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Personal Finance: Financial Planning & Investing

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NOTE AS OF JULY 4, 2025: Some of the information in this thread and other Personal Finance posts & threads may be out of date as of the passage of the recent "Big Beautiful Bill." However, the overall guidance and topics are still relevant. Numbers and "caveats" may need to be updated, but this is still a great resource for personal finance knowledge and links to other relevant and valuable resources. I will get around to reviewing each of my posts in this and the other PF threads to update and verify the info is still valid. Meanwhile, as always, caveat emptor!

The following thread topics are linked under Personal Finance prefix and in the secondary navigation menu near the top right (under the search box).


Caveat Emptor! I am not and never have been an investment adviser or had a career in the investment industry. I'm not selling anything. I'm not compensated by anybody to share this information (other than the fact if you click on a book link on the TideFans site I may get a small commission from Amazon for sending you to their site if buy it). I'm just sharing a wealth of knowledge I've assembled through reading a ton of stuff over the years that actually makes sense and seems to work as good as (or better than) ALL OTHER METHODS >90% of the time (at least it has over the last 100+ years and nothing is guaranteed :D). I'm thinking it might be helpful to you, too.

Some (or much) of this may be familiar to you already. If so, awesome! Hopefully the links have something of value for you, anyway. However, what I've found is that many folks have never given much consideration to this topic other than, "I have a 401k and put a little money it so I can retire when I'm old." That's not much of a plan!

"Mine is better than yours!"
If you have a philosophy that you believe works as good or better, fine.

Many folks, however, never get a good foundation to protect themselves against money managers and funds that are out there siphoning off their potential retirement savings through ridiculous fees. I'm not going to argue over this if what you believe (or have a career in this area) is out of phase with what I'm sharing here. We'll just have to agree to disagree. I still like you (probably) :D

I'm not forcing you or anyone else to accept this as gospel. I'm just sharing! I realize that some people may not be comfortable doing the necessary work to manage their own retirement funds & investments. That's cool, too. Just know there may be much cheaper options for you, so read on!

"Hey wait, I'm a broker!"
If you're in the investment industry, you may not like what I'm sharing. That's perfectly OK with me. Otherwise, if you're wondering why you're paying your broker fees over 1% every year for assets under management, or why that fund you're invested in seems to be a roller-coaster of returns, you may find this info gives you an amazing amount of freedom from complication, worry, and stress. I'm just sharing what I've learned over the years and have finally assembled into a coherent content. I also share this info with the college students I teach.

You might actually need financial advice
I realize there there are some who need help or more sophisticated advice in complex financial situations. I'm not in any way discounting there are financial planners and advisers who do act as fiduciaries and have as their primary purpose helping those who need it. You just have to do extensive research so you KNOW that they are putting your finances before theirs. (There's a fantastic book, Where are the Customer's Yachts? that addresses this issue in detail.)

Most of us, though, can do it ourselves without the high fees and the complications.

What I've learned
I want to share what I've learned about Financial Planning & Investing. You can take it or leave it. Several years ago my wife and I changed our investment philosophy and became aggressive in following the "Bogleheads" investment philosophy detailed on Bogleheads.org and based on the investing philosophy and books by John C. Bogle (the late founder of Vanguard) and several books by the founders of Bogleheads.org.

(If you click on one of the links embedded in the page to buy a book from Amazon, TF may get a small commission, but that's not why I'm sharing.) I have read these books and can attest to how much they reinforce what, to me, has become what Jack Bogle calls "Common Sense Investing." The books I suggest are readable, actionable, and based on much research. They are not get rich quick...they're get rich slowly.

The Bogleheads' Philosophy
Simply put, the "Bogleheads' philosophy" is investing for the long term in low-cost index funds according to our desired asset allocation and abandoning managed funds and individual stocks. On a personal level, it has greatly simplified our financial planning and loads of stress off. The hardest thing we have to do is decide now is which investments go where and at what allocation level and in which "buckets" (i.e. 401k, Roth, after tax etc). I rarely, if ever, worry about what the market (or any individual stock or fund) is doing.

Feel free to share & caveat emptor
If you're interested, check out the info that I've put together over time. Feel free to share with friends and family if you find it useful or informative. Another caveat emptor: I'm not endorsing 100% of everything that every author writes. I do, however, believe these are the best books and websites you can read that support the Bogleheads' philosophy and asset allocation and planning and give you a path to greater success in investing for your retirement .

What about Dave Ramsey?
I'm a big Dave Ramsey fan ... for getting folks out of debt. I think he goes off the rails for investing advice, however. So, if you need to get out of debt, follow Dave. If you want to eventually retire, follow Bogleheads once you get your debt situation under control :D

Therefore...
So, with all that prefix and noting again that I'm NOT a financial professional (I do have an MBA in Finance but have never had "finance" as a career), click the links below to what I hope is enlightening:
Let me know what you think and understand that if you believe that daytrading, getting rich quick, or buying bitcoins, individual stocks, (most) actively managed funds, etc. etc. etc. is the path to happiness or wealth, well, we'll just disagree and don't expect me to argue much with you because I'm putting the info out there for you to do the reading yourself!


Content in this series of Personal Finance & Investing threads:
[These links are also now under Personal Finance in the secondary navigation menu near the top.]
 
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I haven't read the links, but am familiar with Bogle's philosophy, and agree with it.

Due to some geeky aspects of the way some major indices are calculated, I do think you need to diversify, even among indices.

The single most important thing, though (and both Bogle and his philosophical brother Warren Buffett would agree) is execution. The second most important is not confusing things you want with things you need.

By that, I mean you invest the maximum amount legally allowed in your 401k and IRA. No excuses. No matter what. No, "We really need this vacation." No, "It's just this once." Every. Single. Paycheck.

I would also say that's a whole lot easier if you don't have debt, even a mortgage. And you definitely don't borrow to buy something that depreciates. Not even a car.

No, it's not easy, especially in the beginning. But trust me, it pays off.
 
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Quote from article by Jason Zweig in yesterday’s WSJ:

”Only 7% of the funds in the highest quartile of active U.S. stock funds in September 2015 were still among the top 25% just three years later, says Aye Soe, head of research for the Americas at S&P Dow Jones Indices. Over five years, fewer than 1.5% managed to stay among the top 25%.”

THIS is why I do passive indexes. If you have the ability to predict which 1.5% of funds will be in that top quartile after 5 years, quit your job, borrow all you can and invest it in those funds!

biggrin.gif


to expound on 4Q’s point...

From the Boglehead’s.org wiki:

”Here is the most likely order of priority for investments versus paying off loans; it does depend on the rates, so these examples are based on typical rates which may not be accurate at any specific time.
- Invest in 401(k) to get maximum employer match (rate may be over 100% in the first year)
- Pay down credit cards (rate 10-30+%)
- Pay down non-deductible auto or student loans, or other medium-rate loans (rate 5-8%)
- Invest in Roth IRA, deductible IRA or decent 401(k) (rate 5% on Treasury bonds)
- Pay down deductible mortgage or student loans (rate 4% after tax)
- Invest in taxable account (rate 4% on municipal bonds)
- Do not pay down subsidized loans as long as subsidy lasts (rate 0-3%)”

- Source: https://www.bogleheads.org/wiki/Payi...rsus_investing



 
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4Q Basket Case said:
I haven't read the links, but am familiar with Bogle's philosophy, and agree with it.

Due to some geeky aspects of the way some major indices are calculated, I do think you need to diversify, even among indices.

The single most important thing, though (and both Bogle and his philosophical brother Warren Buffett would agree) is execution. The second most important is not confusing things you want with things you need.

By that, I mean you invest the maximum amount legally allowed in your 401k and IRA. No excuses. No matter what. No, "We really need this vacation." No, "It's just this once." Every. Single. Paycheck.

I would also say that's a whole lot easier if you don't have debt, even a mortgage. And you definitely don't borrow to buy something that depreciates. Not even a car.

No, it's not easy, especially in the beginning. But trust me, it pays off.
Click to expand...

we have carried no debt except for mortgages for at least 10 years, and the mortgage on our residence should be paid off completely in 3-4 years (that's about 10 years early). during that same time we have been putting away the max allowable and funding our daughter's education. it helps a lot that we live in a relatively cheap part of atlanta, have a minimal commute (<10 mins) and neither of us have really expensive tastes or hobbies.
 
Financial Planning & Investing

I forgot to add this section to the Invest for Retirement page. I have updated it as the first section now. This is a general guide of what to do and in what order

FINANCIAL PLANNING & DEBT
Before you invest make sure you have a sound financial plan. This means understanding your income and your expenses, having a plan for paying off debt and a plan for what to do with excess resources after debt is no longer an obstacle. The way to become a millionaire is not to make $1 million dollars per year. It it to have saved and invested more than you spend! Many people forget that part of the equation and struggle to understand what to do first, second, and so on. Investing up to whatever your employee matches in your 401k is the first step. Here's a general guide below from the Boglehead’s.org wiki:

“Here is the most likely order of priority for investments versus paying off loans; it does depend on the interest rates, so these examples are based on typical rates which may not be accurate at any specific time.

  1. Invest in 401(k) to get maximum employer match (rate may be over 100% in the first year)
  2. Pay down credit cards (rate 10-30+%)
  3. Pay down non-deductible auto or student loans, or other medium-rate loans (rate 5-8%)
  4. Invest in Roth IRA, deductible IRA or decent 401(k) (rate 5% on Treasury bonds)
  5. Pay down deductible mortgage or student loans (rate 4% after tax)
  6. Invest in taxable account (rate 4% on municipal bonds)
  7. Do not pay down subsidized loans as long as subsidy lasts (rate 0-3%)”
Source: https://www.bogleheads.org/wiki/Paying_down_loans_versus_investing
 
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Re: Financial Planning &amp; Investing

Following up on some points now that I'm at my computer:

Paying Off The Mortgage

It is 100% true that from a pure mathematical standpoint, it can make sense not to pay off a mortgage early. The theory is that you can earn more on your investments than you can save by paying the mortgage early, especially at today's incredibly low interest rates. You invest the difference between the 30 year payment and what it would take to make a 15 year payment. At the end of 15 years, maybe sooner, you have more than enough money to pay off the remaining balance. Or you could just keep on paying the mortgage and piling up investments until you pay off the mortgage in 360 easy monthly payments. Your choice.

I disagree with the theory for several reasons:

1. Human behavior will often short-circuit the math. As in, for this theory to work, you have to invest the difference every single stinkin' month. Life happens, as do wants (as opposed to true needs), and the money just gets put toward other things. Doesn't matter why, or how much the kids want to go to Orlando, or how cool that Corvette is, or how much you get out of the social interaction at the country club. What matters is that the money often doesn't go toward either the mortgage or investments.

2. Following this plan makes you vulnerable to a downturn in the stock market. As in, even if you do invest the requisite amount each and every month, if there's a recession on when you want to cash out and pay off the mortgage, your investment stash might not be enough to do so. True, the market will come back. But during the time you're waiting for that, you're still paying the monthly payment.

3. Paying the mortgage off early frees up cash flow. You'll be amazed how much fun you can have when you don't have that nut to crack every month.

4. From a psychological standpoint, not having a mortgage is incredibly freeing. You're no longer as worried about what happens if you get riffed, or you get sick or hurt, or whatever. You don't feel the need to stay in a job you hate simply because it pays well. While you probably wouldn't actually tell your boss to stuff it where the sun don't shine, just knowing that you could will make you smile. So even if you don't have GTH money, you can have a GTH debt position. Believe me, it's absolutely liberating.

Just for the record, Mrs. Basket Case and I did follow our own advice. When we bought our first house, it was on a 30-year note. About a year later, interest rates fell to the point that we refinanced on a 15-year note, and our payment actually stayed almost exactly flat. From that point, we promised ourselves that we would be mortgage-free 15 years from the date of that refinance.

In the interim, we moved a couple of times, trading up. But we just kept on paying on a amortization schedule consistent with the targeted end date. For example, if we were 3 years into our 15 year plan (i.e., 12 years to go), and we traded up for a new house, that new note was on a 12-year schedule. If we couldn't afford to do that, we couldn't afford the new house, never mind that mortgage lenders were practically shoving money into our hands.

We also put some bonuses and other "found" money on the house note, and ended up being mortgage free a couple of years ahead of schedule.

Thing is, it wasn't that hard. You get used to having that payment each month, and it's just part of the monthly routine. Kind of like forced savings in a way. Then comes that first month when you don't have write that check. I'm telling you, it is glorious.

401ks and IRAs

401ks
A lot of advisers say to put in your 401k (or 503b) "at least as much as it takes to maximize your employer's match." Advisers who say that are really capitulating to clients who say, "I can't afford to do that," and therefore often don't participate at all.

The fact is, maxing your employer's match is a great start. But it's not enough. And unless your employer has an incredibly generous match beyond anything I've ever heard of, it's certainly not "maxing out your 401k."

For 2019, if you're under 50, you can contribute up to $19,000 a year into a 401k. If you're 50 or older, it's $25,000. That's maxing out your 401k.

IRAs
For IRAs, the limits are $6,000 if you're under 50, and $7,000 if you're 50 or older.

If you max your 401k and your IRA, and get some company match, and you do that for a long time, and you invest according to the principles of Jack Bogle and Warren Buffett, you'll have a secure retirement. You'll also have a lot less stress during your working years because you don't have that sword of Damocles debt pile hanging over your head.

How To Do It
This is both the easiest and hardest part.

It's easy in that, you start out putting as much as you possibly can into the tax-advantaged accounts -- IRAs and 401ks. You define what you're "able to do," honestly, and without equating things you want (like a nice dinner out) with things you need (like paying the electric bill).

Especially early in your career, it might not be realistic to truly max both out. So what you do (and what Mrs. Basket Case and I did) is, every time you get a raise, it goes into the 401k and/or IRA. Every bonus too, until you get to the point that you're putting in the most the law allows. Then reward yourself with something fun -- provided you don't have to borrow to do it.

It's hard in that almost nobody does this. They spend on trips to Disney or Las Vegas, or a fancy new car, or a lavish lifestyle. And it's no fun listening to them talk about it. Whereas you should be defining leisure spending as what's left over after living expenses and investing, most people define ability to invest as what's left over after living expenses and leisure expenses.

It really feels like you're starting an uphill bicycle ride in 21st gear. It's hard, and it's tiring, and you're working your cheeks off, and for the first several years, there's not a huge pile of money to show for it. But as with the bicycle ride, you gradually build momentum, and it gets easier. Then comes the first day the stock market has a nice uptick and your portfolio goes up $1,000 while you were just going about your daily business. That's when it starts to sink in that you're on the right track.

The real beauty is that, while it does require discipline and deferred gratification, anybody can do this.
 
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Financial Planning & Investing

The hardest thing we did a while back was moving from being in 100% equities to 80% then 75% equities/25% bonds. That was hard because I was thinking at the time, “the market is killing it right now!” but it made so much sense after doing the research and seeing the actual historical numbers. It helped me sleep better at night when there were downturns.

If you’re 22 with 40 years to save, pay off debt and then just save as much as you can and invest it wisely and do what 4Q has stated - maximize. Keep it simple. Read the books I suggest and the links I’ve provided. If you’re older it is not too late.

4Q’s advice and cautions are about behavioral economics. Likewise, the Malkiel and Millionaire Next Door books reinforced in me to not worry about what everybody else had or what the market was doing. The Boglehead’s books presented clear, actionable wisdom. The Rick Ferri books are more like masters courses for the whys and hows and reasonably readable.

Read them all but most importantly save! Then worry about tweaking around the edges.

Also, consider delaying receiving SSI until 70 to maximize how much you receive.

Obviously the advice specifics are different based on everyone’s unique case and obligations but all this advise here gives you a framework to work within and goals to work toward knowing you’re not being taken to the cleaners.
 
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