Home     Forum     401k     401k Rollovers
    Register   Login   Members   Search   FAQs     Recent Posts    




Just turned 30, not sure what to do with my money

Reply to topic
Money Talk > Retirement Planning

Author Thread
Wino
Senior Member


Cash: $ 113.80

Posts: 560
Joined: 03 Aug 2012
Location: Dubai
 Reply with quote  

quote:
Originally posted by SyZ
I can see how people with a 30-60k income sometimes have trouble if they're buying new cars and spending money on vacations and eating out and what not all the time -I don't see how people who earn salaries like $130,000 are struggling to make ends meet. How can you earn that kind of salary and then stress yourself to the limits that you're still living paycheck to paycheck?
It's not how much you make. It's how much you spend.
Post Thu Jan 15, 2015 8:12 am
 View user's profile Send private message
blixet
Preferred Member


Cash: $ 32.55

Posts: 156
Joined: 28 Apr 2013
Location: Southern California
 Reply with quote  

Exactly. Whether it is debt or budgeting, it usually isn't a financial problem. It's a behavioral problem.

Check out The Millionaire Next Door from your local library.

Information is more valuable sold than used – Fischer Black
Post Thu Jan 15, 2015 2:08 pm
 View user's profile Send private message
SyZ
Contributing Member


Cash: $ 8.55

Posts: 42
Joined: 01 Nov 2014

 Reply with quote  

The discipline and intelligence needed to attain that profession and salary would make you think the person could figure out how to manage money, especially since most people who go into those professions only want the money ... oh well

Any opinions on tax exemptions? I'm used to getting a large refund check but that just makes me think that the government is gaining interest on my money all year while I overpay them in taxes
Post Fri Jan 16, 2015 2:46 am
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 720.20

Posts: 3503
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
I'm used to getting a large refund check but that just makes me


LOL - about that refund. I haven't gotten one in at least 20 years, I make sure of it. I adjust my withholding (on the W4 form) so that I owe about $1000 on April 15.

The average refund in the US is about $3000. It makes you wonder what people are thinking - if you know that your tax bill for the year is about $10,000, why on earth do people prepay $13,000 and then wait for the IRS to refund $3000 of it the next year? (I keep the $3000 in an SP500 Index fund and I've been earning 11%/yr on it forever.)

Another reason not to over-withhold - remember a few years ago the CA Governator couldn't pay the CA state refunds so he sent out IOU's? People like me had no concern, we already had the money in the bank. And lately Obama has been talking about being late/holding back refunds? Not a concern for me, I'll owe in April - ie, I already have that money banked & invested.

History - tax withholding was invented during WW2 to pay for the War. Before that everyone paid their tax bill on April 15. When the law was changed to Prepay, people grumbled - but not that much, it was "for the War Effort", people were very patriotic about winning WW2. But after the War the IRS kept the withholding system in place. And a decade or so later, it became clear that Americans had lost the ability to save up to pay their taxes in a lump sum in April - and that truth has become more true ever since. Today, it would be disaster for many folks (and for the US Treasury) to come up with $10k or $15k in April. Sadly there are Americans who don't understand that they pay $10k or $15k in taxes, they think that the IRS "gives" them a $3000 refund every year?
Post Fri Jan 16, 2015 4:17 am
 View user's profile Send private message
blixet
Preferred Member


Cash: $ 32.55

Posts: 156
Joined: 28 Apr 2013
Location: Southern California
 Reply with quote  

I withhold enough to meet the safe harbor rules but deliberately under-withhold so that I owe the IRS and the state every year. Since it is planned, there is no shock or burden in paying in April. I prefer not to loan my money to the government at 0% nominal.

Information is more valuable sold than used – Fischer Black
Post Fri Jan 16, 2015 2:50 pm
 View user's profile Send private message
SyZ
Contributing Member


Cash: $ 8.55

Posts: 42
Joined: 01 Nov 2014

 Reply with quote  

I agree that I'm messing up by paying too much in taxes, but how do I figure out the correct amount to owe? Ie, if they had a table:

1 ---> you will owe $1,000
2 ---> you will owe $5,00
3 ---> you will owe $0

etc, it would be easier. Instead, I just get money back (only about $300-500) and try to fix it for the next year

I went out with some friends yesterday and they brought some new people, and all they were talking about were ways to not pay taxes or to get the government to pay you:

- buy a boat, lend it to a company as a lease vehicle, pay nothing
- creating a scholarship and having your child apply and then having them win to avoid taxes
- buying a home, renting it to people with government-recognized disabilities to have the government pay their rent / your mortgage
- flying to India to open a bank account for 9% savings and then retiring in Belize to avoid being taxed

etc.

Makes me wonder how much of it is legit, moral, and repeatable
Post Sun Jan 18, 2015 9:01 pm
 View user's profile Send private message
Wino
Senior Member


Cash: $ 113.80

Posts: 560
Joined: 03 Aug 2012
Location: Dubai
 Reply with quote  

quote:
Originally posted by SyZ
- flying to India to open a bank account for 9% savings and then retiring in Belize to avoid being taxed

If you look at my name, you'll see that I live in Dubai. This is completely illegal, and the financial penalties are so severe that this falls into the category of "effing stupid." Just look up "FBAR" for the first thing. With that, if you have over $10K in an overseas account (cumulative, so 10,000 accounts with $1 counts as $10000), you must report it. If you do not, you can be fined 25% of the amount in the account per year. So, if you do this for 5 years, you owe more than you had, not even counting penalties and jail time.

The withholding is an easy question. As long as you withhold more this year than you paid last year (or exactly the same), then you cannot be penalized. As long as your pay goes up, you are covered. If you pay goes up, you owe more, but cannot be penalized.

Who is the company that's going to pay you for the lease boat? They have to pay, or you have to pay. You MIGHT be able to get a slight tax break, but someone is going to pay the payment. Would you pay for someone else's boat if you owned a company?

The rental scheme? How about "Buy a house and rent it to anyone else?" How does the government being involved make a difference? Real estate for income is not a new idea.

The scholarship idea MIGHT work if you paid the same amount to non-relatives on other years, but I don't see how paying for multiple scholarships makes you more money over time. Your tax break is proportional to your tax rate, so if you have enough to pay for multiple scholarships, you only actually pay maybe 65%, and get a 35% rate.
Post Sun Jan 18, 2015 9:38 pm
 View user's profile Send private message
SyZ
Contributing Member


Cash: $ 8.55

Posts: 42
Joined: 01 Nov 2014

 Reply with quote  

I feel like either everyone is doing it wrong, or I'm just missing something, and I can't be missing something, because the math is right

I had a woman the other day, 67, who had just retired, and had bought a 2013 Rav 4 for cash. Had 4k miles on it. Crashed it, total loss, we gave her $31,000. Why? Because she had no lienholder. Why? Because she bought it for cash. Why?

... "because I didn't want a car payment in retirement"

... what? Is the burden of setting up automatic payments each month (you clearly have the funds if you're dropping 40k cash) and then using the money elsewhere too much? I don't understand

My roommate just put a $4k payment on his car to pay it off early, next he wants to finish his student loans. He has about $5,000 credit card debt

I talk to people at work, they're putting a little extra ($100-$200) towards their mortgage to cut into the principal, but they're investing only 5% in their 401k and they're in their 30s

I think I'm going to just change my tax exemptions to 0, and end up owing in 2016. I mean, mathematically, I want as small a refund as possible, and if it can even go below $0 (refund -> owe), I might as well do that too
Post Fri Jan 23, 2015 3:33 am
 View user's profile Send private message
Wino
Senior Member


Cash: $ 113.80

Posts: 560
Joined: 03 Aug 2012
Location: Dubai
 Reply with quote  

quote:
Originally posted by SyZ
I feel like either everyone is doing it wrong, or I'm just missing something...(snip)

My roommate just put a $4k payment on his car to pay it off early, next he wants to finish his student loans. He has about $5,000 credit card debt

When he completes his loans, he will have zero debt. He can then devote his full paycheck to investing, and no matter what happens, he has money for retirement, unless the whole country goes bankrupt. He has elminated all risks that come with investing that he has control over.

quote:
Originally posted by SyZ
I talk to people at work, they're putting a little extra ($100-$200) towards their mortgage to cut into the principal, but they're investing only 5% in their 401k and they're in their 30s

Six of one, half dozen of the other... They are putting money into an appreciating asset (the house), instead of an appreciating asset (retirement account). They would likely make more in the stock market index fund, but they could also lose there. The odds of them losing on the house are covered by the fact that they MUST have somewhere to live. Again, they are eliminating a controllable risk at the cost of probable additional gains.

quote:
Originally posted by SyZ
I think I'm going to just change my tax exemptions to 0, and end up owing in 2016. I mean, mathematically, I want as small a refund as possible, and if it can even go below $0 (refund -> owe), I might as well do that too
If you withhold zero, you will pay a penalty and interest as well as the taxes owed. Just make sure you put in at least as much as you paid last year, and you're covered.

You are missing something. You think that risk is not something to be accounted for in your dealings. When oldguy mentions "risk and return," you are thinking only of the "more returns" side of the equation. You can also LOSE more money due to the risk.

If 100 people were to get on an airplane knowing it would crash and only one person would survive, they'd all feel sorry for the families of the other 99, because the person doing the thinking would be certain he would be the only survivor.

Risk in investing is real. You can either play the odds and hope for the best using oldguy's method and thereby make some percentage more in your lifetime unless you lose it all, or you can eliminate all detrimental factors that you can control, and have a safe and assured retirement. Paying off debt before investing is the more certain way to a comfortable retirement. Leveraging investments will get you more money, unless you go bankrupt.
Post Fri Jan 23, 2015 6:04 am
 View user's profile Send private message
SyZ
Contributing Member


Cash: $ 8.55

Posts: 42
Joined: 01 Nov 2014

 Reply with quote  

I guess

I fully understand the risk versus return aspect, but we're not dealing with something like that, we're just talking about putting $40k down to avoid having a 1.9% interest loan, on the chance that investing elsewhere would be worse - can't you just get short term bonds and CDs that guarantee more than that?

Just filed my taxes and I somehow owe $800 to the government, despite having a paycheck of about $1,700 and taking home $1,211 when all is said and done. I guess it's as good as I could have hoped for, since I got to use my money all year before handing it back to them, just makes me bitter
Post Tue Jan 27, 2015 4:07 am
 View user's profile Send private message
oldguy
Senior Member


Cash: $ 720.20

Posts: 3503
Joined: 21 May 2006
Location: arizona
 Reply with quote  

quote:
about putting $40k down to avoid having a 1.9% interest loan, on the chance that investing elsewhere would be worse - can't you just get short term bonds and CDs that guarantee more than that?


The Law of investing - risk and return are directly proportional.

Often people 'think' that something is safe, "guaranteed", but that just means that they don't understand the risks. Think about high-pressure marketing schemes that you encounter - there is a whole industry that depends on "hiding risks" from clients. Infomercials - "call now, money back, no risk guarantee". Annuity products, Time Shares, whole life insurance - they are sold mostly to people who misunderstand.

The actual 'no risk' products are savings accounts, CDs, money market. They are designed to provide safe storage of money, they are pegged to inflation, and they are supposed to safely offset inflation but provide zero return. Everything else carries risk - you must select your risk level.
Short term bonds usually pay about 3% or 4%, and carry more risk than a CD. Stocks usually pay about 11%/yr and carry more risk than short bonds. I mix the two to get the risk level that I want. Say that I want a 7.5%/yr risk level, I would mix the 11%/4% @ 50/50. And if I wanted to increase that 7.5% risk a little, I would switch to 60/40.
Post Tue Jan 27, 2015 6:06 pm
 View user's profile Send private message
SyZ
Contributing Member


Cash: $ 8.55

Posts: 42
Joined: 01 Nov 2014

 Reply with quote  

So I found a pleasant surprise at work today - apparently, last Friday the company's match was distributed:

http://i.imgur.com/tBuxcBx.jpg

For whatever reason, I thought this was already done. Essentially, I got $1,700 for free

What's the difference between the current balance and vested balance? So the portion that the company matched they're able to take away if I were to quit tomorrow, but I keep the vested balance, which is what I had put in myself?

They put all the extra money in the company stock, am I able to move it around?
Post Wed Feb 11, 2015 1:17 am
 View user's profile Send private message
Wino
Senior Member


Cash: $ 113.80

Posts: 560
Joined: 03 Aug 2012
Location: Dubai
 Reply with quote  

quote:
Originally posted by SyZ
What's the difference between the current balance and vested balance? So the portion that the company matched they're able to take away if I were to quit tomorrow, but I keep the vested balance, which is what I had put in myself?

They put all the extra money in the company stock, am I able to move it around?

The vested balance is what is yours now. The remainder is what will be yours when the terms of the account are fulfilled, which is usually some percentage per year up to about 5 years. The law used to be 7 years maximum, but I don't know if it has changed.

The terms of the account are specific to your company. I believe that they cannot force you to invest in only the company, but the award of distributions might have different terms. The "invest in our company only" rule was what killed the pensions of many Enron ex-employees. I don't know if the government changed the rules to outlaw that after Enron, but I hope they have forced companies to allow other options.

Short answer: Ask your HR people because your program rules are for your program.
Post Wed Feb 11, 2015 2:12 am
 View user's profile Send private message
davidto
First Time Poster


Cash: $ 0.20

Posts: 1
Joined: 08 Apr 2015

 Reply with quote  

Once your loans are paid off, continue to put 5% into the 401K, and start to put 15% into a good mutual fund. Vanguard, TRowe Price, and Fidelity all have good programs that you can set up online. You can get "live" help from all of them. The entire process will be done within a few days.
Post Wed Apr 08, 2015 10:07 am
 View user's profile Send private message Visit poster's website

Goto page Previous  1, 2, 3, 4, 5, 6, 7
Reply to topic
Forum Jump:
Jump to:  
  Display posts from previous:      





Money Talk © 2003-2016