Articles - Page 3 of 3

04Mar 2020 by Martin@FIgoals.com No Comments

The Ideal Account Type For Each Investment

Some investments are better in certain accounts because of different tax structures. Here's how to align those tax structures to minimize taxes. To maximize your financial independence goals, you need to increase income, minimize expenses, maximize investment gains, and minimize the taxes paid on those gains. This article will tackle that last item. I group different account types together based on their tax structure. With that mindset, we have: What types of accounts are there? What does each account type mean and when should you use each account type? Health Savings Accounts are one-of-a-kind and should be maxed out if a high deductible health insurance plan fits into your family’s needs. It is the only account type where it's possible to not pay any taxes on the money. Ever! The Roth IRA category includes Roth…

04Mar 2020 by Martin@FIgoals.com No Comments

Tax Implications of Common Investment Strategies

Income, Investing

Understanding the tax implications of your investment strategy is as important as the strategy itself. This article is a follow up to “Want a Great Retirement”. That article went into the pros and cons of common retirement income strategies. This article will go into the tax implications of those common investment strategies. Buy individual bonds There are three main tax structures for bonds: Treasuries are taxed at the federal level but usually avoid state income taxes.Municipals avoid federal tax and usually avoid state income tax if they were issued from the state you reside in. For example, if you live in New York and buy Ohio muni’s, New York will make you pay state income tax on that income.Corporate bond income is taxed as ordinary income with no special treatment. The ideal scenario…

04Mar 2020 by Martin@FIgoals.com No Comments

Want a Great Retirement? Focus On Dividend Income

Income

Dividend income will smooth out any market fluctuations and overcome inflation during retirement. Highlights: Bonds offer consistent income but don’t increase with inflation.Growth stocks can offer high returns but are volatile.Dividends offer stable income and increase with inflation so you keep a standard of living.Dividends also help smooth out the ups and downs of stock returns. How do you pay your bills during retirement? There are several ways to finance your retirement. Some of the usual ways are collecting interest from bonds, dividends from stocks, or capital gains from selling growth stocks. Of course, you could hit the lottery or get a big inheritance from a long-lost uncle. Those last two sound pretty cool but let’s focus on the options we can control. Interest from bonds. You buy bonds or a bond fund. Short…

04Mar 2020 by Martin@FIgoals.com No Comments

A Smarter Take on the 3 Fund Portfolio

Investing

Improve on the 3 fund portfolio by combining a diversified stock ETF with better bonds. This article will show you how small tweaks can improve the 3 fund portfolio. Your standard 3 fund portfolio If you go anywhere near Vanguard or the Bogleheads site, you'll see a 3 fund portfolio that looks something like this: 50% VTSMX (Total stock market)20% VGTSX (Total international stock market)30% VBMFX (Total bond market) You can use the admiral share versions for even lower fees: VTSAX, VTIAX, VBTLX. Here are the returns of the mutual fund portfolio: portfoliovisualizer.com Yes, its also called the "Lazy" portfolio but that's not an insult. In this case, being lazy is seen as a positive attribute. Here's the ETF equivalent (and of course we like ETFs more): 50% VTI20% VEU or VXUS (pretty…

04Mar 2020 by Martin@FIgoals.com No Comments

The 3 Fund Portfolio: Your Starting Point to Financial Freedom

Investing

A mix of basic index funds beats most active management What is the 3 fund portfolio? Everyone's talking about a 3 fund portfolio, aka the lazy man's portfolio, that actually beats professional money managers. Way back in the day a man named John Bogle started a company called Vanguard. His entire premise was that it's extremely difficult to beat the market consistently year after year, so why not just try to match it? He created index mutual funds for that simple purpose: match the market, don't try to beat the market. Obviously, he was on to something because now passive index funds are extremely popular. A group of investors emerged calling themselves Bogleheads, as in followers of what John Bogle was preaching. They wanted to keep their investments simple, low-cost,…

04Mar 2020 by Martin@FIgoals.com No Comments

Early Retirement: You Can Retire 31% Earlier. Here’s How.

Income

Speed up your retirement date without having to increase your savings rate. First, some history on retirement People retiring at some point in their life is a fairly recent concept. Prior to the 1700s, the average life expectancy was only 40 years old at the high end. The focus was to have children who were capable of tending the farm before you passed away. "Enjoying your golden years" was not even a thought. It wasn't until the mid-to-late 1800s that people started living long enough where they could out-live their job requirements. It was mostly physically demanding jobs that would've been tough to do past 50 (firefighters, policemen). The government recognized that weakness in the system and developed pension plans to help those workers. As life expectancy increased, even people…

04Mar 2020 by Martin@FIgoals.com No Comments

Don’t Worry About Your Budget – Focus on Your Cash Flow

Budgeting

A budget will show if your expenses are on track but your cash flow shows how quickly you’ll reach financial independence. What does cash flow have to do with my FIRE (Financial Independence, Retire Early) planning? Your net worth gives you a good snapshot of what your current financial life is like. Think of it as a photo of that particular moment in time. Well, your cash flow statement will show you what is coming in and what is going out of your bank account over a period of time. Most people will find it most beneficial to do this on a monthly basis, so that’s how I’ll refer to it from now on. Your cash flow number can be positive (more money coming in than going out, yay!) or negative (more money going…

04Mar 2020 by Martin@FIgoals.com No Comments

What is the F.I.R.E. movement?

Money Mindset

FIRE (Financial Independence, Retire Early) is a movement sweeping the United States. Joining will improve your life! What's this new "FIRE" you're talking about? FIRE stands for Financial Independence, Retire Early. It’s a movement where people figure out how much they need to have saved up in order to live off the passive income. The thinking goes like this: I need $40,000 a year to live off of with a 4% withdrawal rate. That means I need $1,000,000 saved up (4% of $1,000,000 is $40,000). That’s the FI (financial independence) part of FIRE. They then figure out how to max out their savings to reach that magic $1,000,000 number as fast as possible, which is the RE part (retire early). As a reference, some of the best FIRE practitioners are saving over 50% of the income!…

04Mar 2020 by Martin@FIgoals.com No Comments

Your Net Worth: It’s the Engine to Financial Independence

Budgeting, Income, Money Mindset

Figuring out your net worth is an important step in gaining financial freedom. In a nutshell Net worth is an important calculation because it dictates how much income you'll have in retirement. Add up all of your assets and subtract out all of your debts. What’s left is your net worth. Ideally, you want to see a positive number there, but based on what stage of life you are in a negative number can be OK! This figure simply tells you how close you are to financial independence; no big deal. Your net worth will show you what retirement will look like. Your net worth tells you how close to FIRE you are. How? Take your net worth and multiply by 4%. That’s the amount of income your net worth can afford to pay out each…

04Mar 2020 by Martin@FIgoals.com No Comments

Compound Interest: The 8th Wonder of the World

Investing, Money Mindset, Top Posts

Compound interest is a concept you have to understand if you want to be rich. Not one of the official ancient wonders, but it is ancient and wonderful. The Great Pyramid of Giza, the Hanging Gardens of Babylon, the Statue of Zeus at Olympia, the Temple of Artemis at Ephesus, the Mausoleum at Halicarnassus, the Colossus of Rhodes, and the Lighthouse of Alexandria. Those are known as the Seven Wonders of the Ancient World. Unfortunately, only one of them can still be visited today. Who thinks there's an eighth wonder? Well, according to Albert Einstein: "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn't... pays it." - Albert Einstein What is compound interest Compound interest is the interest you earn on the interest…