[Adventurous]

I believe there is a subset of us on this forum, for whom financial fitness is both a hobby and a noble pursuit. @stoney and @Toshi , I'm looking at you. I believe we share the desire to maximize ROI for capital invested, with the goal of establishing a lifestyle not dependent upon a traditional career to sustain.

The intent of this thread is to act as an ongoing dialogue to discuss all matters related to personal financial fitness, to the extent that one's occupation allows. Investing, 401k, 529s, hell, even the best way to string together Discount Tire offers to get the best deal on a new set of treads, its all fair game.

I'll go first. Renewable energy, where are you guys invested as we head into 2021? With the approach of the Biden administration, I believe there will be a increased focus on renewable energy and diversifying America's dependence on fossil fuels, both as an energy source, and as an export. Who's currently poised to make the leap and become the ExxonMobil of solar energy?

 

[Adventurous]

Also, let's talk side hustles. Whatcha got going? I'm trying to figure out how to best leverage my skills and spare time to generate additional income.

 

[Westy]

Also, let's talk side hustles. Whatcha got going? I'm trying to figure out how to best leverage my skills and spare time to generate additional income.

Sounds like someone needs a gig app for fluffing

 

[Jm_]

Thank god this isn't about COVID fitness.

 

[SkaredShtles]

Pro tip: Don't have kids
Semi-pro tip: Ride bikes more instead of getting a "side hustle"

 

[Westy]

I am lucky enough to live well below my means. I am currently on track to retiring comfortably. I have a years worth of savings in case my employment prospects go sideways. Now that I hit that milestone I am on track to have even more cash I don't know what to do with. I could invest it, but I kind of hate the idea of putting money into the market for a multitude of reasons. It is not enough to use it for anything I would really like, such as a cabin in the mountains. I don't need a bigger house or a nicer car or for god's sake any more bikes.

So just going to hole it away for more financial security in the future so perhaps I can retire earlier or snag a lower paying gig that I would really enjoy. Perhaps when the job market gets better I could take a sabbatical or some extended time off between jobs.

 

[Toshi]

1) Buy massive quantities of crayons on discount. Oh wait, that was @stoney 's advice, not mine

2) My energy diversification starts and ends with having ~14 kW PV on the roof of my house, and offsetting the rest of my use via Xcel's Renewable*Connect. I guess the PHEV minivan is a bit of a hedge as well. For investments I'm 100% index funds in tax-preferred accounts and in whatever Betterment picks for me at 80% stocks.

3) The downside of being a doctor is that basically no side hustles outside of my field make financial sense in terms of $/hr. The upside is that I actually have internal opportunities (the weekend 5-10 PM shifts I pick up here and there; and medical-legal consulting).

 

[SkaredShtles]

I am lucky enough to live well below my means. I am currently on track to retiring comfortably. I have a years worth of savings in case my employment prospects go sideways. Now that I hit that milestone I am on track to have even more cash I don't know what to do with. I could invest it, but I kind of hate the idea of putting money into the market for a multitude of reasons. It is not enough to use it for anything I would really like, such as a cabin in the mountains. I don't need a bigger house or a nicer car or for god's sake any more bikes.

So just going to hole it away for more financial security in the future so perhaps I can retire earlier or snag a lower paying gig that I would really enjoy. Perhaps when the job market gets better I could take a sabbatical or some extended time off between jobs.

You're probably going to use most of it up paying for healthcare premiums between retirement and 65... unless you have that sorted out already. Which I wouldn't be surprised if you did.

 

[rideit]

I have two side hustles, the ATM gig, and the ski/bike shop gig (to get all of my skiing free and gear at cost).
We also rent two properties.
Wifey handles investments, etc (she is also a CPA/financial planner.).
New main gig pays for health insurance.
0 debt besides mortgages.
10 years ago we could barely pay the mortgage on one cheap house, but things have worked out fairly well so far.
The biggest unknown variable is going to be kiddo’s college payments.

 

[Westy]

You're probably going to use most of it up paying for healthcare premiums between retirement and 65... unless you have that sorted out already. Which I wouldn't be surprised if you did.

It is an unknown variable, but a variable I have included in my calculations. Realistically speaking I will have to work until 65 simply for health insurance.

Health insurance is pretty much a form of corporate servitude.

 

[SkaredShtles]

It is an unknown variable, but a variable I have included in my calculations. Realistically speaking I will have to work until 65 simply for health insurance.

Health insurance is pretty much a form of corporate servitude.

It's fucking ridiculous... so yeah.

 

[Nick]

Everyone has different income, goals, needs, etc. But I think there are some standards everyone can follow.

Eliminate your current debt, including all CC debt. Make erasing that your top priority. Still paying off that basket weaving degree from '97? Don't buy shit until it's paid off.
edit: Mortgages aside, if you choose to own a home.

Max your 401k, and open a brokerage account assuming there is any additional $ to invest.

Keep increasing your income. I have a "side hustle" of brokering bike and ski shit. Just buying & selling. Do I make much? No. But, it's paid for my recreation, ski passes, vacations etc for many years.
edit: use CC rewards like a mofo. I use a cash back card for EVERYTHING and get to spend the rewards of essentials like hookers and cocaine.

For me, having a nest egg brings tremendous comfort and flexibility. Like Westy, I know I could live for an extended break from any income or support. But, I only keep 3-6 months of cash handy and invest the rest. Toys are cool, but not sweating a downturn is moar cooler. (knock wood)

Renewables. My jam.
There are a few renewable ETFs which offer investment options, as well as a few large energy IPPs you can invest in (Engie). Just last week we saw a renewed level of support for this market from the Federal Govt. in the form of:

• 2 year ITC extender for solar (though no direct-pay option)
• 1 year PTC extender for wind, and offshore wind ITC extender through 2025
• No standalone storage ITC, though $100M in DOE grant appropriation for advanced storage technologies
• In broader legislation, reform coming for permitting renewable projects on federal lands

Our Dept. of Energy continues to back renewables in a real way, and it's getting better. These supportive measures will accelerate projects in mid/late stage development, and keep me very busy.

Health insurance is a fucking disgrace in the USA. Nuf said.

Finally, PM stoney all of your investment questions and if you don't get a reply KEEP sending him PMs until you hear back. He loves offering advice more than he loves building furniture or crashing bikes.

 

[Toshi]

Eliminate your current debt, including all CC debt. Make erasing that your top priority. Still paying off that basket weaving degree from '97? Don't buy shit until it's paid off.

Do you make an exception for mortgages? Because I don't plan on paying down my 15 year 2.125% primary residence mortgage quickly at all with that rate!

 

[Nick]

Do you make an exception for mortgages? Because I don't plan on paying down my 15 year 2.125% primary residence mortgage quickly at all with that rate!

Of course, I should have been more clear and will edit.

 

[Jm_]

3) The downside of being a doctor is that basically no side hustles outside of my field make financial sense in terms of $/hr. The upside is that I actually have internal opportunities (the weekend 5-10 PM shifts I pick up here and there; and medical-legal consulting).

I wouldn't say that: https://www.justice.gov/usao-cdca/pr/doctor-among-10-facing-federal-drug-trafficking-charges-related-distribution-opioids

 

[boostindoubles]

Just spent 7 years looking for a fixer upper house and spent that entire time squirreling cash away to fix-up said property when acquired. Found a smoking deal - spent a year working it out. Bicycle community for the win!

Spent savings on whole house cabinets, new plumbing, new HVAC including duct work, added 1.5 baths bringing it to 3 bed 3 bath home. Into it for 375k and could turn around and sell for 600k. We gonna live here for years though. Now I need to start squirreling cash for a garage/shop/apartment/carport/elevated patio.

Growing up around farms and farmers - cash is for reinvesting in the operation. Better equipment - more land - replanting fields.

 

[boostindoubles]

I have learned that if I want my cash to get me something good - I can't make a decision/purchase without research, piles and piles of research. Quick decisions usually end up wasting money.

Similarly, cutting corners or trying to do half instead of all is usually going to cost more in the end also.

 

[stoney]

I unfortunately, can't add very much, just given the nature of my job and license related rules.

I can add general rules, but this is not advice for individuals. Talk to your own individual advisor for your personal situation.

1. Make a budget

2. Put together goals for what you want to do and when (retirement, etc).

3. Payoff all debt (ex-mortgage), highest rate to lowest. If you are paying someone interest, you can't make money.

4. Create an emergency fund - 3 months expenses if 2 income household; 6 months if 1 income household.

5. Max your 401(k)/457/403(b) (employer dependent).

6. Max your HSA. After $2000 you can invest the funds. It's triple tax-advantaged; do it!

7. Are you saving 25% yet? This is where you need to look at those goals from above.

If yes, good job. Take half of every raise to savings, half to yourself - keep increasing your savings rate.

If no, you need to get to 25%, minimum. Look at your goals. Do you want to retire before 60? Well, you'll need after-tax money. Open a non-retirement investment account and establish a long-term investment plan as part of retirement.

8. Sometimes you have to spend money to make money. Don't forget that.

9. Plan forward when purchasing. Know you drink coffee everyday and it's 25% off right now? Buy an extra bag or two.

10. Think before you buy (see budget). Do I need this $8000 Yeti? Or can I get 95% of the same bike (Canyon/GG/Etc) for $4000? If you're not pushing a bike to the limit, why pay for the extra? Or do I even need a new bike; is this an "I want new" purchase? Same with cars - the nicest model of the lower manufacturer (Honda, Toyota, etc) is usually nicer than the lowest model of the higher manufacturer (Acura, Lexus, etc) while still costing notably less. Or buy used, recently off lease, to let someone else take the depreciation.

11. A lot of what @Nick is spot on. And @Toshi is where I'm at for renewable energy - for the individual, panels is your best option; it's hard to pick the companies that will really do great long-term.

 

[stoney]

@Adventurous We're saving ~25% between 401(k), 529 plans, HSA, and miscellaneous after-tax savings. We take 100% of annual bonuses and invest them; it is not included in our planned 25% - but we usually do not spend the money. It usually ends up being an adtl 10%, so that tends to push us over 35% gross saved.

Even with the cost of the girls, planning for 5-years at Mines each (most expensive public school in CO), assuming we make no changes to how we save (no adtl rate), we'll be done at 57. My goal is to see if I can get that down to early 50's if possible.

I would like to get our savings rate up to 35% regular and 45% with bonuses. If we can do that, we can FIRE early 50's based on ourselves alone, even with kids in college and having a mtge still. It's still 15-17 years out, but it's a target that's realistic and attainable

*For everyone - do not plan on inheritances; they might be gone by the time you expect it *

 

[Jm_]

The idea is, by the time you are old and your body doesn't work well anymore, you'll be able to not do all the stuff you always wanted to do!

 

[stoney]

I have two side hustles, the ATM gig, and the ski/bike shop gig (to get all of my skiing free and gear at cost).
We also rent two properties.
Wifey handles investments, etc (she is also a CPA/financial planner.).
New main gig pays for health insurance.
0 debt besides mortgages.
10 years ago we could barely pay the mortgage on one cheap house, but things have worked out fairly well so far.
The biggest unknown variable is going to be kiddo’s college payments.

529 for kid school:

"Wyoming does not offer a state-sponsored 529 college savings plan. Nor does it charge state income tax. The state adopted Colorado’s 529 plan as its own, but Wyoming residents can open an account in any state that lets them."

Colorado is www.collegeinvest.org. It's how we have the girls set up.

Make sure you always have yourself setup first, then plan for kids. You can take out loans for school, not for retirement.

 

[stoney]

It is an unknown variable, but a variable I have included in my calculations. Realistically speaking I will have to work until 65 simply for health insurance.

Health insurance is pretty much a form of corporate servitude.

Plan $12-15k/yr for medical. You can also look into COBRA for your first 18 months of retirement, if before 65 (medicare).

 

[Toshi]

529 for kid school:

"Wyoming does not offer a state-sponsored 529 college savings plan. Nor does it charge state income tax. The state adopted Colorado’s 529 plan as its own, but Wyoming residents can open an account in any state that lets them."

Colorado is www.collegeinvest.org. It's how we have the girls set up.

Make sure you always have yourself setup first, then plan for kids. You can take out loans for school, not for retirement.

I don't see the point of 529s in states with no special tax breaks for them. Still count as assets for FAFSA, no?

 

[stoney]

I don't see the point of 529s in states with no special tax breaks for them. Still count as assets for FAFSA, no?

Federal tax-free growth.

Colorado 529 Plan Tax Deduction Benefits for College Savings

If you are a Colorado taxpayer, contributions to a CollegeInvest 529 can be deducted from your Colorado state income tax return. Learn more.

www.collegeinvest.org

 

[Toshi]

Federal tax-free growth.

Colorado 529 Plan Tax Deduction Benefits for College Savings

If you are a Colorado taxpayer, contributions to a CollegeInvest 529 can be deducted from your Colorado state income tax return. Learn more.

www.collegeinvest.org

Fair enough.

In rideit's situation I'd pay my kids for use of their photos for my website or whatever, and then deposit said earned income into Roths for them.

 

[Adventurous]

I have two side hustles, the ATM gig, and the ski/bike shop gig (to get all of my skiing free and gear at cost).
We also rent two properties.
Wifey handles investments, etc (she is also a CPA/financial planner.).
New main gig pays for health insurance.
0 debt besides mortgages.
10 years ago we could barely pay the mortgage on one cheap house, but things have worked out fairly well so far.
The biggest unknown variable is going to be kiddo’s college payments.

Please expound upon the ATM thing. I've seen that mentioned several places as a good way to generate passive income with little investment and oversight.

@Adventurous We're saving ~25% between 401(k), 529 plans, HSA, and miscellaneous after-tax savings. We take 100% of annual bonuses and invest them; it is not included in our planned 25% - but we usually do not spend the money. It usually ends up being an adtl 10%, so that tends to push us over 35% gross saved.

Even with the cost of the girls, planning for 5-years at Mines each (most expensive public school in CO), assuming we make no changes to how we save (no adtl rate), we'll be done at 57. My goal is to see if I can get that down to early 50's if possible.

I would like to get our savings rate up to 35% regular and 45% with bonuses. If we can do that, we can FIRE early 50's based on ourselves alone, even with kids in college and having a mtge still. It's still 15-17 years out, but it's a target that's realistic and attainable

*For everyone - do not plan on inheritances; they might be gone by the time you expect it *

I'm probably somewhere in the neighborhood of 30% between 401K, HSA, side investing and side savings. That'll obviously drop a bunch once we get into a house, but im doing my best to figure out a way to get into one using only my salary to qualify, as the wife's isn't as guaranteed as mine. Figure if we can afford expenses on one income, that'll free up the rest to go into savings of some kind.

Just never feels like enough, hence this thread. Id love to figure out ways to put my money to work and grow my wealth beyond the traditional path of savings from salary. While that's a solid long term plan, I want to make an investment in our future now, and set up a financial plan that allows for a lifestyle sustainable without consistent employment.

My dad reminded me the other day that a $1,500 account they established in the mid 80s grew to $51K in 2020. While I doubt returns over the coming decades will be as good, shocking away $1,500 now with the promise of that being $35K in 30 years is tempting. The best time to start is now.

Curious to know how you are advising younger investors with regards to social security. Telling them to invest with no promise of it being there? Or planning on it still being around, just at a reduced rate?

 

[Toshi]

It'll be around at a reduced rate, but even when maxed (FICA cap x 30 years average) it's really not that much.

 

[stoney]

Please expound upon the ATM thing. I've seen that mentioned several places as a good way to generate passive income with little investment and oversight.



I'm probably somewhere in the neighborhood of 30% between 401K, HSA, side investing and side savings. That'll obviously drop a bunch once we get into a house, but im doing my best to figure out a way to get into one using only my salary to qualify, as the wife's isn't as guaranteed as mine. Figure if we can afford expenses on one income, that'll free up the rest to go into savings of some kind.

Just never feels like enough, hence this thread. Id love to figure out ways to put my money to work and grow my wealth beyond the traditional path of savings from salary. While that's a solid long term plan, I want to make an investment in our future now, and set up a financial plan that allows for a lifestyle sustainable without consistent employment.

My dad reminded me the other day that a $1,500 account they established in the mid 80s grew to $51K in 2020. While I doubt returns over the coming decades will be as good, shocking away $1,500 now with the promise of that being $35K in 30 years is tempting. The best time to start is now.

Curious to know how you are advising younger investors with regards to social security. Telling them to invest with no promise of it being there? Or planning on it still being around, just at a reduced rate?

That's 9.5% before inflation. I wouldn't plan on that. S&P 30yr ror has been going down continuously. I use 7% ror w 2.5% inflation (4.39% inflation adjusted ror) for my growth projections in personal stuff.

@Toshi is right about SS. It will be there but likely reduced and potentially adjusted by need. Little known fact: if the payroll tax cap was removed, SS would be funded indefinitely. The individual people it would impact would not feel it; the businesses that it would impact however would see lower profits. Clearly we know why there is an issue here...

As for the house on one income, figure out how much you can spend based on your income. You will be able to establish that number on your own. The mtge people might want you both for qualifying, but know how much is the max you can spend monthly on one income. Extrapolate that up to a total mtge amt (factor escrow and any potential hoa dues too). That + down pmt is how much you can spend on a house. One option is to focus all savings into getting as much cash as possible to put into a down. That allows for a more expensive house with the same mtge (and potentially avoid PMI).

 

[stoney]

Fair enough.

In rideit's situation I'd pay my kids for use of their photos for my website or whatever, and then deposit said earned income into Roths for them.

Why? You have to pay taxes up front either way (Federal). When used for schools, you don't pay taxes either way. You lose control of the money at 18 because it's in their name (amongst other rules). And if the kid doesn't go to college, you can't use it for the other one (transfer of beneficiary). And you have an effectively limitless contribution limits ($400k total) vs. Roth cap at $6k/yr.

You also have to make the early commitment in the assumption your kid isn't going to be a fuck up and who will lose their mind when coming into a lot of money at 18.

 

[Westy]

Whatever you do, listen to SS and don't buy a house.

 

[stoney]

Whatever you do, listen to SS and don't buy a house.

Convincing people that primary residences are not long-term investments is damn near fucking impossible. Even calculating price appreciation accounting for inflation in front of them does nothing.

 

[Westy]

Convincing people that primary residences are not long-term investments is damn near fucking impossible. Even calculating price appreciation accounting for inflation in front of them does nothing.

Do they then complain about how rent keeps going up?

 

[stoney]

Do they then complain about how rent keeps going up?

Yep. Inflation is beyond some people.

I'll use my parent's house in SoCal for example. It's in a community that has ballooned in value over the last two decades. Bought in 1997 for $337,500. Zillow values it now at $1,096,000. Monstrous appreciation, right? Not so much. That works out to a RoR of 5.25%. But oh wait! Inflation from 1997-2020 has averaged 2.7% per annum. That's a 2.48% inflation adjusted RoR. I know their mtge rate averaged over 5% most of that time period, even refinancing down when possible. That was a net negative investment, not including the cost of maintenance and other large repairs (foundation, removing pool, etc).

Primary residences are not an investment. They are a used, illiquid asset, that normally do not carry the depreciation of things like vehicles. Nothing more. Rentals are otherwise, but primary residences are just roofs.

 

[Adventurous]

That's 9.5% before inflation. I wouldn't plan on that. S&P 30yr ror has been going down continuously. I use 7% ror w 2.5% inflation (4.39% inflation adjusted ror) for my growth projections in personal stuff.

@Toshi is right about SS. It will be there but likely reduced and potentially adjusted by need. Little known fact: if the payroll tax cap was removed, SS would be funded indefinitely. The individual people it would impact would not feel it; the businesses that it would impact however would see lower profits. Clearly we know why there is an issue here...

As for the house on one income, figure out how much you can spend based on your income. You will be able to establish that number on your own. The mtge people might want you both for qualifying, but know how much is the max you can spend monthly on one income. Extrapolate that up to a total mtge amt (factor escrow and any potential hoa dues too). That + down pmt is how much you can spend on a house. One option is to focus all savings into getting as much cash as possible to put into a down. That allows for a more expensive house with the same mtge (and potentially avoid PMI).

Oh I know how much I *could* spend, which happens to be more than I'm comfortable spending. The absolute last thing I want to be is house poor. If we can structure our lives around living off of a single income, and put the cash my wife earns to work, it should have us in a good spot. The goal is to create a lifestyle that allows for maxing out yearly 401k, roth, and HSA contributions, plus tucking away cash into general savings.

At this point, I'm resigned to only putting 10-15% down, and leaving the rest in our emergency fund. I'll take the $100/mo PMI for a bit knowing I have a 6 mo safety net if required. I've lived on the margins before, and it was mentally exhausting.

Trying to approach this with "a house is a home, not an investment" mentality.

 

[SkaredShtles]

Whatever you do, listen to SS and don't buy a house.

If he doesn't listen to my pro-tip above, he may as well buy a house...

ETA: Sounds like @Adventurous has a realistic outlook on home-ownership.

 

[Adventurous]

A recent article I saw claimed that retirement prospects for millennial was bleak, as the average annual growth over the next 3 decades was only expected to be in the range of 4%. The author estimated the total savings rate would have to be near 40% to compensate for lackluster growth.

I can't imagine many households getting close to that 40% rate. Future prospects = bleak.

 

[stoney]

A recent article I saw claimed that retirement prospects for millennial was bleak, as the average annual growth over the next 3 decades was only expected to be in the range of 4%. The author estimated the total savings rate would have to be near 40% to compensate for lackluster growth.

I can't imagine many households getting close to that 40% rate. Future prospects = bleak.

I don't disagree. I did just run current mtge rates and got a quote .5% lower on a 30yr. Savings rate just went up $100/m.

 

[rideit]

@Adventurous sent you a PM

 

[Westy]

I don't disagree. I did just run current mtge rates and got a quote .5% lower on a 30yr. Savings rate just went up $100/m.

I fear a bait and switch, but from what I saw last night, I can lower mine $500/month.

 

[Toshi]

I fear a bait and switch, but from what I saw last night, I can lower mine $500/month.

TIL that Westy has a $2mm mortgage