Last year I hustled real hard and put away 20,000 pre-taxed dollars into my tax deferred 457 retirement account. I was able to stash away money for my 8 months emergency savings, and take a trip to Florida and Punta Cana Dominican Republic and enjoyed a few concerts as well.
My assets
I was pretty aggressive with my portfolio throughout my career. Investing heavily in stock mutual funds, and a bit in bonds. My cash savings was steadily increasing and that was about it. When I say stocks, I want you to know it was in stock funds not individual stocks. I do not pick stocks and I do not try to beat the market with selected stocks. ETF’s or exchange traded funds and Index funds are where I’m at.
The equity in my house was another asset. I bought my townhouse in 2002 about a year after one of my many break ups. Once again, not wanting to rely on anyone else for anything, I bought a house I could afford all by myself. You will see that in 2002 my gross annual income was $36,227. I was receiving child support also but that stopped in 2007 and then I had to pay child support. Yeah, don’t get me started with that shit.
Making it automatic
I decided in the beginning that a percentage of my paycheck would go in to retirement, not a set dollar amount. This way, if I cranked out some serious overtime or hit the triple holiday pay check, a larger portion would go into the accounts instead of a set dollar amount like 300 or 400 dollars.
Bonus bonanza
I also put all 100% of my retention bonus into my retirement account. This way the whole amount went in tax deferred. Many of my colleagues took the cash bonus but they ended up getting nearly half of it eaten by taxes. Screw that. That was free money. It was offered a few years into my career and continued until this year 2019. After this year, the bonus amount was just rolled into our total salary for a salary increase.
Some hyper consumer individuals liked the one-time bonus but I loved that it was rolled into my salary as now my hourly rate has increased for overtime. It was never a promised thing so just be grateful that we got it at all. I never ever banked on that bonus, ever! You get yourself into trouble when you depend on bonuses to pay off Christmas and holiday debts. I highly discourage this type of behavior.
Learn as you go
Now even though I was selecting my own funds with the retirement accounts we had through work, I didn’t know what the hell I was doing. I just made a nice mixture of small caps, and big caps and blends etc. I would see what the funds returns were since inception and told myself that I think I was doing the right thing. Well it paid off. Yeah yeah, I could have had them manage it but then they would get a little bit more of my money.
I wanted to hold on to my hard-earned money as much as I could. Don’t even get me started on expense ratios. I didn’t even learn about that until last year. Holy shit the money I see going in to their pockets. OMG get Personal Capital for this. It’s free. It’s just like Mint but I like it better. I can see how much money I lose to them in expense ratios. Argh!!!!
Expense ratios are the work of the devil
Expense ratios on the down and dirty. This is the fee they charge you for managing the fund. Some of it is 1% or higher. I have mine now in Vanguard funds. Thank the bee gees that our new retirement account holders offer Vanguard funds. Here is a clear-eyed example. Picking a random expense ratio number, and let’s say you have $100,000 dollars in a fund, an expense ratio at .58 percent would be $580 dollars a year they take from you before they report your gains or losses. If your expense ratio was .04%, they would take $40.00. Which would you want them to take? This is why you need to ask what the expense ratio is or look at it yourself. All of that information should be visible to you. Personal Capital reported that I was losing thousands of dollars annually to expense ratios.
Brokerage firm Vanguard for the win
I have changed all of my funds over to Vanguard funds. Fidelity is currently offering 0% expense ratio funds. You better jump on these. Get started with the Total Stock Market Index fund. The symbol is Vanguards VTSAX if you have a cool 3 grand to start with or the ETF VTI with no minimum. Both are Total Stock Market funds. Fidelity offers FZROX. Fidelity Zero Total Market Index Fund. Do some research and see what you like best but look at the expenses for each one and get started. I have a bit in short term bonds because I’m getting older and want a bit of security but I still have quite a bit in aggressive funds. The bonds are in VBTLS which is Vanguards Total Bond Market Index Fund. I also have a tiny bit in BSV which is Vanguards Short term bond ETF.
Remember earlier when I said I was only putting in 4% when I first started? Each year I increased it a bit, and each time I got a raise I increased it a bit, and eventually I was close to maxing out each year. Stay tuned for my salaries through the years.