Personal Finance Advice
Old head advice would be useful here.
Starting work at a BB in NY this summer and will be on street base, don't expect my stub or real bonus to be anything extraordinary relative to other firms. Was at the bar with my future roommates a few days ago and we were talking about rent budgets, but also discussed that none of us really know that much about personal finance.
Lifestyle wise, I wouldn't say I live particularly frugally but if I had to guess I'm in the 35th percentile ballpark for how much I spend relative to the dumb shit I see my peers buy.
Thinking I'm going to try to save around 2k a month and plow it all into SPY since compliance is really annoying with regards to everyone else, but I am curious to see if anyone older on this forum has any advice on managing money during your analyst years to set yourself up well for the future?
Special credit cards or something? Any specific personal banking or tax tricks? Idk just shooting stuff out
first, emergency funds, have several months of bills in cash just in case shit hits the fan. betterment, etrade, wealthfront, and others all offer FDIC insured accts yielding over 3% and sometimes over 4%. I prefer FDIC but if you want vanguard they have good money market yields at present
second, max out roth 401k and backdoor roth (not the company match, the IRS maximum) - total of $29k total (22,500 roth 401k + 6500 backdoor roth)
third create a rule where after your savings account from step 1 gets over a certain amount, automatically move it to an investment acct at the same institution where you have your savings (part of the reason I mentioned those 3 firms). within this portfolio I'd keep it simple. personally I'd want global stock exposure not just SPY so I'd buy an all country all cap ETF or build out an ETF portfolio representing all of those sectors. too many investors are underallocated in small cap and mid cap and I think that's a mistake
as for other stuff like credit cards and tax tricks?
have a HDHP and max out your HSA but don't use it for anything, just get the triple tax deferral and once able, invest those funds in 100% stocks because it effectively becomes an IRA when you retire
if your company has a ESPP with at least a 10% discount and immediate liquidity, max that out and then sell the stock right away and move it into your savings or after tax investments
have your bonus fund a megabackdoor roth (google it) provided your company's 401k plan has all of the necessary bells and whistles
as you move up and get stock grants, sell those at vesting and reinvest in the strategy from step 3
for credit cards, I'd start with something simple (V/MA) and no fee with cash back until you're in a rhythm habit wise. I personally have a chase freedom card for this purpose. once you figure out what type of traveler you are you can look at amex platinum (my preference), chase sapphire reserve, citi american air, etc., but I wouldn't do that right away
for monitoring spending, try different strategies. I personally do well by having all things I can't put on CC autopay around the same time each month from the same acct and then have everything else on CC which I pay off every single month. this gives me a good idea of what my spending is because the autopays (mortgage, water, power, etc.) rarely change whereas the other stuff fluctuates more
for identity theft, I have alerts every time my card is charged and I run a lot of stuff on my CC through PYPL or AAPL pay for an added layer of protection. this could be a text alert (my bank and my amex) or an email alert (pypl, chase card, etc.) so that if someone is using my card, I know about it right away and almost all of the alerts are such that you have a phone # to call if the charge was fraudulent. I also rarely store my card information on websites and use PYPL whenever possible. for AMZN I don't worry, but I don't know what sort of cybersecurity measures my BJJ gym has as an example, so I prefer PYPL. in addition, I also have credit monitoring setup (free through my bank) so if my credit is pulled I know right away. an alternative to this is checking your credit annually on annualcreditreport.com
in addition to your emergency fund you could also have a short/medium term savings plan for things like travel, down payment on house/car, a kiton suit, etc. and in today's interest rate environment I'd just add that to your high yield savings acct so it's FDIC insured or in gov't money market (I use both). because you don't know the timing of the expense there's no sense in locking it up in a 2y treasury or CD, but if the curve steepens at all I'd probably do something like that to get more yield
finally, focus on first principles - savings rate, antifragility, and living life.
savings rate - the main thing you need to realize is that financial independence is a function of your savings rate, rate of return, and number of years you work. while I will never agree 100% with anyone's assumptions, this is a generally good guide: https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-b…
antifragility - live below means, you don't know what can go wrong (https://www.wallstreetoasis.com/comment/2450282#comment-2450282)
living life - buy die with zero by bill perkins. I save large chunks but I also spend large chunks on the things that give me joy (experiences mostly). I don't care about having the nicest house, nicest car, nicest clothes, but I do want to have the nicest memories. to put this into perspective, I spent 2x on travel last year than what I spent on my mortgage, and this requires you to deliberately live near no one of your income bracket. I personally enjoy this (I grew up lower middle class) but it's a mindset shift for many
happy to answer any followups, good on you for thinking of this early
For underallocation on mid-small caps, what other funds have you invested in personally?
very uneducated about this but I sort of assume go-to indexes like VTI overallocate for big companies like Apple, so you would invest in mid-small caps either additionally (after investing in VTI for example) or just not invest in VTI but build a portfolio with the same/equivalent diversification, just more weight on mid-small
also more so a personal question, but is this a good time to invest with market going down? Honestly keep considering things went way too high during covid and haven’t cooled down adequately, but probably have to start investing regardless. Just not sure of what percentage of my savings would be smart to do if things indeed do get worse
I don't think the regulators would like me saying specific positions as that could be construed as a recommendation so I'll just say that I have a mix of some highly regarded bottoms up managers that focus on smid as well as a couple of index funds
if your time horizon is long and you've not accumulated the vast majority of the money you will accumulate, it's always a good time to invest. I don't try to time the market, I just plow in the same amount every month and the only deviation I make is if things look really tasty I may take from my emergency funds to invest more. when I get older and have accumulated the vast majority of my lifetime wealth I bet I'll have a folio like buffett, equity plus 10-30% cash depending on valuations. in other words, always be buying, your psychology is your worst enemy which is why I build in systems to not allow for my emotions to alter what I know long term will be a solid investment strategy
Jeez man thank you so much. Really appreciate the help and am going through learning more about it now.
Curious about any particular reason that you prefer to have an investment acc with the same financial firm as for the cash account?
For ease of transfers from cash savings to long term investments to prevent you from second guessing your buying decisions
Print this post and stick it on your wall OP
One thing that helped me internalize the anti-fragility/frugality angle a bit is any time you go 'up' in purchase, then you will never go back down. For example as a college grad if you need a car you probably have no issue getting heavily used (100k+ miles on it or 10+ years old) for something lame like a Civic. If you make some money and want something nicer then maybe you get a more of a fun car that is lightly used (<5 years). From then on for the rest of your life when you need a vehicle you will never get a heavily used car again. And say you finally buy a brand new car, you will never buy a used car again. You are used to having a new car - same if you trade up in brand. Now you can apply this to almost anything (ex: size of apartment/house, brands, food, etc). Easy to trade up and set that as new bar. Very hard to go down - especially willingly and not because a job loss or divorce forced you to.
Also as you get older life will throw so much unexpected expenses your way that you realize why the hell would you want to add any yourself. Medical expenses, moving expenses, your year gets blown up because you get invited to 6 weddings so you are flying out somewhere every month for an expensive weekend, etc. Life will take your money, so dont just hand it over for nothing.
Lastly dont fall into the 'I work hard so I deserve this' trap. You 'deserve' nothing in life. If you can afford it and budget it and still hit your individual financial goals, then yea do whatever. But just because you ran a mile doesnt mean you deserve an ice cream sandwich. If you feel like shit and think buying something expensive will help it wont, you should focus on why you feel that way instead. If you can buy something but cant truly afford it such as an expensive house then it will ruin you with stress. You dont own it, it owns you
Adding on your last mortgage point a bit for the young guys.
When you get approved for a mortgage there is the high end amount the bank is willing to lend you that would probably put you under financial strain, the middle amount (~30% of take home) that is probably what you can afford , and less (ex: 15 yr, or sub 20% take home) that puts you in a financially favorable position and will upset your realtor why you dont want more.
It's easy to fall in love with the houses at the high end but caution is when you live in those neighborhoods it's not just your mortage is higher. Your neighbors are executives and high end professionals, with that comes more pressure to buy anything. Yards are immaculate and often professionally done, toys such as grills, furniture, pool, etc. are all top end. More likely to have luxury cars, boats, etc. So if you're already stretching to be in that neighborhood you will see pressure on all ends that will make you feel inadequate and buy more stuff you might not be able to afford
When stretching to buy fsomething financially you cant afford it NEVER is a one time payment. Nicer car means more insurance and more upkeep to look spotless, country club membership means more expensive socials and engagements (you, your wife, and the couple you just met arent going to get dinner at the local pub together), etc. This doesnt mean dont do those things of course but if you can afford it and not stretch for it
The sad reality is that in San Diego, houses for us cost around 800k these days. *sigh*
.
Fugit non aliquid libero harum. Ut ex aspernatur sapiente animi omnis.
Et dolores aut asperiores dolor enim reiciendis similique. Nulla repellat ipsam aliquam voluptates.
Repellendus sint sint minus alias voluptatum at nobis. Qui architecto voluptatibus illo nemo eum. Odit porro quo aut odit numquam. Doloribus aut sequi maxime numquam quam molestias. Natus ut sit sint.
Et occaecati sit natus possimus alias ut. Rerum et nesciunt maiores aut. Voluptatibus aspernatur voluptatem aliquid sint provident. Numquam optio facere doloribus et blanditiis quasi possimus.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...