Review Investments

[daveramsaywhat]

Hi!

I'm a 35 year old male, married with 2 kids. Wife is stay at home Mom. We don't have anyone who we can discuss this with, so this seems like the proper place. My wife and I are not on the same page with how much we can "safely" invest extra income per month. My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up. See below for more info + questions:

Emergency funds: $115,000 cash in our bank, mostly in an account earning 1% rate.

Debt: $20,927 @ 5.34% interest rate (car)
$386,000 @ 2.9% interest rate (home)
$24,000 @ 0% (bathroom renovation)

Tax Filing Status: Married Filing Jointly,

Tax Rate: 35% Federal, 4.99% State

State of Residence: North Carolina

Age: 35

Desired Asset allocation: Not sure
Desired International allocation:: Not sure

Current portfolio Value @ May 2023:

$124k portfolio (more below)

71% - His Fidelity 401k
9% - Her 401k Charles Schwab (old employer)
9% - Her state pension (5 years in public school)
3% - His Fidelity Rollover IRA
3% - Our joint taxable account account
1% - His Computershare
< .01%- His Fidelty Roth IRA

Questions:
1. I want to increase investing exponentially (up to $1,750/week from $300/week) but my wife would rather keep our savings account at or around $100k or higher due to market volatility. Our 6 month emergency fund is covered, which is roughly $68k. What's the best plan?

2. I want to pay off our debt early and then throw more than $300/week at the joint account. My wife wants to wait 2 1/2 months (pay off $5k/month towards car debt). How do I explain the benefits of being in the market for longer time vs trying to time the "crash"?

3. I love the idea of investing entirely in an index fund like $VT, but am open to investing 80/20 stocks/bonds, but how would I do that with Fidelity?

[Clemblack]

I am not the best person to answer your questions. But I do know that a person with an income as high as yours should not have a $20,000 car loan at 5%. Pay that off tomorrow.

[FiveK]

daveramsaywhat, welcome to the forum.

Some quick items to consider:
a) Pay the car loan in full
b) Pay the monthly minimums on the other loans
c) Move most cash to a high yield (earning at least 4%) online savings account or similar

See the Prioritizing investments wiki article. Where do you see yourselves relative to those suggestions?

To your questions:
1. A high-yield savings account could serve as a bond component, so you could get to $400K stocks / $100K savings (80/20 ratio) before needing to revisit this issue.

2. See items a) and b) above (based on the relative interest rates). Two market timing articles:
Does Market Timing Work?
The world’s worst market timer

3. See Other than Vanguard, Boglehead-style

[wetgear]

What Percentage of your total portfolio does each investment represent? Keep them sorted by account but their percentages should be of the entire portfolio. Number of shares is not a particularly easy thing to review and it will limit the responses you get.

What are you contributing to your retirement accounts each year?

Can you roll your rollover IRA into your 401k as cash?

Can you transfer your Computershare held Gamestop shares in kind into your Fidelity Joint Taxable?

I agree with your wife on paying off the car. A guaranteed after tax 5.34% is pretty good. It's also a small enough value that getting rid of it for the sake of simplicity is a worthy goal. A good compromise might be throwing 15k at the car tomorrow, keeping a 100k EF, paying off the car aggressively and then investing aggressively. It would only take ~ 1 month to pay off the car in this scenario which reduces risk before you start throwing a bunch of money into investments. You'd still have a big EF to make that safer too. You may also consider a more conservative AA to allow investing without as much volatility which would also be a solid compromise.

You could hold VT/BND @ 80/20 at Fidelity but you should be thinking of the entire portfolio AA not just the Fidelity account(s).

[ruralavalon]

Hi!

I'm a 35 year old male, married with 2 kids. Wife is stay at home Mom. We don't have anyone who we can discuss this with, so this seems like the proper place. My wife and I are not on the same page with how much we can "safely" invest extra income per month. My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up. See below for more info + questions:

Emergency funds: $115,000 cash in our bank, mostly in an account earning 1% rate.

Debt: $20,927 @ 5.34% interest rate (car)
$386,000 @ 2.9% interest rate (home)
$24,000 @ 0% (bathroom renovation)

Tax Filing Status: Married Filing Jointly,

Tax Rate: 35% Federal, 4.99% State

State of Residence: North Carolina

Age: 35

Desired Asset allocation: Not sure
Desired International allocation:: Not sure

Current portfolio Value @ May 2023:

$124k portfolio (more below)

$12,353 - Her 401k Charles Schwab (old employer)
$1,284 - His Computershare
$88,529 - His Fidelity 401k
$100 - His Fidelty Roth IRA
$4,773 - His Fidelity Rollover IRA
$4,900 - Our joint taxable account account
$12,374 - Her state pension (5 years in public school)

Current portfolio:

Mix of stocks/bonds - Her 401k Charles Schwab
55 of Gamestop - His Computershare
5117 of Fidelity Freedom Index 2055 Fund - His Fidelity 401k
4 of Gamestop - His Fidelity Roth IRA
204 of Gamestop - His Fidelity Rollover IA
53 of Vanguard Total World Stock Index Fund - Joint Fidelity Taxable Account
Not sure - Her state pension

Questions:
1. I want to increase investing exponentially (up to $1,750/week from $300/week) but my wife would rather keep our savings account at or around $100k or higher due to market volatility. Our 6 month emergency fund is covered, which is roughly $68k. What's the best plan?

2. I want to pay off our debt early and then throw more than $300/week at the joint account. My wife wants to wait 2 1/2 months (pay off $5k/month towards car debt). How do I explain the benefits of being in the market for longer time vs trying to time the "crash"?

3. I love the idea of investing entirely in an index fund like $VT, but am open to investing 80/20 stocks/bonds, but how would I do that with Fidelity?

Pay off the "$20,927 @ 5.34% interest rate (car)".

Does your employer's 401k plan beverage features to permit a Mega-backdoor Roth?

[ruralavalon]

Hi!

I'm a 35 year old male, married with 2 kids. Wife is stay at home Mom. We don't have anyone who we can discuss this with, so this seems like the proper place. My wife and I are not on the same page with how much we can "safely" invest extra income per month. My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up. See below for more info + questions:

Emergency funds: $115,000 cash in our bank, mostly in an account earning 1% rate.

Debt: $20,927 @ 5.34% interest rate (car)
$386,000 @ 2.9% interest rate (home)
$24,000 @ 0% (bathroom renovation)

Tax Filing Status: Married Filing Jointly,

Tax Rate: 35% Federal, 4.99% State

State of Residence: North Carolina

Age: 35

Desired Asset allocation: Not sure
Desired International allocation:: Not sure

Current portfolio Value @ May 2023:

$124k portfolio (more below)

$12,353 - Her 401k Charles Schwab (old employer)
$1,284 - His Computershare
$88,529 - His Fidelity 401k
$100 - His Fidelty Roth IRA
$4,773 - His Fidelity Rollover IRA
$4,900 - Our joint taxable account account
$12,374 - Her state pension (5 years in public school)

Current portfolio:

Mix of stocks/bonds - Her 401k Charles Schwab
55 of Gamestop - His Computershare
5117 of Fidelity Freedom Index 2055 Fund - His Fidelity 401k
4 of Gamestop - His Fidelity Roth IRA
204 of Gamestop - His Fidelity Rollover IA
53 of Vanguard Total World Stock Index Fund - Joint Fidelity Taxable Account
Not sure - Her state pension

Questions:
1. I want to increase investing exponentially (up to $1,750/week from $300/week) but my wife would rather keep our savings account at or around $100k or higher due to market volatility. Our 6 month emergency fund is covered, which is roughly $68k. What's the best plan?

2. I want to pay off our debt early and then throw more than $300/week at the joint account. My wife wants to wait 2 1/2 months (pay off $5k/month towards car debt). How do I explain the benefits of being in the market for longer time vs trying to time the "crash"?

3. I love the idea of investing entirely in an index fund like $VT, but am open to investing 80/20 stocks/bonds, but how would I do that with Fidelity?

Pay off the "$20,927 @ 5.34% interest rate (car)".

Does your employer's 401k plan have the features necessary to permit a Mega-backdoor Roth?

Also is there a High Deductible Health Plan (HDHP) offered at work making you eligible to use a Health Savings Account (HSA)?

[daveramsaywhat]

What Percentage of your total portfolio does each investment represent? Keep them sorted by account but their percentages should be of the entire portfolio. Number of shares is not a particularly easy thing to review and it will limit the responses you get.

What are you contributing to your retirement accounts each year?

Can you roll your rollover IRA into your 401k as cash?

Can you transfer your Computershare held Gamestop shares in kind into your Fidelity Joint Taxable?

I agree with your wife on paying off the car. A guaranteed after tax 5.34% is pretty good. It's also a small enough value that getting rid of it for the sake of simplicity is a worthy goal. A good compromise might be throwing 15k at the car tomorrow, keeping a 100k EF, paying off the car aggressively and then investing aggressively. It would only take ~ 1 month to pay off the car in this scenario which reduces risk before you start throwing a bunch of money into investments. You'd still have a big EF to make that safer too. You may also consider a more conservative AA to allow investing without as much volatility which would also be a solid compromise.

You could hold VT/BND @ 80/20 at Fidelity but you should be thinking of the entire portfolio AA not just the Fidelity account(s).

Maxing out 401k at $22,500 per year. I can rollover IRA to my 401k, yes. I'd rather leave the shares in computershare and dedicate the joint taxable account as the dumping place for VT/BND.

[daveramsaywhat]

daveramsaywhat, welcome to the forum.

Some quick items to consider:
a) Pay the car loan in full
b) Pay the monthly minimums on the other loans
c) Move most cash to a high yield (earning at least 4%) online savings account or similar

See the Prioritizing investments wiki article. Where do you see yourselves relative to those suggestions?

To your questions:
1. A high-yield savings account could serve as a bond component, so you could get to $400K stocks / $100K savings (80/20 ratio) before needing to revisit this issue.

2. See items a) and b) above (based on the relative interest rates). Two market timing articles:
Does Market Timing Work?
The world’s worst market timer

3. See Other than Vanguard, Boglehead-style

Thank you for your feedback! If we pay off the car, we'll still have the 24,000 bathroom reno (which we're in the middle of), which would leave us with $70k in savings. Would I put all $70k in HYSA or anything over the EF amount?

[rich126]

Personally I wouldn't keep much money in my bank account unless it was earning at least 4%. I would keep it at Fidelity or Schwab and buy short term treasuries, maybe 3 months or 6 months and get around 5% on that money. Most people, especially at your income, will never need the money in their emergency fund and even if they do, selling a treasury and getting the cash is easy to do.

[ruralavalon]

. . . . .

Thank you for your feedback! If we pay off the car, we'll still have the 24,000 bathroom reno (which we're in the middle of), which would leave us with $70k in savings. Would I put all $70k in HYSA or anything over the EF amount?

For the emergency fund any combination of a federally insured high yield savings account, a federally insured short-term CD, or a very safe money market fund (or any one of those) is reasonable in my opinion.

You can get a rate of 5%.

For rates see:
https://www.bankrate.com/
https://www.doctorofcredit.com/
Vanguard Money Market Funds
Fidelity Money Market Funds

[queenofthemadhouse]

We use SoFi for our checking, so their savings account earns 4.2%. You can create a 'vault' within the savings account for your efund. I'm sure there are many banks with a setup similar to this that you could use with a decent return.

Like others have said, pay off the car. Keep enough in the short term savings to pay off the renovation on the 0% schedule, plus the $68K for the efund. $100K sounds about right for that. You've got $115K, and the car debt is only $20K. You can pay that off and still be nearly at $100K.

Clear the path for the back door Roth IRA for you by rolling in the traditional IRA to your 401k. It looks like the path is already clear for her. That's $250 a week (maybe a little more short term to finish up 2023).

Are you sure about the expenses? Were you paying off debt until recently? How long did it take to accumulate the $115K?

[MarkVH0518]

Questions:
1. I want to increase investing exponentially (up to $1,750/week from $300/week) but my wife would rather keep our savings account at or around $100k or higher due to market volatility. Our 6 month emergency fund is covered, which is roughly $68k. What's the best plan?

I agree keeping 100K in cash is not necessarily wise, but keeping your wife on your side is more valuable.
My solution for you to consider the $100k as part of your bond allocation, then you can both keep your wife happy and meet
your investment objectives.
I certainly recommend finding an account paying 4-ish% for your savings. The suggestion above for Treasuries works.
Even a money market account works, although those are not formally government insured.

2. I want to pay off our debt early and then throw more than $300/week at the joint account. My wife wants to wait 2 1/2 months (pay off $5k/month towards car debt). How do I explain the benefits of being in the market for longer time vs trying to time the "crash"?

For 2 1/5 months this is an argument not worth winning. Paying off the car debt is valuable, keeping your wife on your side is
extremely valuable. Just say 'Yes, dear" on this issue.

3. I love the idea of investing entirely in an index fund like $VT, but am open to investing 80/20 stocks/bonds, but how would I do that with Fidelity?

Use the reverence above on 'Other than Vanguard; Boglehead style'
If your wife is concerned about market loses, I recommend against 100% stock allocations.
I suggest starting with the 100K savings account and with the rest of your portfolio being invested at 80/20.
I haven't worked the numbers, but this is, perhaps, a 60/40 allocation - at the beginning.
The trick is to invest all new money at an 80/20 rate.
What will happen at your proposed (high!) savings rate relative to your currently (low!) level of assets
is that your actual asset allocation will move quite quickly to an 80/20 allocation - unless
we hit a market downturn in the near future whereby you will be glad and then your wife was a better market timer than you are.

Please note: you will be investing for minimally 20 or 30 years. At this point in your investment life cycle the rate of savings
is much, much more important that choosing 60% stocks vs. 90% stocks.
Just to help you with investing foresight, not until unearned investment income matches your savings rate (when
your assets are between 10 and 20 times savings rate) will your asset allocation be equally important to your savings rate.

Regards,
Mark

[YeWill]

My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up.

Let me get this right.

Income $450k.
Savings $84.9k (= 1.2k × 52 + 22.5k)
Taxes $100k (an estimate)
--------
Expenses $265.1k (=450 - 84.9 - 100)


I know this is not what you asked but I think you spend a lot relative to the income you bring, especially if your wife is stay at home, which spares you from a lot of kid related expenses.

[pizzy]

Where is all the money going?

[KrisNC]

Is your high salary very recent ?
For your income in MCOL, your Savings are low. I think your expenses are more than 100k. Track your expenses closely.

** Pay off car loan ASAP . It does not make sense to have so much cash and pay 5% on a loan and then save up for cash for next car.

1. Max 401k up to 22,500
2. Check if your employer offers After-tax contributions with direct conversion to Roth. If so, you can save even more directly from pay check.
3. Backdoor IRA : If you can rollover your IRA into your current 401k then you save 6,500 each for yourself and spouse (search for backdoor Roth)
Even if you cannot rollover into your 401k, you can still invest 6,500 in Spousal IRA(Traditional -> convert to Roth)
4. College savings for kid(s) ? 529 or UTMA or other ?
I know NC does not have a deduction but it's worth to invest early and use tax free gains for college (if your salary remains high in 15-20 years)
5. Additional retirement savings in Taxable.

[YeWill]

Where is all the money going?

I think, with a stay at home mom, they can do something similar to what KlangFool does: save one year of expenses, which will be $175k [= (450 - 100)/2]. With market growth, they can reach FI in 20 years.

[KrisNC]

It is okay to keep 100k in cash for safety if that is your preference.
The key is to decide on an asset allocation and automate your investments.
IMHO, 1k monthly is too low for your income.

[Wiggums]

$300/week in additional savings is only a 4% slice if your 330k income. You have a wonderful opportunity to live well today and save well for the future.

We have a budget and track all our expenses. We found it helpful so that DW and I were on the same page. We also have a list of big expenses so that we can free up the money before it is needed. I know that holding enough cash makes my DW feel more secure. We balance that with my desire to continue to invest. So, win-win

[daveramsaywhat]

Is your high salary very recent ?
For your income in MCOL, your Savings are low. I think your expenses are more than 100k. Track your expenses closely.

** Pay off car loan ASAP . It does not make sense to have so much cash and pay 5% on a loan and then save up for cash for next car.

1. Max 401k up to 22,500
2. Check if your employer offers After-tax contributions with direct conversion to Roth. If so, you can save even more directly from pay check.
3. Backdoor IRA : If you can rollover your IRA into your current 401k then you save 6,500 each for yourself and spouse (search for backdoor Roth)
Even if you cannot rollover into your 401k, you can still invest 6,500 in Spousal IRA(Traditional -> convert to Roth)
4. College savings for kid(s) ? 529 or UTMA or other ?
I know NC does not have a deduction but it's worth to invest early and use tax free gains for college (if your salary remains high in 15-20 years)
5. Additional retirement savings in Taxable.

Thanks for this!

Salary went from $140k to $320k in the last year, expenses are the same, we overspent in lifestyle creep but are doing a better job with that recently!

1. Already done
2. Will check on this
3. Will check on this
4. We have a 529 I forgot to mention, not a high amount, maybe $1000 or so.

[daveramsaywhat]

$300/week in additional savings is only a 4% slice if your 330k income. You have a wonderful opportunity to live well today and save well for the future.

We have a budget and track all our expenses. We found it helpful so that DW and I were on the same page. We also have a list of big expenses so that we can free up the money before it is needed. I know that holding enough cash makes my DW feel more secure. We balance that with my desire to continue to invest. So, win-win

I agree, $300/week is small compared to the income we have, and as listed earlier, we can do up to $1750/week (what my wife is potentially comfortable with).

[daveramsaywhat]

Where is all the money going?

I think, with a stay at home mom, they can do something similar to what KlangFool does: save one year of expenses, which will be $175k [= (450 - 100)/2]. With market growth, they can reach FI in 20 years.

My salary recently went from 140k to 320k. After the lifestyle creep, we're at a better place to focus on investing more than we have today. I'm not following the saving of 1 year expenses.

[JeanneForever]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

[er999]

The obvious move is to at least get more interest on the $115k paying 1%. See for example ally bank that’s offering 3.85% on fdic insured, that’s an extra $3200 / year without any additional risk.

If you want slightly more risk (moving outside fdic insurance and having some nongovernmental loans) this fidelity money market fund (with $100k minimum but can then drop below the balance once funded) is offering 4.9%:
https://fundresearch.fidelity.com/mutua ... /31617H805

That would be an extra ~$1200 / year over the ally account, or $4400 / year better than your current situation.

I agree with paying off the car loan but defer to your wife as the difference in waiting 2.5 months is insignificant particularly if you move to the 4.9% money market fund which is very close to the 5.34% car interest rate.

Also can’t tell what percentage of GameStop you have but might want to decide how much individual stocks you will have going forward (this board usually suggests none or at most 5-10% speculative percentage limit)

If your wife wants $100k instead of $68k that seems fine just get a higher interest rate. In the next 10 years $32k more of fixed income won’t make any difference if you can invest anywhere near your proposed rate.

[daveramsaywhat]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

The concern was about missing 2.5 months worth of investing up to $1750/week (from $300/week) and how not doing that could "put us back" by a specific amount of time.

[JeanneForever]

I meant to add that holding Gamestop is probably not helping her trust you on the volatility issue.

[JeanneForever]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

The concern was about missing 2.5 months worth of investing up to $1750/week (from $300/week) and how not doing that could "put us back" by a specific amount of time.

That's your concern. I don't think that's her concern? Is it?

[daveramsaywhat]

The obvious move is to at least get more interest on the $115k paying 1%. See for example ally bank that’s offering 3.85% on fdic insured, that’s an extra $3200 / year without any additional risk.

If you want slightly more risk (moving outside fdic insurance and having some nongovernmental loans) this fidelity money market fund (with $100k minimum but can then drop below the balance once funded) is offering 4.9%:
https://fundresearch.fidelity.com/mutua ... /31617H805

That would be an extra ~$1200 / year over the ally account, or $4400 / year better than your current situation.

I agree with paying off the car loan but defer to your wife as the difference in waiting 2.5 months is insignificant particularly if you move to the 4.9% money market fund which is very close to the 5.34% car interest rate.

Also can’t tell what percentage of GameStop you have but might want to decide how much individual stocks you will have going forward (this board usually suggests none or at most 5-10% speculative percentage limit)

If your wife wants $100k instead of $68k that seems fine just get a higher interest rate. In the next 10 years $32k more of fixed income won’t make any difference if you can invest anywhere near your proposed rate.

I updated the percentage holding in the original post. A HYSA makes more sense in having access to liquidity easier vs CDs from what I understand. What I'm concerned with is missing 2.5 months of investing up to more than $300/week (up to potentially $1750/week).

[daveramsaywhat]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

The concern was about missing 2.5 months worth of investing up to $1750/week (from $300/week) and how not doing that could "put us back" by a specific amount of time.

That's your concern. I don't think that's her concern? Is it?

Yes this is my concern, with the larger concern (on my side) being how we can increase $300/month while also making sure we invest/save wisely, given our situation.

[daveramsaywhat]

I meant to add that holding Gamestop is probably not helping her trust you on the volatility issue.

With less than 5% of my portfolio and $320k/year income, volatility isn't the concern on that portion of the portfolio. I do not plan to invest more into Gamestop.

[YeWill]

My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up.

Let me get this right.

Income $450k.
Savings $84.9k (= 1.2k × 52 + 22.5k)
Taxes $100k (an estimate)
--------
Expenses $265.1k (=450 - 84.9 - 100)

I know this is not what you asked but I think you spend a lot relative to the income you bring, especially if your wife is stay at home, which spares you from a lot of kid related expenses.

Where is all the money going?

I think, with a stay at home mom, they can do something similar to what KlangFool does: save one year of expenses, which will be $175k [= (450 - 100)/2]. With market growth, they can reach FI in 20 years.

My salary recently went from 140k to 320k. After the lifestyle creep, we're at a better place to focus on investing more than we have today. I'm not following the saving of 1 year expenses.

I think based on the original post, you are spending over 250k per year. And based on this response, you don't think $175k per year is enough for a family with a stay at home parent. This level of spending night be hard to sustain indefinitely. But to each his own ....

[daveramsaywhat]

My income last year was $330,000. This year is projected to be over $450,000. I'm maxing out 401k, investing $1,200 a month in $VT (taxable fidelity account) and have an emergency fund of about 12 months saved up.

Let me get this right.

Income $450k.
Savings $84.9k (= 1.2k × 52 + 22.5k)
Taxes $100k (an estimate)
--------
Expenses $265.1k (=450 - 84.9 - 100)

I know this is not what you asked but I think you spend a lot relative to the income you bring, especially if your wife is stay at home, which spares you from a lot of kid related expenses.

Where is all the money going?

I think, with a stay at home mom, they can do something similar to what KlangFool does: save one year of expenses, which will be $175k [= (450 - 100)/2]. With market growth, they can reach FI in 20 years.

My salary recently went from 140k to 320k. After the lifestyle creep, we're at a better place to focus on investing more than we have today. I'm not following the saving of 1 year expenses.

I think based on the original post, you are spending over 250k per year. And based on this response, you don't think $175k per year is enough for a family with a stay at home parent. This level of spending night be hard to sustain indefinitely. But to each his own ....

Oh I understand now! Yes $175k is more than sufficient. That isn’t the issue. We can live on less. Thanks for clarifying.

[Hacksawdave]

Your highest ordinary tax bracket is 43.79% when you factor in the NIIT tax. I would find tax-exempt and tax-efficient investments for the taxable side. Does the bathroom renovation at 0% have a time limit and reset?

You don’t mention a budget. What’s available for investing?

I would pay off the car loan. That is a guaranteed return without risk.

[queenofthemadhouse]

So, I understand that the income has gone up recently. So, are you estimating expenses at $140k a year now, roughly? Based on the $68k being 6 months of expenses?

If that’s the case, it seems like you could do both save the $7.5k per month in investments AND build up the more accessible investments pretty quickly if that makes your wife more comfortable.

Is a significant chunk of your income bonus or some other form that comes outside of a regular paycheck type schedule?

[daveramsaywhat]

So, I understand that the income has gone up recently. So, are you estimating expenses at $140k a year now, roughly? Based on the $68k being 6 months of expenses?

If that’s the case, it seems like you could do both save the $7.5k per month in investments AND build up the more accessible investments pretty quickly if that makes your wife more comfortable.

Is a significant chunk of your income bonus or some other form that comes outside of a regular paycheck type schedule?

$70,000 would be 6 month expenses at $140k a year that we budgeted originally. Once my salary increased from $140k to $320k, we didn't revisit the amount of investments past maxing out 401k and contributing $300/week to joint fidelity account, and we also haven't revisited our budget compared to what we had before, since my salary increase was not expected to be long term.

[daveramsaywhat]

Your highest ordinary tax bracket is 43.79% when you factor in the NIIT tax. I would find tax-exempt and tax-efficient investments for the taxable side. Does the bathroom renovation at 0% have a time limit and reset?

You don’t mention a budget. What’s available for investing?

I would pay off the car loan. That is a guaranteed return without risk.

We are re-visiting the budget, that's something from this thread that we're finding is necessary, since our original plan was based on a salary of $140k/year.

[daveramsaywhat]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

What I've mentioned in the past is a HYSA and based on this thread is a wise move that will allow for us to increase our return on investment and stick with the original plan of paying off the car over 2.5 months.

The budget/goals over the next several months/years is not as clear since we haven't revisited that since my salary was $140k/year, which I'm learning is something we should revisit (based also on this thread).

[MarkVH0518]

We are re-visiting the budget, that's something from this thread that we're finding is necessary, since our original plan was based on a salary of $140k/year.

Now that you've shared some hints about your change in lifestyle, I'm going to poke some into this.
All that follows is speculative, so treat it as such. But speculative does not imply unimportant.

I've been trying to guess what jobs for 35-year-olds have earnings go from 170K to 330K to 440K is a short time.
I imagine that some medical professions might make that first earning increase at that age,
but I can't image any medical professions that would immediately make the second increase.
The only other examples I can imagine is a salesman or a tech entrepreneur.

If you are a medical professional, or someone with similar earnings potential, then setting a budget expecting 440K earnings is potentially prudent.

However, if you are a salesman or tech entrepreneur, or someone with similar earnings potential, then setting a budget expecting
440K earnings is downright foolish.
If you are in this second category I recommend setting your budget assuming earnings of 220K (or even less).
These kinds of earnings have a tendency to disappear in an instant.
These jobs can easily be erased; leaving you not with an earnings of 170K but of 0.
And after a period of 0 earnings you return to an earnings potential of 170K.

If indeed this even approximately describes your situation, I recommend saving everything, after tax, that corresponds to
the highest 200K of your earnings. Since you are at the 40% tax (fed & state) bracket, you should be saving 120K per year.

To repeat, I am speculating, but if I am approximately correct, this suggestion is quite important.
If, on the other hand, your current good fortune lasts for 5 years and your best crystal ball indicates the good fortune
will continue, you can adjust your spending upward. But even then I suggest you continue to consider a significant
portion of your income non-sustainable and budget accordingly.

Best Regards,
Mark

[wetgear]

The obvious move is to at least get more interest on the $115k paying 1%. See for example ally bank that’s offering 3.85% on fdic insured, that’s an extra $3200 / year without any additional risk.

If you want slightly more risk (moving outside fdic insurance and having some nongovernmental loans) this fidelity money market fund (with $100k minimum but can then drop below the balance once funded) is offering 4.9%:
https://fundresearch.fidelity.com/mutua ... /31617H805

That would be an extra ~$1200 / year over the ally account, or $4400 / year better than your current situation.

I agree with paying off the car loan but defer to your wife as the difference in waiting 2.5 months is insignificant particularly if you move to the 4.9% money market fund which is very close to the 5.34% car interest rate.

Also can’t tell what percentage of GameStop you have but might want to decide how much individual stocks you will have going forward (this board usually suggests none or at most 5-10% speculative percentage limit)

If your wife wants $100k instead of $68k that seems fine just get a higher interest rate. In the next 10 years $32k more of fixed income won’t make any difference if you can invest anywhere near your proposed rate.

I updated the percentage holding in the original post. A HYSA makes more sense in having access to liquidity easier vs CDs from what I understand. What I'm concerned with is missing 2.5 months of investing up to more than $300/week (up to potentially $1750/week).

Almost but you need to list percentage of total portfolio of each fund/holding in each account.

See here: viewtopic.php?t=6212

[dogagility]

I meant to add that holding Gamestop is probably not helping her trust you on the volatility issue.

With less than 5% of my portfolio and $320k/year income, volatility isn't the concern on that portion of the portfolio. I do not plan to invest more into Gamestop.

I agree with JeanneForever.

Having any money invested in Gamestop suggests that you like the idea of taking risk with you and your spouse's retirement portfolio. I understand how your spouse has a trust issue with your investing style. It may not matter that this is only a small portion of your portfolio... it may be that your investment philosophy is the issue.

My suggestion is to sell Gamestop and invest the money in a broad stock market index fund.

[JeanneForever]

I meant to add that holding Gamestop is probably not helping her trust you on the volatility issue.

With less than 5% of my portfolio and $320k/year income, volatility isn't the concern on that portion of the portfolio. I do not plan to invest more into Gamestop.

I agree with JeanneForever.

Having any money invested in Gamestop suggests that you like the idea of taking risk with you and your spouse's retirement portfolio. I understand how your spouse has a trust issue with your investing style. It may not matter that this is only a small portion of your portfolio... it may be that your investment philosophy is the issue.

My suggestion is to sell Gamestop and invest the money in a broad stock market index fund.

Yes, that is what I meant.

[daveramsaywhat]

I meant to add that holding Gamestop is probably not helping her trust you on the volatility issue.

With less than 5% of my portfolio and $320k/year income, volatility isn't the concern on that portion of the portfolio. I do not plan to invest more into Gamestop.

I agree with JeanneForever.

Having any money invested in Gamestop suggests that you like the idea of taking risk with you and your spouse's retirement portfolio. I understand how your spouse has a trust issue with your investing style. It may not matter that this is only a small portion of your portfolio... it may be that your investment philosophy is the issue.

My suggestion is to sell Gamestop and invest the money in a broad stock market index fund.

Yes, that is what I meant.

That makes sense. I already started to move the rollover ira to fidelity 401k (which is a target date fund) based on feedback from this thread. My investment philosophy has changed quite a bit, which is what I’ve learned from boglehead concepts!

[Outer Marker]

As others have said, get rid of the car loan -- like Tuesday.

I don't think there is any need for a separate, dedicated "emergency fund." It's a mental accounting game that just results in under-allocation to equities. I do, however, believe in having ready access to sufficient cash. I keep $20K in my checking account, which is about 2 month's expenses. However, I've got 10+ years of spending in safe fixed income investments that could be accessed with varying degrees of difficulty including about $100K in taxable in Ibonds and other instruments.

75/25 might be a reasonable allocation (within the range of 75/25 to 25/75 recommended by Buffett's mentor, Benjamin Graham). Set aside whatever makes you sleep well at night in safe fixed income, which will have you below your target allocation, then add new savings in equities until you get to 75/25 and then grow in proportion once you get there.

Set your monthly savings goal to be reasonable and easily achievable. Say, $1,250. If you're consistently running a surplus, bump it to $1,500 - but don't start out on your "stretch goal" of $1,750 and struggle and get discouraged.

Congratulations on your big raise. You've got everything you need to set you and your family up for long term success.

[DIYtrixie]

Do you know why your wife wants to keep $115k+? How does it break down in her head or on paper? $68k for 6 months + what? Or does she want 12 months, which you are barely at? Or is some of it to replace an aging roof/buy another car/pay for braces/take vacations? I'm not clear that all of this is emergency money to her (as other posters are assuming) or that she's comfortable with only 6 months of an emergency fund.

I think you need to understand her why for so much cash before you figure out whether to invest any of the cash. She might prefer CDs for some of it because of FDIC protection. Do you have budgeted goals and time frames for those goals? Because just investing as much as you can might not be appropriate depending on goals, even before you get into you having different risk tolerances.

Agree with the posters who say don't fight her on paying the car off over 2.5 months. The cost of paying if off is her security and the relationship. If she was saying never pay it off, that might be different.

The concern was about missing 2.5 months worth of investing up to $1750/week (from $300/week) and how not doing that could "put us back" by a specific amount of time.

Whatever potential gains you might make from 2.5 months of investing are not worth straining your relationship. Getting on the same page with a partner who is at a different place on their financial journey is slow and hard — but worth it! Play the long game and keep your eyes on the big picture.