Request for Investment and Finance Assistance

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Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 4:09 pm

Hi, I am new to Bogleheads and have been impressed with the information here and the assistance the forum provides. I am posting in hopes of some direction of what I may be doing wrong and what is the best next step(s) either financially or with my portfolio, or maybe both.

Overview

Emergency funds: $1,475

Debt: $317,776
Home: $221,000 @ 3.25% (Paying additional $2,600/yr towards principal)
Credit Cards (3): $10,093 ($1,651 - 15%, $8,120 - 17% and $322 - 25.99%)
Personal Loan: $13,300 @ 8.99% interest
Auto Loans (2): $69,333.84 ($24,341 @ 3.19%; $44.992 @ 3.25%)
Student Loan: $3,654 @ 0% interest

Tax filing status: Single, no dependents
Tax rate: 24% Federal 2018 rate (28% under previous 2017 rates), 2.7% State.
State of residence: Arizona.
Age: 39 (turn 40 later this year)
Income: $125,000 (Bonus up to 15%, usually pays out at 10% if it does).

Desired asset allocation: 80% stocks / 20% bonds.
Open to suggestions for international allocation: ??% (I believe I have seen suggestions to Vangaurd funds in other posts)
Note: The above Asset Allocation is based off USAA and Vanguard investment tools


Current Retirement Assets
Size of the portfolio: $137,379
(Note: Current market situation has had a negative impact here, was $143,908)

Taxable
10% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (ER = 0.04%) $14,275
Note: Investing $110 weekly, $5,720 yearly

Employer 401k (No employer match)
< 1% Vanguard Target Retirement 2030 Fund Investor Shares (VTHRX) (ER = 0.14%) $355
Note: Just started the 401k this week, will invest $18,500

Roth IRA - Vanguard
3% Vanguard Health Care Fund Investor Shares (VGHCX) (ER = 0.37%) $4,027
Note: Investing $105 weekly to max contribution $5,500

Traditional IRA - Vanguard
86% Vanguard Target Retirement 2045 Fund (VTIVX) (ER = 0.15%) $119,073
Note: Currently not contributing


So the reason I am posting is because I will have roughly $12,000 free cash in April from side jobs and tax refunds combined. I am trying to decide if I should pay down debt with the free cash or invest it. If I invest the $12,000, I am open to suggestions as to what investment would work given the above portfolio as the current market correction makes it appealing to invest.

I would like to add that I am looking to exchange my 401k from the VTHRX to one of the following investments once I get $10,000 in my 401k:

Vanguard Growth Index Admiral (VIGAX) (ER = 0.06%)
Vanguard Interm-Term Bond Index Admiral (VBILX) (ER = 0.07%)
Vanguard Balanced Index Admiral (VBIAX) (ER = 0.07%)

Note: I do have other options for 401k funds, and can provide if needed, but didn’t want to put too much info here.

The other option of paying down debt with my $12000 seems appealing and I have many ways to “skin that cat” when it comes down to which debt to pay with the $12,000. My initial thought is to pay towards the second auto loan and refinance to free up monthly cash or pay off the majority of the Personal Loan as both would have roughly the same impact on outflow of money.

Thanks in advance for any advice, and I look forward to comments (or if you just want to laugh at me) and hopefully the hot mess I have above does not make anyones head explode :-)

beingmybest
Posts: 6
Joined: Thu Feb 08, 2018 5:53 pm

Re: Request for Investment and Finance Assistance

Post by beingmybest » Thu Feb 08, 2018 6:10 pm

I would focus on the debt before worrying about investing (although your investing looks fine to me). Start with the highest interest and work your way down. It takes great returns in the market to offset the negative returns you are getting by carrying debt. I estimate that my long term returns in the stock market will be in the 5-6% range, so if any debts have a higher rate than that, pay them off as soon as possible. I would quit paying extra on my mortgage and quit investing in my taxable account (and probably my Roth) until the credit card and personal loans are paid off. (I would continue using the 401K as that lessens my taxes)

I would also take a close look at how much joy you are getting out of your 2 vehicles to determine if it worth paying interest on $70,000. I can't think of any cars that would bring me that much joy, but they might do so for you. If so, I would probably pay off the cars before putting extra towards my mortgage.
“Yesterday is but a dream, Tomorrow is only a vision. But today well lived makes every yesterday a dream of happiness, and every tomorrow a vision of hope.”― Kālidāsa

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Duckie
Posts: 7001
Joined: Thu Mar 08, 2007 2:55 pm
Location: California Bay Area

Re: Request for Investment and Finance Assistance

Post by Duckie » Thu Feb 08, 2018 7:00 pm

jbnaz78, welcome to the forum.
jbnaz78 wrote:Emergency funds: $1,475

Debt: $317,776
  • Home: $221,000 @ 3.25% (Paying additional $2,600/yr towards principal)
    Credit Cards (3): $10,093 ($1,651 - 15%, $8,120 - 17% and $322 - 25.99%)
    Personal Loan: $13,300 @ 8.99% interest
    Auto Loans (2): $69,333.84 ($24,341 @ 3.19%; $44.992 @ 3.25%)
    Student Loan: $3,654 @ 0% interest
<snip>
So the reason I am posting is because I will have roughly $12,000 free cash in April from side jobs and tax refunds combined. I am trying to decide if I should pay down debt with the free cash or invest it.
Pay off the credit cards first. Those interest rates are killers. Stop paying extra on your mortgage. Stop investing in taxable. Get your emergency fund up to at least three months' expenses, then work on that personal loan. Does your 401k have a match?
I would like to add that I am looking to exchange my 401k from the VTHRX to one of the following investments once I get $10,000 in my 401k:

Vanguard Growth Index Admiral (VIGAX) (ER = 0.06%)
Vanguard Interm-Term Bond Index Admiral (VBILX) (ER = 0.07%)
Vanguard Balanced Index Admiral (VBIAX) (ER = 0.07%)
Mixing balanced funds with individual funds makes figuring your AA more complicated. Why not just VBIAX if you don't want VTHRX? And what's wrong with VTHRX?

ChinchillaWhiplash
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Joined: Sat Jan 20, 2018 5:40 pm
Location: Land of Hypoxia

Re: Request for Investment and Finance Assistance

Post by ChinchillaWhiplash » Thu Feb 08, 2018 7:15 pm

The post above sums it up. Do what Duckie says! Totally agree. Get rid of the CC debt 1st. Put anything extra towards paying it off. Pay off highest interest rate 1st. Minimum payment on the others. Once that is paid, put that money + the minimum you were paying on the next card. Repeat until all gone.
You might even want to sell some of the funds in the taxable (if you don't incur too much in capital gains) to pay off the cards. The faster you pay cards off the better. The funds you are putting in the taxable should probably go towards debt also. After the CCs, the personal loan would be good to knock out. I wouldn't worry too much about the low interest debt. Build up emergency fund to have at least 3 months of expenses covered so you don't have to use the credit cards again. I am going through a similar process. Had over 60k in CC debt and have it down to 15k. Did use some transfer offers to get locked in at lower %. Discover card had a 4.99% for life of the balance with no transfer fee.
Last edited by ChinchillaWhiplash on Thu Feb 08, 2018 7:24 pm, edited 1 time in total.

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 7:19 pm

Hi Duckie,

Thanks for the advice. I will update my auto-payments for mortgage and taxable account and redirect those funds for emergency funds.

My employer doesn't match to my 401k. I didn't want VTHRX as it seemed redundant to my Traditional IRA (VTIVX), and VTHRX seemed like it wouldn't be the right asset mix for my age and desired allocation. I may need to research the funds more, but VBIAX seemed it was more in line with my allocation goals.

Thanks again for the input provided so far.

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Watty
Posts: 18103
Joined: Wed Oct 10, 2007 3:55 pm

Re: Request for Investment and Finance Assistance

Post by Watty » Thu Feb 08, 2018 7:23 pm

jbnaz78 wrote:
Thu Feb 08, 2018 4:09 pm
The other option of paying down debt with my $12000 seems appealing and I have many ways to “skin that cat” when it comes down to which debt to pay with the $12,000. My initial thought is to pay towards the second auto loan and refinance to free up monthly cash or pay off the majority of the Personal Loan as both would have roughly the same impact on outflow of money.
Paying off the debt is an easy choice.

Paying off the lower interest car loan or prepaying your mortgage makes no sense while you have the high interest rate loans.

The fact that you are trying to juggle your cash flow could be a sign that you are spending too much and living above your means.

You have about $70k in loans on your cars which is excessive on your income and net worth. You can get yourself into real trouble with getting loans for your toys. Wait until you can pay cash for luxuries, there are lots of ways that you can get into financial problems doing that and you don't have a spouse's income to fall back on.

This does not mean that you have to drive the proverbial Boglehead Toyota Corolla(guilty as charged :D ), there have been threads about more affordable "fun" cars that you can look up or start a new thread to ask for suggestions.

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Tyler Aspect
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Location: California
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Re: Request for Investment and Finance Assistance

Post by Tyler Aspect » Thu Feb 08, 2018 7:33 pm

You should sell off your taxable VTSAX to pay off your credit card debt. When you receive your $12k in April, put it into Vanguard Prime Money Market as part of the emergency cash. $1.4k emergency cash is too little !
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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Duckie
Posts: 7001
Joined: Thu Mar 08, 2007 2:55 pm
Location: California Bay Area

Re: Request for Investment and Finance Assistance

Post by Duckie » Thu Feb 08, 2018 7:43 pm

jbnaz78 wrote:I didn't want VTHRX as it seemed redundant to my Traditional IRA (VTIVX), and VTHRX seemed like it wouldn't be the right asset mix for my age and desired allocation. I may need to research the funds more, but VBIAX seemed it was more in line with my allocation goals.
What is your desired Asset allocation?

VTHRX is 70/30 and includes international. VTIVX is 90/10 and includes international. VBIAX is 60/40 with no international. What do you want?

TwstdSista
Posts: 996
Joined: Thu Nov 16, 2017 4:03 am

Re: Request for Investment and Finance Assistance

Post by TwstdSista » Thu Feb 08, 2018 7:48 pm

jbnaz78 wrote:
Thu Feb 08, 2018 4:09 pm
Credit Cards (3): $10,093 ($1,651 - 15%, $8,120 - 17% and $322 - 25.99%)
Personal Loan: $13,300 @ 8.99% interest

snipped
These interest rates are an emergency. Your first priority should probably be the credit cards. Then beef up your emergency fund. Then attack the personal loan. Skip investing in taxable until these are all paid off.

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:11 pm

@ Duckie

I was looking to get it more at 80% stocks and 20% bonds. Given my retirement timeline and using tools on USAA and Vangaurd, 80/20 was recommended for my situation.

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:14 pm

@ ChinchillaWhiplash
Thanks for the insight of your personal situation and the idea of transferring, I was concerned doing that would just be a shell game and may make more trouble for me.

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:18 pm

@ Watty

I got to the point that debt was inevitable and only since Sept 2017 did I dare to venture outside of Trad/Roth-IRA's. I was without a 401k all of last year, so I worked hard on getting cash flow to any type of savings account and trying to put that as a priority. The vehicle situation didnt hit me until I made this post and saw the total loan amounts. But I guess I am close to being a Boglehead as the second car I bought was a Toyota Tacoma. :-)

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:20 pm

@ Tyler Aspect

Thank you for the info about Vanguard Prime Money Market, in my readings of others post I do not recall seeing this fund mentioned.

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Duckie
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Joined: Thu Mar 08, 2007 2:55 pm
Location: California Bay Area

Re: Request for Investment and Finance Assistance

Post by Duckie » Thu Feb 08, 2018 8:21 pm

jbnaz78 wrote:I was looking to get it more at 80% stocks and 20% bonds. Given my retirement timeline and using tools on USAA and Vangaurd, 80/20 was recommended for my situation.
VTTHX 2035 is currently 78/22. That's close enough, although at your age I'd be 30% bonds.

Yankuba
Posts: 84
Joined: Wed Dec 07, 2016 10:45 am

Re: Request for Investment and Finance Assistance

Post by Yankuba » Thu Feb 08, 2018 8:25 pm

beingmybest wrote:
Thu Feb 08, 2018 6:10 pm
I would focus on the debt before worrying about investing (although your investing looks fine to me). Start with the highest interest and work your way down. It takes great returns in the market to offset the negative returns you are getting by carrying debt. I estimate that my long term returns in the stock market will be in the 5-6% range, so if any debts have a higher rate than that, pay them off as soon as possible. I would quit paying extra on my mortgage and quit investing in my taxable account (and probably my Roth) until the credit card and personal loans are paid off. (I would continue using the 401K as that lessens my taxes)

I would also take a close look at how much joy you are getting out of your 2 vehicles to determine if it worth paying interest on $70,000. I can't think of any cars that would bring me that much joy, but they might do so for you. If so, I would probably pay off the cars before putting extra towards my mortgage.
I agree 100%

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:48 pm

@ beingmybest
@ Yankuba

Thanks for reminding me of the negative return from carrying debt, that is a better way to look at debt rather than just accepting it will always be there.

Topic Author
jbnaz78
Posts: 8
Joined: Wed Feb 07, 2018 2:25 pm

Re: Request for Investment and Finance Assistance

Post by jbnaz78 » Thu Feb 08, 2018 8:55 pm

Duckie wrote:
Thu Feb 08, 2018 8:21 pm
VTTHX 2035 is currently 78/22. That's close enough, although at your age I'd be 30% bonds.
Thank you for the suggestion on bond ratio. I will review my 401k options to see what bond funds I have to get the allocation to 30% bonds. That way I am correcting my asset allocation with 401k and adjusting my paycheck to fix my debt, then I can adjust accordingly once I have my finances in a better state. I just got nervous this past year with no 401k and everything I used to evaluate my potential retirement was not a good outlook, so I made changes to "pay myself" first and just getting by on enough effort to keep my debt under control.

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