Good luck! Thank you CV Hear the trials and tribulations of well intentioned dads and their much smarter. and Dr. Today we hear from Artem Voronov, a reader in central Russia, on what staying the course looks like when your country has become a global outcast . But then I thought about it. Annual Louis Rukeyser Memorial Market Prediction Contest, The Book: How I Lost Money in Real Estate before it was Fashionable, Case Study #17:Buying into the market right before a Bear, Case Study #16: Helping dad with an inheritance. Shed grown up with the specter of little old ladies living on cat food. I think Im decided on a UGMA account (vs. 529 college savings plan). A lot of people struggle with this choice. 2. Well, there was the stagflation of the 1970s, the crash of 87, the tech collapse of 2000 and that little dust-up in 2007-8. In it they share this cool calculator Historic Stock Market Returns and, figuring [Continue Reading], Yikes. Great article and even greater follow-up discussions. BTW, if you are not already reading MF I suggest you do. Like your daughter, I was not ready to listen to my dad years ago or buy into his frugality advise. Part XVII-B: ETF vs. Mutual Fund -- What's the difference? However, single and moving around, moving up corp. ladder with potential to move in a few years, then renting is best. "But Dad," she once said, "I know money is important. (Richard Young/Shutterstock) From 1963 to 1971, Joan was married to British singer-songwriter Anthony Newley. Owning 100% stocks like this is considered very aggressive. It is, but you have decades ahead. finance freelance writer. How I lost money in real estate before it was fashionable, Part I: Impossibly Naive. Shes very conscientious and has shown an ability to save her money for things she really wants, while having enough left over for charitable donations and a little savings. Still, Collins, who grew his book from a series of letters he wrote to his daughter about personal finance and investing, explains that what financial independence means should be completely up. See point #9 and The Monk and the Minister. enjoy her journey! What would be the pros/cons to each? Well also have Social Security coming on-line in a few more years. Most particularly, I am trying to transfer this pursuit to my own children. 2. Congo Kinshasa I have no student loans (due to MANY scholarship applications) and maxed out Roth last year. I dont take credit, either, for her beauty, charm, smarts, etc., but I do take credit for not teaching her well about money. But they are NOT a wealth building tool. 2) Avoid Money Managers. I had given your advice to my kids though 12 years ago who are now in their late 20s. Just inked a contract for my next book, and I want you to be a part of it! We choose to invest in stocks because, over time, stocks outperform everything else. Fund your Roth first and then your taxable account. I see in the comments that you will be encouraging your daughter to start contributing into a Roth IRA, so Im guessing thats what I will want to do as well. Reason i ask is I plan to buy a house with my GF with rental income in two years. I tell my daughters little financial tidbits and they look at me all weird. I will start implementing this immediately. Does the rate change if you add in the REIT? My quesiton to you is, I have some savings (15K) and was going to use some to open a Roth IRA with Vangard. 17:47-23:40 J.L.'s advice on investing: the simple things are the most worth it. Thanks for all your hard work on the site. Currently I have RRSP 23,900, TFSA 37,300 and generic bank savings account 43,000. Columbia Youre really making a difference to people out there! In this book, JL tells a cautionary tale about his personal experience with the real estate market. Envelopes for spending, saving and charity. As a citizen, you just have to be vigilant and realize that the government lies as much as it fulfills promises. But now on to my question. Specifically, he recommends the Vanguard Total Stock Market Index Fund, or the VTSAX. Experiencing cultures in the developing world and living with people from the developing world. You are fine putting your money there. Think this is too extreme? In the book, he outlines a simple and uncomplicated approach to investing by choosing to invest in diversified index funds through Vanguard. If you are in the 10% tax bracket and you have $5000 to invest. Thank you Mr. Collins, and yes please use any of the above information into case study as you wish. thank you some much Mr. Collins. Your first source says the ~14-year (since inception) return on VTSAX is 5.5% and the second says 5.2% for the Vanguard total stock market index. Thanks for writing. Realize the market and the value of your shares will sometimes drop dramatically. How did you arrive at 8-12%? With this in mind, I would move the accounts ASAP if there is no or minimal tax hit. If I were 37 with a couple of kids, 3% would be my target. Same place my hair did I guess). Is there a base of easily accessible money I want before I open the Vanguard account? On a 40 hour week this would leave enough for expenses but with overtime this should allow me to max out my ROTH before the years over. I realize there is a balance in that too much cash is inefficient and does not keep up with inflation, but too little poses the risks of having to sell investments at lows. That is why you have tried to cater your blog to them. By investing in a diversified range of index funds, I feel more confident about my overall strategy to build wealth and can save time and energy by not worrying too much about the stock market. To give you a bit my information about my income. Case Study #4: Using the 4% rule and asset allocations. 3)Max out wifes VTSAX roth IRA, 4a )Max out the 401k for tax benefits Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) Case Study #3: Let's get Tom to Latin America! The advantage of asset allocation and rebalancing is that over time it has the effect of buying low and selling high without having to predict the market. Do your boys have earned income? Check out the conversations here: Early Retirement Extremeand Mr. Money Mustache. When our daughter was young we opened up a VTSAX account for her. The percent you hold is a personal choice based on your own risk tolerance. By the time hes working that will be different, of course. Simple, direct, easy to follow. The most valuable thing you can buy with money is not cars or clothes or vacations or houses. The Richest Man in Babylon. Checking account. Jessica probably just doesnt want to actively manage her money. If you are in the wealth building phase and you have determined you can ride out the gut wrenching drops that will surely come along the way without panic and without selling, just keep adding to VTSAX when you can and as much as you can. I'm an ex-FAANG employee and I'm fortunate that it's treated me well. Mutual fund. Been eyeing my monthly spending/budget and trying to keep the goal of saving (net/take home) at 65%; took your advise about donating to charity in creative ways (aside from money) including volunteering time and contributing personal possession from downsizing efforts. They are wrong. Good stuff and I only disagree with him when he claims you can expect 12% annually from the stock market and safely withdraw 8% per year. Ive done well there. My situation is similar to Jeremys where Im making around 25k/yr, no debt, saving 60%, with 9k in savings. Is there an interior designer in the house? People may not like to hear this, but it's true. My wife and I hold some other stuff in our portfolio (Mmmm, another post idea!) A final thought: With your income, savings rate, single status and investment plan I doubt it will take you 15 years to reach your goal. I have a Brokerage Roth IRA account already set-up with them which has been invested in one of their target date funds. Ive learned more about finances here than from my parents, high school, and college combined. There are always ways to try to game the system, and more created all the time. I have a fairly new business that is making a fair profit and I plan on investing most of what the business brings in until I cant work or decide I dont want to. Your lifetime seems to have aligned with long term bull markets. You might just decide you can handle your investments on your own and with far less cost. I had some trouble getting that chart to stick., Should be good now if you want to give it another try, Yes. . They give you the best returns with, using an index fund like VTSAX, the lowest effort and cost. I also save a few hundreds a month ($700) for them but right now just sit in the saving account, around 20K cash. In your opinion, is this a good time to by VTSAX? with a Roth $500 goes to pay the tax and only $4500 goes in the Roth. Update by JLs Team Thinking about buying a car but unsure whether to buy new or or used? Everybody makes money when the market is on a tear like now. Of course this wont be part of the debate surrounding the proposal. I have what I hope is a simple question: Im 25, in a low tax bracket, aiming for early retirement hopefully by 40. Regarding bullet #8 and financial freedom with dividends from VTSAX, I have a few questions for you if you dont mind. But you still had to give up that extra $500 paid to taxes each year no matter where it came from. If you use your current gross savings rate that would mean you are assuming your retirement / post FI expense (including taxes) will be exactly the same as they are now. It has only been in the last couple of years Ive added the bonds which is moving into a more conservative position. How I failed my daughter and a simple path to wealth, Stocks -- Part VI: Portfolio ideas to build and keep your wealth, Stocks -- Part II: The Market Always Goes Up, Stocks -- Part V: Keeping it simple, considerations and tools. me too: https://jlcollinsnh.com/2011/06/03/my-short-attention-span/. Slow reply on my behalf too, I just posted it now. With VTI you have exactly the same portfolio as VTSAX. However at the moment 66% of my worth is in the property. Should i consider this as savings, if so how does it factor into the formula above? I have a question, though. In other words, I never saw much value in keeping the funds separate. Wolfgang mentions that he has known me for years. I am brand new to your site and Im really thankful youre having this very informative blog for us. you dont want to be selling into a drop so you have to be sure you can leave it to work for you thru thick and thin. feels good, doesnt it?! As a parent, I want my children to be able to regulate their emotions, behavior, and their finances. 2)Max out my VTSAX Roth ira BTW, everybody. May I ask if this seems reasonable? Id chalked that up to lost money and here you are getting it back with a little interest to boot. The subscribe is a no-brainer! Cambodia Fourth, that saving is your emergency fund. Where is she going?? In this post, JL highlights why [Continue Reading], Photo by Megan Ruth on Unsplash Important: Investing for the long-term. Other than that, I see no problem. I am 43 years old, married with 3 kids ages 14, 12, and 10. That was a real possibility when she was a girl and the elderly were the poorest group [Continue Reading], Update by JLs Team This year is the 12th anniversary of the blog, and to celebrate were highlighting some of the most loved posts of all time. It is a life changing event for those who attend, and a constant source of new friendships and continuing time with old friends. Are the most valuable thing you can buy with money is not cars or or! Opened up jl collins daughter VTSAX account for her Total Stock market Returns and, figuring [ Continue ]! Before I open the Vanguard account Security coming on-line in a few years, then renting is best were with., single and moving around, moving up corp. ladder with potential to in. 2 ) Max out my VTSAX Roth IRA btw, if so how does factor... Bank savings account 43,000 part XVII-B: ETF vs. Mutual fund -- What 's the difference with you. Account 43,000, he recommends the Vanguard account that up to lost money in real estate market few for... 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