Financial advice

[mapletree123]

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I am less than 5 years out from residency, board certified in a job I really enjoy, single parent to 3 small children, and I have primary custody and financial responsibility.

My loans are paid off. I live frugally. I have about 150K in retirement (maxed out 401K now and SEP-IRA when I was 1099) and about 400K liquid sitting in my savings/checking account that I don't know what to do with. I've looked at bogleheads and white coat investor, but it's still overwhelming. I am completely ashamed to say this, but I don't even understand half abbreviations in the posts, and with my current circumstances have little time to educate myself.

My questions are:
1) Should I find a fee-only advisor I trust, and if so how do I find one?
2) How much do I "jump start" into the 529s for my 3 kids? (am starting but don't have yet)
3) I'm buying a home (150-200 range). Should I pay cash or get a 15 year mortgage?
4) Any good primer on picking funds and putting together a portfolio?
5) What do I with what I have and also going forward?

Any thoughts or suggestions are appreciated!

 

[deleted87051]

I am less than 5 years out from residency, board certified in a job I really enjoy, single parent to 3 small children, and I have primary custody and financial responsibility.

My loans are paid off. I live frugally. I have about 150K in retirement (maxed out 401K now and SEP-IRA when I was 1099) and about 400K liquid sitting in my savings/checking account that I don't know what to do with. I've looked at bogleheads and white coat investor, but it's still overwhelming. I am completely ashamed to say this, but I don't even understand half abbreviations in the posts, and with my current circumstances have little time to educate myself.

My questions are:
1) Should I find a fee-only advisor I trust, and if so how do I find one?
2) How much do I "jump start" into the 529s for my 3 kids? (am starting but don't have yet)
3) I'm buying a home (150-200 range). Should I pay cash or get a 15 year mortgage?
4) Any good primer on picking funds and putting together a portfolio?
5) What do I with what I have and also going forward?

Any thoughts or suggestions are appreciated!

If you keep saving like you already are, the rest almost doesn't matter. You've got the hard part down.

 

[Ezekiel2517]

Buy the following books (both can be found on amazon):
-Personal Finance For Dummies
-White Coat Investor Book
Should only take a few hours to get through them. Invest a few hours of your time and you can set up a financial plan for the rest of your life, without wasting money on an advisor who definitely does not have your best interests in mind and could very well rip you off. The answers to all your questions are there.

 

[btbam]

The simplified approach would be the following:

First off, having 400k liquid is insane. That's 400k that isn't earning any interest and simply depreciating at 2-3% a year. As far as buying a house, you have to ask yourself, can the extra money you save by not buying in cash return more than the interest rate on a loan? For example, if you put down 20% and did a 15 year loan with a 3.5% interest rate, that other 150k could be put in the market where the average return over the lifetime of the market is ~8%. If you want a really simple investing strategy for now, buy something like the Vanguard 2045 or 2050 retirement fund which is more aggressive now while you are 30 years from retirement and becomes gradually more conservative over time. Also, the expense ratio is extremely low which means lower fees for you.

 

[BLADEMDA]

https://pages.wealthfront.com/faq/

If you don't want to manage your money yourself then these guys are cheap: 0.25%

 

[BLADEMDA]

http://www.rickferri.com/blog/

http://portfoliosolutions.com/home/low-fees

I've instructed my significant other to use Rick Ferri or DFA advisor if I die prematurely.

Rick Ferri or this DFA advisor: http://www.evansonasset.com/index.cfm?Page=6

 

[BLADEMDA]

Of course, there is always Vanguard:

The less you pay, the more you keep
It's really that simple. You'll have more money working for your benefit with our low costs compared with the industry average.

Keep more with our low financial advisor fee of only 0.30%

You'll get the benefit of a Vanguard advisor, a customized financial plan, ongoing portfolio management, and more for an annual cost of 0.30% of your assets under management. That's less than one-third the industry average of 0.99%.*

See what our lower fee could mean for you
For example, with a $250,000 investment, the low cost of our advice service is only $750 annually compared with the industry average of $2,475. That means you'd keep $1,725 more annually invested toward reaching your goals. And there's no fee for leaving the service.

Over a 20-year period, with compounding, that puts $93,011 more in your portfolio working for you. And that could help your investments last longer.

 

[BLADEMDA]

 

[BLADEMDA]

 

[mapletree123]

Buy the following books (both can be found on amazon):
-Personal Finance For Dummies
-White Coat Investor Book
Should only take a few hours to get through them. Invest a few hours of your time and you can set up a financial plan for the rest of your life, without wasting money on an advisor who definitely does not have your best interests in mind and could very well rip you off. The answers to all your questions are there.

Thanks for the info - I'll check these books out.

 

[mapletree123]

The simplified approach would be the following:

First off, having 400k liquid is insane. That's 400k that isn't earning any interest and simply depreciating at 2-3% a year. As far as buying a house, you have to ask yourself, can the extra money you save by not buying in cash return more than the interest rate on a loan? For example, if you put down 20% and did a 15 year loan with a 3.5% interest rate, that other 150k could be put in the market where the average return over the lifetime of the market is ~8%. If you want a really simple investing strategy for now, buy something like the Vanguard 2045 or 2050 retirement fund which is more aggressive now while you are 30 years from retirement and becomes gradually more conservative over time. Also, the expense ratio is extremely low which means lower fees for you.

Yes, I agree it's insane, and I've made a lot of mistakes up to this point. Honestly I don't know if I could make more in the average return of the market vs paying 3.1% interest on a 15 yr fixed mortgage. There is also a psychological benefit to being debt free, but is it worth gambling a good average return. I don't know. I need to really start educating myself. Thanks for your reply.

 

[mapletree123]

Of course, there is always Vanguard:

The less you pay, the more you keep
It's really that simple. You'll have more money working for your benefit with our low costs compared with the industry average.

Keep more with our low financial advisor fee of only 0.30%

You'll get the benefit of a Vanguard advisor, a customized financial plan, ongoing portfolio management, and more for an annual cost of 0.30% of your assets under management. That's less than one-third the industry average of 0.99%.*

See what our lower fee could mean for you
For example, with a $250,000 investment, the low cost of our advice service is only $750 annually compared with the industry average of $2,475. That means you'd keep $1,725 more annually invested toward reaching your goals. And there's no fee for leaving the service.

Over a 20-year period, with compounding, that puts $93,011 more in your portfolio working for you. And that could help your investments last longer.

Thanks for all the info Blade, pictures included. I will check out Rick Ferri and that DFA advisor. Do you like one more than the other? It makes me really nervous to think of someone taking full control of my finances, but it would be nice to have someone available on a prn basis and pay an hourly rate. I'm not sure if that even exists.
Do you have any thoughts Blade on (a) buying the house outright, and (b) how much to jump start in the 529 plans?
Thanks again.

 

[BLADEMDA]

Thanks for all the info Blade, pictures included. I will check out Rick Ferri and that DFA advisor. Do you like one more than the other? It makes me really nervous to think of someone taking full control of my finances, but it would be nice to have someone available on a prn basis and pay an hourly rate. I'm not sure if that even exists.
Do you have any thoughts Blade on (a) buying the house outright, and (b) how much to jump start in the 529 plans?
Thanks again.

Well you can start by reading the books and hiring a fee based financial planner. Remember, low cost, no load ETFs are more tax efficient then mutual funds in a taxable account. Taxes can eat up a lot of your earnings.

A truly honest fee based planner will recommend Vanguard or DFA products. Sure, other ETFs work and I own quite a few but They must be compared against the Vanguard product for cost and tax efficiency.

Does you State offer prepaid college plans? Are they a good deal? I purchased such plans for my children in addition to 529 plans.

As for buying a home I think that is a great idea. Perhaps, put 50 percent down and finance the rest. This way you have liquidity in terms of cash combined with a low monthly payment. Even though you may want to pay off that home having the cash to invest, buy furniture, start those 529 plans, 12 month emergency fund, etc makes better sense at this point in your career.

 

[BLADEMDA]

Thanks for all the info Blade, pictures included. I will check out Rick Ferri and that DFA advisor. Do you like one more than the other? It makes me really nervous to think of someone taking full control of my finances, but it would be nice to have someone available on a prn basis and pay an hourly rate. I'm not sure if that even exists.
Do you have any thoughts Blade on (a) buying the house outright, and (b) how much to jump start in the 529 plans?
Thanks again.

You could just do all the investing by yourself online. It's not hard these days which is why wealth front.com only charges 0.25 percent to do it for you.

Vanguard ETFs make the process simple and cheap

 

[pjl]

The way you are going, just pay for the house. You are currently not doing anything with the money and chances are you will take a few years to change your strategy.

 

[BLADEMDA]

Table 2. ETFs for Level I and II Low-Hassle Portfolios
Total U.S. Stock ETFs
iShares Dow Jones U.S. Index (IYY)
iShares Russell 3000 Index (IWV)
SPDR DJ Total Market (TMW)
Vanguard Total Stock Market ETF (VTI)
Large-Cap Stock ETFs
iShares Russell 1000 Index (IWB)
iShares S&P 500 Index (IVV)
SPDR S&P 500 ETF (SPY)
Vanguard Large-Cap ETF (VV)
Extended Market ETFs
Vanguard Extended Market Index ETF (VXF)
Mid-Cap Stock ETFs
iShares Russell MidCap Index (IWR)
iShares S&P MidCap 400 (IJH)
MidCap SPDR Trust (MDY)
Vanguard Mid-Cap Index ETF (VO)
Small-Cap Stock ETFs
iShares Russell 2000 Index (IWM)
iShares S&P SmallCap 600 Index (IJR)
Vanguard Small-Cap ETF (VB)
Micro-Cap Stock ETFs
iShares Russell Microcap Index (IWC)
Total Market International Stock ETFs
iShares MSCI-EAFE (EFA)
European, Pacific and Emerging Market ETFs
Vanguard European ETF (VGK)
Vanguard Pacific ETF (VPL)
Vanguard Emerging Markets ETF (VWO)
Interm-Term U.S. Gov’t Bond ETF
iShares Barclays 7-10 Year Treasury Bond Fund (IEF)
Short-Term and Long-Term U.S. Gov’t Bond ETFs
iShares Barclays 1-3 Year Treasury Bond Fund (SHY)
iShares Barclays 20+ Year Treasury Bond Fund (TLT)