Personal Finance

This is an outline of our personal finance plan. I'm sharing this as a starting point for others to form their own plan, and also to gather feedback on what we can improve. If you have a suggestion, feel free to file an issue.

I'd like to make financial advice accessible to everyone

Looking for people to talk to and learn more about the problem space. I don't have anything to pitch, but would love to chat. Please email me at [email protected] or file an issue

Debt

• Pay off loans, except ones with very low interest. e.g. 0.9% car loan. Builds credit, less than inflation.
• Never keep a balance on credit cards, auto-pay everything in full
• Ask for a credit increase every year, don't over do it
• Carry less than 1/3 of credit limit in credit card balance
• Check credit score once a year. CreditKarma has a better interface and suggestions for improving credit score.
• Refinance for a lower interest rate on mortgages or large loans
• Ask mortgage lender for a half dozen pre-approval letters in 25k increments up to the max. Prevents seller from seeing your max purchase power.
• Consider 401k loans. Up to $50k, prime rate, and interest and principal are both paid back into the account
• Consider personal loans or personal line of credit for debt consolidation. Example "First Republic Personal Line of Credit" 2.25 - 3.5%, interest only first 2 years, then amortized for remainder of the loan. Total terms from 5 - 10 years.

Liquidity

• 12 months of expenses in a high interest savings account
• Budget out large purchases into monthly amounts to save. e.g. car, wedding, vacation
• "Liquidity access lines" to borrow against your portfolio

Compensation

• The Open Guide to Equity Compensation
• Consider Your Options

Medical

• Health Savings Account (HSA). Maximize employer contributions.
  • Do not invest until balance would exceed minimum to avoid fees
  • Choose a plan that allows investment in index funds like Wells Fargo or Health Savings Administrators
  • Continue to pay medical expenses out of pocket when possible to maximize tax deferred growth
  • No penalties for non-medical withdrawals after 65. Can use as another retirement account.

Retirement

• Pay less taxes - guide to tax advantaged accounts
• Choose a Retirement Plan IRS overview of different plan types. Highlights the benefits of each.
• IRS Rollover Chart shows what retirement plans can be rolled over.
• Calculate whether Traditional or Roth contribution makes sense for your tax bracket. calculator. Typically, high income/high tax rate => traditional, low income/low tax rate => roth. Save on taxes now vs save on taxes later.
• Maximize contributions to tax advantaged accounts: 401k, IRA, HSA.
• Backdoor Roth IRA. Pay special attention to IRA aggregation rule and pro-rata distributions, and the consequences of 'step doctrine' for audits
• After-tax 401k contributions and rollovers
• Choose low cost index funds.
• Charitable giving. Contributions to eligible organizations can be itemized as a deduction

Children

• 529 plan. For non-qualified expenses, principal can be withdrawn without penalty, but withdrawals will be proportional principal and earnings. source
• Vanguard 529
  • $3,000 minimum
  • Age based options. I'm using the "moderate" option: starts at 75/25 stock/bond allocation
• Dependent care FSA. IRS publication 503

Tools

• Review of spending with Mint or Personal Capital. Categorize spending, note any large differences in monthly trends. Link all accounts. Mint is better for budgeting, but Personal Capital does a better job with investment tracking. I use the latter now.
• Vanguard brokerage account. Using this for our Roth IRA and IRA.
• Setup direct deposit and auto-pay for all accounts.
• FI planning tool. Interesting to play with, but no longer using it.
• You Need a Budget - YNAB Displined walkthrough and awareness of all funds is of significant value, even if used only for the trial period.

Resources

• Personal Finance reddit commontopics - good guide for the order one should save in.
• Reddit guidelines for each age group
  • ELI18: Personal finance tips for young adults (US)
  • ELI22: Personal finance tips for older young adults (US)
  • ELI30: Personal finance tips for thirty-something adults (US)
  • ELI40: personal finance tips to make best use of your assets (US)
• Bogleheads: Lazy portfolios. No longer using this, only have target retirement index funds.
• I Will Teach You to be Rich - short, friendly, casual introduction to debit, savings, and retirement
• Quora Personal Finance - stopped using this
• Random Walk Down Wall Street
• Mr. Money Mustache - personal finance and early retirement blog

Entertainment

• Money stuff regular column by ex-Goldman Sachs trader
• Planet Money podcast

Recommended by others

• How To Get Rich
• The Only Investment Guide You Will Ever Need
• Money and Other Subjects
• Pete Jackson feedback
• Radical Personal Finance - Thoughtful introduction of financial perspectives. Minimalist view.
• Khan Avademy - Personal Finance - Excellent presentation, focused at college age, of value to all ages.