, both are correct -- just a matter of what each individual values most.

On the other hand, if you're not responsible/disciplined, it's moreso a behavioral issue than anything else. Putting money in the market vs. paying down a mortgage shouldn't be the conversation when you're buying cars and houses you can't afford and racking up thousands of dollars in credit card debt.
 
We bought our first house two years ago, after my wife finished law school and passed the bar. I immediately questioned whether I should pay extra on the mortgage and quickly decided against it. As explained above, the interest rate is so low compared to what you can reasonably expect in the market. Instead, I max out my 401k (my firm has a generous profit sharing plan on top of that) and invest nearly 100% of my bonus each year. I opened a Vanguard account in 2014 and highly recommend their service. I spread that out between an S&P fund, International Fund, and Small-Cap fund. Nothing to pick or really think about.
 
My mortgage is 3.25. Historic ROI in the market is 6.

The other advantage of ETFs is that you can buy in real time whereas a mutual fund you’re purchasing at the close price. So if the market takes a massive hit in the morning you can “buy the dip”.
 
DeaconCav06 said:
My mortgage is 3.25. Historic ROI in the market is 6.

The other advantage of ETFs is that you can buy in real time whereas a mutual fund you’re purchasing at the close price. So if the market takes a massive hit in the morning you can “buy the dip”.
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My mortgage rate is slightly higher (unlucky timing and I should have refinanced but didn't), but I think the historic average return on the S&P 500 is around 10%.
 
Will social security still allow you to draw early and then pay it back later for the full payout? I remember my dad raving about that as free money. He'd take the early $, invest it, then paid it back in full when the time came and had made $ off the early $, only to get the full payout. He's a lot smarter than I am about that stuff, though, and he thought the feds would wise up and get rid of that option at some point.. Also helps to have some disposable income available, obviously, which is what the IRA and 401k and a pension if you're lucky is for.
 
Nothing shows up on that website for me, is that because I am a poor?
 
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