FAQs

• Working is something you do so you can retire.
• Money is a tool. It’s the means, not the end.
• If you want to retire earlier, spending less is much more important than earning more. By far.
• Bring lunch.
• Buy used. Drive it till it dies.
• Diesel for highway, hybrid for city. [We wrote this a long time ago. Nowadays it’s probably hybrid for highway, electric for city.]
• Calculate how much you spend a year. When your savings equal 25-33x, you are ready to retire. This is because you can draw down on 3-4% of your nest egg in perpetuity.
• We are trying to teach our kids the difference between “need” and “want.” Many of us would benefit from learning the distinction.
• Automate your savings. “Pay yourself first.”
• If you’re Christian, don’t forget >= 10% (of gross, not take-home) to the Church.
• Save a bare minimum of 10% of your gross salary. We recommend 20-33%. See the table here.
• Before you contribute to retirement savings, bulk up your emergency fund: 6-12 months of necessary expenses.
• Contribute to a 401k if your company has one, and especially if there is a match. At least contribute to an IRA if you qualify.
• Max percent of stocks in your portfolio should be “120 – age.” The rest should be bonds.
• Asset allocation: KISS. Bonds and equities as above. Of equities, 50-67% US and 50-33% international, depending on your risk tolerance. Buy Vanguard mutual funds (VTSMX, VGTSX, VBMFX).
• Rebalance once a year. Maybe twice a year, if you’re doing it manually.
• For tax-deferred and tax-“free” accounts, rebalance by selling high and buying low. For taxable accounts, consider rebalancing by adding to underperforming assets.
• The 1/3 rule: Keep 1/3 of your savings in a taxable account, 1/3 in a tax-“free” account, and 1/3 in a tax-deferred account. [This will be difficult to achieve for most of our readers.]
• Even if you can’t directly contribute to a traditional or Roth IRA, you can and should to a traditional or Roth 401k. You can also backdoor into a Roth IRA.
• If you have kids, don’t put money in their names (UTMA). Put it in a 529. Start with one in your state for state income tax purposes. Also consider the NY, Utah, and Vanguard 529s. If you think they’ll go to a private college, you’ll need about $1000/mo starting at birth.
• Encourage your kids to go to college and to finish college.
• 529s can pay for grad school, don’t forget.
• Have your parents reduce their taxable estate by helping pay for your kids’ education. And remember, it’s not a taxable gift if you pay the school directly.
• Everyone knows about life, but don’t forget disability. Individual > group. And if you’re a physician, get “Own Occ.”
• 95% of you don’t need permanent life insurance.
• It’s better to have control than to have ownership.
• If you’re married and your state lets you, T/E can be a good option.
• Trusts can bypass probate. They are just one method. Also look at POD and TOD. Note that these are state-dependent.
• LLCs for rental property. Never an S corp. Ever.
• Retirement accounts should go to the spouse (primary) and then to kids (contingent) unless you have a properly established retirement trust. Emphasis on properly.
• When possible, leave money to kids directly instead of your spouse, lest your kids be hit with estate taxes after #2 goes.

Will you add more questions to this FAQ?

Yes. We’re just getting started. If you have a question to add, contact us!