Everything You Need to Know About My Investments

So I promised you a post on my investments, since you asked to learn more about my passive income strategy.

I’m not sure my investments count as “passive income” yet (since I’m not living off them or anything), but right now my investments and my novels are the two items “making money while I sleep,” as it were, so… we’ll start with the investments.

Yes, that means I also need to get you a post about “passive income through self-publishing,” or something like that. I’ve added it to the schedule for next week.

Here come all of the standard disclaimers:

I AM NOT AN INVESTMENT ADVISER.

THIS SHOULD NOT BE CONSIDERED INVESTMENT ADVICE.

IF YOU WOULD LIKE INVESTMENT ADVICE, GO FIND YOURSELF A REGISTERED INVESTMENT ADVISER WHO IS ALSO A FIDUCIARY.

I MEAN, I DIDN’T DO THAT—I GOT MY ADVICE FROM THE LIBRARY AND THE INTERNET—BUT I THINK I’M SUPPOSED TO TELL YOU TO DO THAT.

PLEASE DO NOT SUE ME.

Okay!

So I currently have a Roth IRA, a Traditional IRA, a SEP IRA, a Rollover IRA that used to be a 403(b), a TIAA annuity account that was part of the 403(b) but couldn’t be rolled over into the Rollover IRA, a HSA, and an individual brokerage account.

Everything except the TIAA annuity and the HSA are with Vanguard.

I am actively adding money to the Traditional IRA, the SEP IRA, the individual brokerage account, and the HSA. (The Roth, the Rollover, and the TIAA annuity are in the “hold” phase of “buy and hold.”)

I am withdrawing money from the HSA to cover qualified medical expenses, as necessary. (I know that some people say it’s better to leave your money in your HSA until you retire, to get the maximum growth out of your contributions, and to pay for qualified medical expenses out of pocket. I’m using my HSA as the health savings account it was intended to be, for better or for worse.)

It’s my goal to hit the maximum contribution on my HSA, Traditional IRA, and SEP IRA every year, because these three “above-the-line” accounts significantly reduce my adjusted gross income and my overall tax burden. If I keep my AGI small enough, I also get to retain my ACA health insurance subsidy (which means my Bronze plan costs $142.83 every month instead of $442.83).

I do not currently have a Solo 401(k), though it’s worth asking my CPA if I should get one.

Right now my investing strategy is as follows:

At the end of every month, I look at the money in my checking and savings accounts. I have two savings accounts — one where I stash the money that goes towards estimated taxes, and one for general savings.

The general savings account maintains a balance of $10K, to cover any emergencies or “didn’t get a freelance paycheck I was expecting” cash flow issues.

The tax account maintains a balance of “whatever my CPA told me to put towards estimated taxes next quarter.”

The checking account maintains a balance of $3K, which is $500 more than my typical $2,500/month expenses. (Right now YNAB lists my average monthly spend at $2,715.36, but that number should drop over the next few months as I get further away from the money I spent on my two-week vacation. When I configured my YNAB budget for the year, I set it to average $2,500/month, including vacation, Christmas, business expenses, and YNAB’s favorite category, “stuff I forgot to budget for.”)

Anything else in my checking/savings accounts at the end of the month gets invested.

Here’s where I’m investing it:

The Roth IRA, the Traditional IRA, and the HSA are all with VFIFX (Vanguard Target Date 2050). These accounts represent the first phase of my getting interested in investing; I was more excited about the idea of opening the accounts than anything else, and picked the target-date fund because that was when I assumed I would retire.

The Rollover IRA and the individual brokerage account use the Boglehead three-fund portfolio strategy, which means the investments are divided between three low-cost index funds that cover the bond market, the domestic stock market, and the international stock market. This represents the second phase of my investing strategy, aka “the part where I went and read a Boglehead book.”

The Rollover IRA is split between VBTLX, VFIAX, and VTIAX. These are all Vanguard Admiral Funds, i.e. “index funds that have lower expense ratios because you’re able to cover the buy-in,” also the finance world is totally Matthew Effecting and Vimes Booting all over the place. I get to save money on my investments because I was able to afford to invest in the funds with the lowest expense ratios, and is that fair, NO, and will I do it anyway, YES.

The individual brokerage account is split between BND, VTI, and VXUS. I picked ETFs for this account instead of index funds because I could start investing in ETFs right away without having to save up the index fund buy-in minimum. Was this a mistake? Should I sell the ETFs, pay the capital gains tax, and re-invest in Vanguard Admiral Funds? This is currently the question I’m trying to figure out, btw. Suggestions welcomed. I understand that you are not giving me investment advice and I will not sue you.

The SEP IRA is entirely invested in VTSAX, which represents the third phase of my investment strategy, aka “the part where I went on reddit.com/r/financialindependence and learned that a 100% VTSAX portfolio was theoretically the fastest path to FI,” although the redditors don’t all agree on that count and also PLEASE DO NOT TAKE THIS ADVICE AND THEN SUE ME.

But what’s interesting about having these three different investment templates (target-date, three-fund, and VTSAX) is that they kinda balance each other out over time? If one’s down, the other one’s up, and on good days they’re all up, and they’re rarely all down at the same time, so I always feel like I’m doing something right.

As of this very minute, I have $5,419.50 in the TIAA, $3,617.80 in the HSA, and $101,378.83 in my combined Vanguard accounts. ($6,427 of the Vanguard money is from investment returns; the rest is from contributions.)

Sooooooooooooo… that’s everything I know about my investments. If you have questions, ask ’em below; if you have comments, go ahead. If you were hoping for a less finance-heavy post, come back on Friday and I’ll let you know what cozy-mystery book series has currently taken over my spare moments. ❤️

 

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