The Five Elements of Your Credit Score

How to improve your credit score

What makes up your credit score and what is the most important elements of the score? There are 5 parts to your credit score and I will address each in regards to questions I get a lot about how your credit score is affected after opening/closing travel hacking credit cards. Your score boils down to five things: your payment history, your utilization, the time length of your credit, the type of credit accounts you have, and finally the number of credit inquiries you get over a period of time. Let’s touch on each and how they relate to the benefits of travel hacking. What benefits do I speak of? I am talking about $4,500 of benefits without doing much. More to come on that strategy later, now time for something much less sexy, but nonetheless important.

1. Your Credit Payment History

First and foremost, making payments (more specifically on time payments) on your credit cards and other credit accounts is the biggest portion of your score, accounting for a whopping 35% of it! It is crucial you make your payments on time and in full every month. Obviously, this is not affected by opening or closing travel hacking cards. If you can’t pay your cards on time and in full every month I would NOT recommend you start travel hacking.

2. Your Credit Utilization

Secondly, your credit utilization makes up 30% of your credit score. This credit utilization includes both individual accounts as well as your credit utilization as a whole. The lower the usage, the better. I try not to have more than 10% of my credit utilized for any one account. That is to say, if you have a credit card with a $10,000 credit limit, try to have less than $1,000 on that line of credit at any given time. This is not affected by opening or closing cards.  As long as you have money in the bank to pay off anything you charge to your card, you are golden.  A benefit by nature of increasing the credit lines you have to utilize, is that you make it harder to be docked for utilizing your credit since you have grown your credit. The key is to keep your spending the same.

3. Your Credit History Time Line

Thirdly, the amount of time you have had credit lines opens accounts for 15% of your credit score.  So the longer your accounts are open the better.  This can hurt your score if you are in the business of opening and closing cards left and right. The truth is you don’t have to close travel hacking cards! I have not closed one to date and I don’t plan to. I have several great reasons for keeping them open. 1. You build credit by keeping them open. 2. You score points through referrals which can really add up and these referral points renew on a yearly basis. 3. They actually can be used towards your wealth building strategy believe it or not. How that is done is beyond the scope of this post, but I will expound on that thought in a future post. It deserves its own post. Suffice to say, all of my travel hacking cards remain open to this day making me credit, rewards, and even money.

4. The Type of Credit You Have

Fourthly, 10% of your credit score is determined by the different types of credit accounts you have open. You get points for having a car loan, a house loan, student loans, and credit cards, and other lines of credit… Seriously? You get points for being in debt? A little odd isn’t it? You are not docked for opening cards here, but you are docked for closing them.

 5. The Number of Credit Inquiries Over A Period of Time

The fifth and final point that makes up your credit score! The remaining 10% of your credit score is determined by credit inquiries.  There are hard pulls and soft pulls. A hard pull can lower your score by roughly 5 points per six month period. Roughly 10% of your credit score is determined by the number of hard pulls you have received within the past 12 months.

In Summary

Obviously, everyone’s credit report has unique elements that make their score what it is. I can tell you that I have opened up 7 cards over the past 6 months and my credit score has not suffered (it has gone down some, but not suffered). It remains great and stands to only get better. For an extra $4500 of free travel in the long-term, I will take a little hit to my credit score in the short-term. It can only stand to go up from here.

See how I travel hack in an upcoming post!

$1000 Bonus With Acorn Investments

So,  I am all for investing by thyself and for thyself. I believe that you can totally bite off a reasonable approach and strategy for investing based on your long-term goals and do it yourself without the help of anyone. These days it’s not that hard with the internet around. But… I am also a huge fan of free money and making things easy. With these two thoughts in mind, which aren’t necessarily dichotomous, Acorn has given you and I the opportunity at a little free money and easy investing without much planning. Without further ado I urge you, my reader,  to pad the billfold this month with a little extra $1000 if you can swing it. I am out to do it and it can be done. The following is how to do it!!!

 

 Invite 12 People To Sign Up For Acorn, Get $1,000

First, you have to sign up for your own account through the app. You can do this on your computer or on your phone. Please SIGN UP HERE so I can get my numbers! The link doesn’t lie, I am the friend who wants you to have a brighter future. Or at least make you a $1,000 richer.

When you sign up you need to invest just $5 in their app and keep it there for 30 days.  Thereafter, you have to find 12 people to refer and they too must sign up through your link and invest $5 for 30 days. If you are able to get 12 people on board before February 28th then you get $1000. It is just that easy.

How Do They Invest For You?

Well, first off if you are investing only $5 you don’t have much to lose! They look at your age and your timeline prior to retirement and develop an asset of stocks and bonds for you. You can link your bank account to the app and invest monthly (that is what I am doing) or you can link your credit card and choose to invest by rounding up on your purchases! Safe and easy either way.

No Free Lunch (Barring The Doc Lounge)

There is a fee for the app, but it is not bad. The cost of investing anything under $5000 is $1 per month. Anything over $5000 is 0.25%. Look, if you are anything like me you like it dirt cheap! My Roth IRA has an expense ratio of 0.04% and that is as cheap as they come so why would I go through the hassle of being charged $1 per month to invest $5 at Acorn? They are giving me $1000. I will take a roughly 1000% rate of return!

Get Your Referral On!

Consider this your February Side Hustle and get your referral on peeps! No time like the present! Please use my link and Sign Up Now For Acorn! then post your own referral link in the comment section below!

The Finer Points

When I found out I could make an extra $1000 doing this, I was skeptical and had to reach out to the company. They responded within the day and said the following:

“For the month of February we are running a promotion where if you refer 12 friends and they all register for an account and make their first investment of at least $5, you will receive a $1000 bonus.”

It is important to note that “Each friend must be approved and have made their initial investment of $5 by 02/28/2018. Bonuses will be paid out on 03/15. ”

You will need to verify your account with a current bill or drivers license once you apply. Also, they ask some questions at the beginning while setting up you. These questions are typically asked when starting any and every investment account so don’t worry, they are not creepers.

Sign Up For Acorn, Invest $5, Invite 12, & Indulge in $1000

What Should You Call Your Financial Independence Blog?

What Should You Call Your Financial Independence Blog?
Names are super important. To make a name for yourself and your work, it has to be easy to market, easy to understand, easy to say, easy to remember and easy to search for! It has to be a name that people will remember.

Welcome to The Life Of FI MD Blog

Whelp, I finally decided on a name for this one.  It took awhile to decide on the name, but I really like it! I chose this name because even though I am far off from FI, I am living a life now that supports it and that is key. You won’t become financially independent by making more money, you have to learn to save at whatever stage you are at. And savings by itself wont get you there either, if that is all you are doing. This blog highlights all the ways FI is lived out on a day to day basis!

Names to consider for your FI journey blog

My FI Life
The FI Life
Nine to FI
Fi in time
FI of my life
Fi Sighted
Folks Who Fi
Big FI
FI My Life
Live My FI
Mind of FI
FI Minded
FI My Life
Yolo FI
Why I FI
FI Mind
FI Minded
Find My FI
Foster Thy FI
DIY FI
More FI Here
Made For FI
Life of FI
Lots of good ones here, I thought it would be criminal not to share so enjoy!

Best of What’s Around. The January Edition

Different Posts From Different Folks!  #Bloggingdom. 

January was a fun month for perusing a plethora of different “Year in Review” posts and “New Year’s Resolutions” articles  all across the land of Bloggingdom (Yeah, Google doesn’t seem to think that is a word…  I definitely just made that one up, but I am keeping it)! It is always fun to see the way that people out there are rallying in different areas of their life, especially in areas of finance.

Young FIRE Knight

One post that really “caught my eye” (bad joke, sorry) was from Young FIRE Knight. He completed a Cost Comparison Between LASIK & Contacts/Glasses over several years. Can you guess which one won? Go check out his post, it also details how satisfied most people are with LASIK, can you guess what percent of patients are satisfied with their surgery?

The Wealthy Accountant

One of my favorite bloggers, Keith, at The Wealthy Accountant, wrote an excellent article highlighting the need to Steady The Course when new to investing especially in this current bull run. He always has some humor mixed with some history and in this post he calms one’s view on how the market has been acting lately. Runs don’t last forever! The Do’s and Don’ts section in this particular post is full of gold so I encourage you to go read it. It reminds me of My Own Investment Personal Statement. If you are new to the game of investing, take a look at his post! If anything, at least go over and subscribe to his posts, the guy is giving away $1000!

Debt Free Happens

Kevin at Debt Free Happens did the hard work this month of tidings up the financial house to the nth degree! In his post on Organizing Your Financial Estate Records, he detailed the steps required for proper estate planning: after getting a will together and purchasing life insurance it is crucial to having a record of all your beneficiaries, accounts and passwords, document locations and another key point (go read it for more info). I could not agree with him more, after I purchased life insurance I slept better at night knowing my loved ones would be set financially. You would be doing your own loved ones a favor by checking out his post and following his outline. Thanks Kevin for putting this one together!

The Wealth Hound

With a name like The Financial State of Our Union, how could I not have read this article? The Wealth Hound details how to go about getting on the same page financially with your spouse, and/or your future self through a thorough assessment of where you are at financially! I would just add that if this is the first financial state of your union that you and your spouse have ever attended together, I would skip the cold brew and wine, stick with the tea, coffee, or high-quality H2O for this one! Either way cheers to better financial future for you both regardless!

Actuary on FIRE

Quite possibly best for last, an article I absolutely LOVED reading was written by actuary on FIRE and came to us as a two-part series that touches on the perennial discussion of Dollar Cost Averaging or Lump Sum Investing. I have no choice but to dollar cost average, but in the event of a windfall you bet I am going to lump sum invest! As someone who always wants those real numbers, studies, and verifiable information behind my decisions, I really appreciated his actuary diligence on this piece.

If you are broke like me, then Separating & Automating your savings & investing at every paycheck is all you can do aside from praying for the day you catch that windfall! The data is clear; if you can hack it, front loading is best! Time in the market is just as valuable as the coin you placed in it.

Did you write or read a post that you loved this month? Leave it below, I would love to see it!

How To Fund Your Roth… Painlessly

Separate & Automate Your Savings. A How-To Step By Step.

Do you want to start saving money? Then take yourself out of the equation. Make it an automatic thing every month that you don’t even think about. The absolute best way for you to start saving money is by separating and automating your savings. Separate, meaning you put your savings in a place that is hard to get to so you are not tempted to touch it! And automate, meaning you set up the technology available to you to work for you to transfer and invest money without a second thought!

Follow The Following

What you will find in the following post is a classic wealth-building strategy. Step by step, little by little separating and automating your savings will help you to start investing your money at every paycheck. You don’t have to think, you don’t have to act, and you don’t even have to have the time from here on out! All you need is to do is follow these steps and you will start saving a portion of your paycheck every paycheck!

  1. Go to Vanguard.com
  2. Log in
  3. Top menu bar hover over “My Account”
  4. Go to “Account Maintenance”
  5. Go to “Automatic Investment”
  6. Choose the desired fund you want to invest in.
  7. Choose the dates, amount and frequency you want.
  8. I recommend every paycheck place enough in your Roth to max it out yearly!
  9. Not sure what to place in your Roth? See THIS POST where I detail a great strategy.

Gather Little By Little

He who gathers money little by little makes it grow. The trick is to learn the gathering technique. Here is the gist, as soon as that money hits your account, a portion of it should go directly to paying you first. Put it in your Roth! Start with something small, you can do without $211.53 per paycheck. The following is how I came up with that number and why you too should put $211.53 per pay period to your Roth IRA.

$211.53 is a Great Starting Point

Let’s say you’re paid every two weeks, which means you receive 26 paychecks in a year. $5,500 is the max you can place in a Roth yearly, and that number divided by 26 pay periods equals $211.53 per pay cycle. If you are maxing out a spouse’s account, which you can and should do, then repeat steps 1-8 for them!

That was painless. Good on you for taking action! Keep grinding. First time to the blog? Check out my Welcome Page.

separating and automating your savings. Separate, meaning you put your savings in a place that is hard to get to so you are not tempted to touch it! And automate, meaning you set up the technology available to you to work for you to transfer and invest money without a second thought!
Somethings in life are meant to be separated, like you and the money you want to save. Other things are, well, inseparable.

Graduate Level Optimizers: It’s Tax Gain Harvest Season

Tax Gain Harvesting… What In The World Is It & Why Would I Care?

This article has to do with taxable investment accounts and the tax on your gains from them. If your employment income is low enough and you have a sizable taxable account then tax gain harvesting is a great strategy to ensure you are not taxed on your investments if you follow the rules. So let’s talk first about tax brackets and then we can talk more about invested income taxing.

Let’s assume for your 2017 taxes you are married filing jointly. Let’s say you have an adjusted gross income of roughly $60,000 between you and your spouse. You will be in the 15% tax bracket when it comes to the money you have made on your W2 (bonus question: Do you know how much you will pay in taxes?) Here is a list of the 2017 tax brackets. Great news! In 2018 you would only be taxed at 12% due to the Tax Cuts and Jobs Act. This saves you $1,800 in taxes if you are in this bracket!

Tax Brackets for Married Filing Jointly W2 income

Tax Rate Taxable Income Bracket Tax Owed
10% $0 to $18,650 10% of taxable income
15% $18,650 to $75,900 $1,865 + 15% of the excess over $18,650
25% $75,900 to $153,100 $10,452.50 + 25% of the excess over $75,900
28% $153,100 to $233,350 $29,752.50 + 28% of the excess over $153,100
33% $233,350 to $416,700 $52,222.50 + 33% of the excess over $233,350
35% $416,700 to $470,700 $112,728 + 35% of the excess over $416,700
39.6% $470,700+ $131,628 + 39.6% of the excess over $470,700

What is interesting is that your taxable investment income is taxed differently. They are taxed through dividends and capital gains. A dividend is a portion of the profit of the company you hold. These are paid out while you hold your stocks and a capital gain or loss is the difference in the cost of the stock when you bought it versus when you sold it. If that is positive then you made a profit! Uncle Sam wants his share and you should know how he determines what’s his and what’s yours so you can work to keep more of yours. He rewards savers and taxes spenders. Do you want a wealth building strategy? Learn to save. Let’s see how Uncle Sam determines what’s his.

Short Term & Long Term Capital Gains

This is where the buy and hold strategy comes into play with your taxable accounts. When you sell a stock the tax you will pay on your capital gains depend on how long you have owned that particular stock. If you have held that stock for over one year, great, that means that you will be taxed at a lower rate tax rate. This is considered a long-term gain. If however, you sell that stock after only owning it for less than a year then you are subject to being taxed at your current marginal tax rate, ouch! This is a short-term gain.

Tax Brackets for Married Filing Jointly Investment Income

Tax

Rate

Taxable Income

Brackets

Short-term

capital gains

Long-term

capital gains

10% $0 to $18,650 10% 0%
15% $18,650 to $75,900 15% 0%
25% $75,900 to $153,100 25% 15%
28% $153,100 to $233,350 28% 15%
33% $233,350 to $416,700 33% 15%
35% $416,700 to $470,700 35% 15%
39.6% $470,700+ 39.6% 20%

Did you notice that 0% tax rate on long-term capital gains if you are in the 10-15% tax bracket (making $0 to $75,900 married filing jointly)? Yeah seriously, scroll back up and look at that. What this means is that you are able to have all the income from your taxable account not taxed!!! In order to complete this “tax gain harvest” you need to sell and buy back your investments. This raises your cost basis on the investment and as long as you are in those low-income tax brackets and the investments have been held for one year you do not pay takes on your gains. I will talk about what a cost basis is soon, so keep reading.

Tax Gain Harvest Now Is To Tax Loss Harvest Later

This strategy of tax gain harvesting sets you up to be in a good position for tax loss harvesting should the market drop as it does from time to time. Lots of folks know about the defensive move of tax loss harvesting, but not too many know about the offensive move of tax gain harvesting. Let’s walk through an example.

So let’s say you are that same person who is married filing jointly with $60,000 of AGI putting you in the 15% tax bracket in 2017. Let’s also say you decided at least over one year ago to invest in a taxable account. You placed $7,000 in that taxable account years ago and it has now grown to $18,000. No, no investment would do this for you in one year, but over years it would. So in our example, you have $11,000 of gains and subsequent taxable income. You would be taxed $1,650 if these were short-term gains since the tax rate there is 15%, but you have held onto them for longer than one year so your tax rate is 0% and you pay zero dollars in taxes!

If the market were to crash later in the year you then have room for tax loss harvesting. This has to do with cost basis. Cost basis is the original value of a stock the day you bought it. When you tax gain harvest you raise your cost basis by selling and then buying back the same stock tax-free.

Said In Another Way

  • So say in 2010 you had $7000 to invest and bought 100 stocks for $70 a share.
  • In 2017 that same 100 shares of stock that you bought in 2010 appreciated to $180 per share.
  • You sell and buy back that stock through tax gain harvesting and now your new cost basis is $180 per share.
  • If the market were to then crash in the following year (which it does do) you could tax loss harvest by selling off that stock and purchasing a different stock. There are laws that govern tax loss harvesting so know about the “wash sale” rule when you conduct tax loss harvesting.
  • Wash sale rules do not apply to tax gain harvesting.

In Summary

I know that was a lot of jargon. Hopefully, you tracked with some of it. I certainly had some trepidation about many of these subjects until I took the time to learn more about them. I find myself sometimes wishing I had a really good stockbroker buddy and a really good tax preparer buddy so I could bounce all these topics off of all of them at once, but I don’t. Now you know why I write these posts!

  • Your bonus question: okay so with an adjusted gross income of roughly $60,000 between you and your spouse do you know how much you will pay in taxes?
    • You are in the 15% tax bracket and you owe $1,865 plus 15% of the excess over $18,650.
    • 60,000 – 18,650 = 41,350
    • $1,865 plus .15*(41,350) = $ 8,067.50 of taxes!
    • It is no wonder that taxes are typically in the top three expenses found on an annual family budget. You don’t realize it because it comes right out of your check every time you get paid! What would you do if you could save an extra $8,000 per year? What are some ways you have learned to lower your taxes?

Thanks for the read 🙂

The Roth IRA Further Explained

The Roth IRA Further Explained
Who doesn’t love a little desert beauty to go along with financial topics?

Who is a Roth For?

Most everyone. If you have made income or your spouse has made income in a given year you are eligible to open a Roth IRA. The max amount of money you can contribute to a Roth IRA in a given tax year is $5,500. I say “given tax year” because you can contribute for any year from January 1st of that year up to tax day (mid April) of the following year giving you an actual 15 and 1/2 months to contribute. If you make more than $135,000 as an individual or $199,000 married filing jointly you are still eligible for a Roth, BUT you have to complete the backdoor Roth IRA. The Physician on FIRE has written an amazing step by step post for this so if you are in that camp follow his walk-through!

Do This Today!

Hopefully, you are busy working on completing your Step By Step and have already Set Up Your Roth IRA so you are now ready for this post! Either way, when you do decide for yourself that investing in a Roth is your next step, go with Vanguard. Let me tell you why I went with them.

As Jack Bogle says: “Two roads diverged in a wood, and I— I took the one less traveled by, And that has made all the difference.” What, what- that was Robert Frost wasn’t it?

Vanguard

Vanguard has some of the lowest fees across the industry. This is assessed by what is known as an “Expense Ratio” or “ER” for short on your mutual fund. How does Vanguard keep costs so low? It is brilliant really, they are the only mutual fund company in the world that is owned by its shareholders i.e. you and me. Pretty novel concept huh? I guess that is also why it is the largest mutual fund company in the world. It was founded by Jack Bogle, a pioneer of the mutual fund; you should look him up sometime, he is a class act.

Expense Ratios

Anyways, he remains to this day a strong voice for the average Joe investor looking to not get ripped off while walking on Wall Street. Expense Ratios on mutual funds at Vanguard are hard to beat! Always know your ERs. If you have any sort of account in the stock market right now call up and ask what you are paying in regards to your expense ratios. If you are above .16% you can easily have it lower so shop around. Now let’s talk mutual funds.

Mutual Funds

Oh, the mutual fund. I will describe a mutual fund in broad terms and then we will circle around and go into specifics. A mutual fund is less risky investment than investing in one stock or one bond or some other investment entity because mutual funds bring multiple stocks and/or bonds together to spread risk and offer investors an opportunity to invest in multiple companies at one time. It’s pretty sweet. So say you are interested in investing in Apple stock (after all you are probably reading this on an Apple device right now), but you are not sure about how risky it is to put a large sum of money into one stock on the stock market. To answer your question, IT’S RISKY!!! But how risky?

Prickly business and  risky business, both can really hurt

Risky Business

Let’s consider the risk to be a fluctuation from a mean. All stock investments on the market fluctuate, that is just what they do, but those investments that carry more risk of loss (and subsequently more opportunity for gain) fluctuate more- that is to say, one day you are up… a lot, and the next day you are down…a lot. For the beginning investor (even for a seasoned one) large fluctuation in whatever sum of money you have set aside to invest with does not sit well with most.

Millennials These Days

So then let’s say you are like most millennials, you have an upwards of at least 4 Apple products of some sort (iPhone, iPod, iPad, and an Apple watch) with which you impulse buy on Amazon.com all the time (I am totally guilty of this, no shame here), you drink Starbucks at least weekly (if not daily… me too) and you have been known to frequent Wal-Mart every so often, okay you are there all the time… just admit it. You want to invest in all of these companies, but to do so would take a lot of work and the stock market is a scary place where people lose money and you don’t know a ton about it so you stay away. You are like most Americans! How could you invest in all of these companies at once and save tons of headaches and time? I am glad the reaches of the internet brought you here. Let’s tackle this question together!

Mutual Funds!!! To Load Or Not To Load?

Mutual funds are the answer! They are a great investment tool in that they pool risk together inherent in the stock market and spreading it out through investing in multiple stocks, and by multiple, I mean hundreds to thousands of stocks. There are many different types of mutual funds and you should read more about them so you are informed, but I will give you a heads up here.

YOLO? No, No Load Bro

The very best type of mutual fund you can have is a “No Load Mutual Fund” Like VTSMX/VTSAX. No load simply means that you are not charged to invest whenever you want to invest. These “load funds” are nothing more than mutual funds with commissions for the salesman that sold them to you. Wave bye-bye to that load money that you will never see again… It’s a pretty sad really. My thoughts and prayers are with the investor hoping to create wealth in this manner. Why pay for something when you can have it absolutely free? Keep reading.

Bro, YOLO So No Load.

Mutual Funds!!! To Index Or Not To Index

What I mean by actively managed funds is this: many mutual funds have fund managers. These managers attempt to predict the market by coin flipping, palm reading, underwater basket weaving and all sorts of hoopla that aims to “beat the market” and get “better than market” returns. Hogwash! This is a futile exercise and study after study has shown that there’s no way to predict the market. However, it’s clear that there is money to be made in convincing people that you can do so. They make it look like meticulous study when indeed, it is just meretricious propagation. You have to be in the know to recognize it, now you are in the know. Now it’s time for a shameless bad dad joke.

Major Pointer: Index… dig it?

The truth is nobody can predict the market and that is exactly what an actively managed fund manager tries to do! You are better off with an index fund. Major pointer:  Index funds are mutual funds that follow a particular index of the stock market. There is no manager involved. They spread out assets of that index and the goal of these funds is to get you the identical returns of stock market for that particular index. They don’t sell you on the idea of trying to beat the market and play towards your greed, rather they sell you on the promise of meeting market returns and this should appeal to your logic and wisdom. Ah yes, logic, such a forgotten thing in today’s feel-good society. Indexing is a stellar way to start and finish your investment career.

Sometime it takes hours of slogging through boring landscape to come on that one reason for your journey. You have now reached that point in this write up. NOW GO START YOUR ROTH!!!

So Then Why VTSMX In Your Roth?

Because it is the combination of everything I have spoken of to this point! It is one of the cheapest and best  low cost no load index mutual fund. Additionally, if you are young like me, you can stand to start here- it is easy and simple. As you grow in knowledge you will find more conservative investors who might want you to consider adding some bonds to your set up which is totally fine. Do yourself the favor though, start today regardless!

Down The Road, You Can Switch

As the years go on and I continue to fund my Roth, I will consider allocating it differently, but this is an excellent starting point. Having a Personal Investing Statement is huge later on in your investing career. I started with this fund because it is absolutely hands down one of the best. I picked it prior to the White Coat Investor’s write up on it, but in reading his recent review of it, I knew I had done something’s right! I will let him (someone much smarter than me) explain it to you in this post: My Favorite Mutual Fund.

Start Early

Starting early in investing is a surefire way to developing passive income (i.e. money that makes you money while you do nothing). Passive income coupled with compound interest is an absolute true recipe for success in your financial journey, but it takes years so start early.

The Other Guys

You might not hear much about Vanguard on TV or the Internet, that is because other companies pay a lot of coin to market themselves to you. You represent hundreds, if not thousands, if not millions, of dollars of profit if you invest with them over your lifetime. At Vanguard, the extra money that would go to fees and advisors is reinvested into your portfolio. Do your future self a favor and invest at Vanguard. Tell them Life Of FI MD sent you, they will probably think you are crazy. I get NO financial compensation for this BTW.

A Word On Financial Advisors & Brokers

There are good guys out there. They are fee-only financial advisors. Otherwise, If you have made it this far down the list you are smart enough to do this yourself, I promise. Give yourself all the time that you need to crush a couple good books on the subject of finance and mutual funds (see setting up your Roth IRA. Part 1) and come out with some knowledge. Investing isn’t hard, but it is worth devoting some good time too. So think, read, compare, be critical and stay away from the pichi caca that salesmen known as financial advisors push on you as “sound financial advice.”

Questions To Ask Everytime

If you are dealing with financial advisors them ask every time what their compensation is with whatever fund/product they “recommend.”

  •  Ask them about the commission they make on the funds they recommend.
  •  Ask for the Expense Ratios on the funds they recommend
  • Ask for the load fees on the funds they recommend
  • Ask for every other extra hidden fees, and if all that weren’t enough
  • Ask them about the extra 1-2% off the top they then charge from your hard earned money after all those fees.

Finally, Ask if they are acting as a fiduciary on every line of product they recommend which means that which they recommend has your best interest in mind. As you might later find, many times their recommendations are not based on your best interest, but rather on theirs. Unless you here born with deep pockets caveat emptor.

I think you are ready.

START YOUR ROTH IRA RIGHT NOW!!!

I leave you with one more desert landscape photograph. Don’t worry, more below average dad jokes to come.

 Oh BTY, Sharing is caring.

PRN ROLOS

Medicine Reflections

PRN: short for “pro re nata.” Latin for “as needed.”  

Long, long ago in a hospital far away there resided a patient, a patient you could never identify, whose dementia was slowly overcoming him. This dementia left him with little memory of his past, his loved ones, his successes and even his reasons for being in the hospital in the first place. Luckily he still did have some aspects of his personality and preferences things that made him uniquely him. He knew the hospital staff that he liked, he knew the food that he enjoyed and he was happy when it came, and he even knew his favorite chocolate treat- the oddly shaped chewy caramel milk chocolate Rolo. Though this man had forgotten even how to feed himself, his fierce love for Rolos had yet to bid him adieu.

From a medical standpoint, this patient was tucked in. He was on an optimal medication regimen for his age and meeting all the goals of his hospital stay therapy. His diet was optimal for his comorbidities. He was cleared by psychiatry to be in the common area with other residents and not endanger himself or others. He had a great bed on a high floor with an even better view. In fact, his view made some of the medicine team members that would round on him in the morning jealous, because if you made it to his room and caught the sunrise at just the right time- though you were there in the hospital and minutes away from any exit, it felt like you were almost outside and breathing that fresh cool morning air seconds behind that dawning sun.

Maybe it was the view, or maybe it could have been the patient as well. He too was almost like a breath of fresh air. His problems were minimal and he was stable, he wasn’t one you were afraid of running a code on in the middle of the night. In addition to all this he was pleasant; pleasantly demented if there ever were such a thing. Rounds typically consisted of asking him how his day was, how his breakfast was, or even how he was, and every answer he gave to those questions was better than the last. He would even sometimes ask how you were as if his own mother were there reminding him when someone asks you how you are doing it is only right to reciprocate the favor back to them. Indeed, both he and his view were breaths of fresh air.

And without fail on most occasions, the strangest thing would happen after the almost ritualistic exchange of courtesies. A pause would come… then maybe a gesture… one slight gesture made for the door, if not a gesture then maybe the mere thought of one, and like clockwork, he would look up in anticipation and say those five famous words: “Do you have my Rolos?” It was the strangest thing to experience. Convincing him you didn’t was beside the point and altogether a lost cause; an argument you weren’t going to win. Nothing from my medical training would prepare me for the conundrum I then faced. This pleasantly demented man, my patient, wanted his favorite snack- the caramel milk chocolate Rolo.

The candy itself had altogether long ago left the shallow recesses of my mind along with the likes of Sunday morning cartoons, super soaker fights, and Pogs… that’s right the overly priced cardboard coined cutouts called Pogs- you remember them if you’re an old enough millennial. What was funny about this man’s inquiry was as a child I loved Rolos too. I REALLY LOVED THEM- like, my favorite candy type of love.

Initially, when he brought up the question I flashed back to a time when all I wanted was Rolos too. Hardly tall enough to reach for the tabloids, knee-high to a grasshopper, and though wet behind the ears, I knew at a young age that every trip to the store held the potential to net me some Rolos. And just like this man- as the ritual of shopping came to an end and gestures were made towards the checkouts, I would pipe up with 5 similar words: “can I have my Rolos?” We shared a similar love and a similar want; and though it felt like I was regressing to a younger me, the message was clearly received. As his provider it was my medical duty to procure my patient his Rolos.

I hope by now you have gathered my playfulness around the subject. I do it for good reason. So much of medicine is hard- people die, sick people have to make horrible choices between bad and worse situations. Worse yet, families sometimes have to make these choices for their loved ones. Grey hairs have worked so hard their whole lives to retire and weeks later discover terminal cancer. A lot of medicine is not good news and things get missed all the time in diagnosis and treatment of disease, it is just the nature of this unperfected beast.

But, I don’t say these things with you because I am jaded to the system. Not at all, on the contrary, I say these things to you because so much of medicine is also wonderfully beautiful. Beautifully flawed. It is one career out of millions, I feel, that is fully able to encompass our whole and sometimes gratuitous humanity- and deal with it on a daily basis. What a privilege it is to experience this- to experience another person’s own humanity and to offer assistance. In every sense, it is awe-inspiring.

I write all this tonight for sheer enjoyment and as a prayer of thanksgiving. I thank God for giving me the opportunity to take part in this patient’s care and teaching me a lesson through it, one that can’t be learned anywhere but at the bedside. That man who stirred up a bit of my own humanity over the simple topic of Rolos might not remember me tomorrow, but man was he happy when I brought him Rolos today. We shared a brief bond over candy and I learned a lengthy lesson on humanity, one I will carry with me as I continue a long, beautiful, gratifying, and unperfected march through my medical training.

Thanks for the read 🙂

How To Set Up A Roth IRA: Step By Step

You Still Don’t Have A Roth?!?!

I promised I would show you how to set up a Roth IRA in my Quick & Dirty post, but first I have one request of you. Before you read any more of this, please, please, please promise to YOURSELF you will take the steps outlined below to set up this account in the next 48 hrs. Years later when you have retired, you can send me a thank you note (check is optional). Also, this is foolproof; I had to go through it myself.

The Best Multiplied Four Times Over!!!

After doing what I outline below for you, you can say that you own one of the best retirement accounts available (the Roth IRA) in one of the best no-load mutual fund indices available (The Vanguard Total Stock Market Index Fund: VTSMX) at one of the best, if not the best, mutual fund companies in the world (Vanguard) for one of the absolute best prices available to investors (a dirt cheap expense ratio)!!! Remember my one request of you, please do this now for yourself (don’t wait until five years from now). In an effort to keep this extremely high yield, I am outlining the steps in this post and my following post will have the reasons why.

Roth IRA Set Up. Vanguard. Step by Step.
The way is made my walking. One step at a time!

Your Step by Step Guide To Setting Up Your Roth IRA:

  1. Go to Vanguard.com
  2. Click “Open An Account”
  3. Click “Open A New Account”
  4. Click “Transfer From A Financial Institution” & “Continue.”
  5. Now set up your account with Vanguard. This will take a couple steps and you will need to fund your account at this time as well as determine the account type: choose the Roth IRA. The money you transfer will be placed in a money market account initially. This takes a couple of days to process. Next is where the magic happens!
  6. Once your account is opened & funded, you are ready to Roth, I mean ready to Rock…
  7. Now, on your new account homepage click the Menu icon at the top left.
  8. Click “My Accounts”
  9. Click “Buy & Sell”
  10. Click “Buy Vanguard Funds”
  11. Click “Add Another Vanguard Mutual Fund”
  12. In the dialogue box enter “VTSMX” and click “Continue.” See my second post as to why I chose this one for myself.
  13. Fund your new Roth by entering in your amount in the dialogue box and clicking “Continue.”

Now Go Read!!!

There really is no way around this. Read, read, read and read some more! You have to read about these topics now. You can’t just trust me on this one, unfortunately. I mean, I guess you can, but if you are like me you need the answers yourself or months later you are likely to think that the grass is greener. Without the knowledge of these topics, you are never going to know what is good or bad in terms of investments and that WILL set you up to fail.
You need to start learning now. Keep your eyes on the look out, my post “What Is A Roth IRA” is coming out soon. In that post I will outline why I set you up the way I did and why I set up my own Roth IRA the same way!

Have You Started Yet?

Starting early in investing is a surefire way to developing passive income (i.e. money that makes you money while you do nothing). Passive income coupled with compound interest is an absolute true recipe for success in your financial journey, but it takes years, so start early.

Albert Einstein considered compound interest the 8th wonder of the world. He said of it, “He who understands it, earns it … he who doesn’t … pays it.”

Welcome

Glad you are here.

Life of FI MD exists to get as many people as possible interested in pursuing Financial Independence and to get those who are already on the path there a little faster. As a young physician FI is a far away and lofty goal, but it is not about the destination, around here on this site it is all about the journey.

If you are one who has felt like your financial situation has limited your life options, you should join the blog as you are in good company. Financial independence is a completely obtainable goal no matter where you are at, but the journey needs to begin now because it boils down to two simple things: an understanding of the math behind financial independence and a lifestyle supporting the math.

Truthfully, whether or not you follow the blog is irrelevant, what is more, important is what you will do with the information contained here within. I invite you to pursue a Life Of FI with me.

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