Life is full of choices. But these money decisions are easy!

life-choice

If it is about deciding what cereal box I should buy, what I decide has little consequence. But indecision when it comes to money matters can prove… well, expensive! Thankfully, some decisions aren’t that hard!

I’d like to invest in the stock market, but don’t know which stock to buy!

Is Coca Cola better than Pepsi? Is Apple better than Google? Why not invest in all of them? Why not invest in a fund that has beaten the stock market 9 times since 1999, a record that puts even the best hedge fund managers to shame?

VTI is one such fund that represents the entire US stock market and has an expense ratio of just 0.05%! (That’s not a typo!) Can’t get better than that! Investing doesn’t have to be complicated.

I’m tired of the constantly changing terms at my bank. I would like to switch. Which bank should I choose?

Let’s see… do you like free checks? Mobile check deposit? No minimum balance requirements? No monthly fees? A savings rate that is greater than the savings rates of the top 4 banks put together?

Yes? Then may I suggest Ally Bank? Great rates, good service and the freedom to use any ATM you choose without worrying about fees!

Can you recommend a good discount broker?

The first rule of investing is fees matter. Trading fees, maintenance fees, inactivity fees… you want a broker that keeps these to a minimum, has been around for a while and will be around when you retire. If I were to begin all over again, I’d start with TD Ameritrade.

Why this broker? They’ve done away with most junk fees other brokerages charge. But best of all, they offer 100 ETFs from reputable companies, including Vanguard, commission-free! For a beginner investor, that is an excellent deal.

What’s a no-hassle rewards card? I can’t seem to keep track the constantly changing rewards categories with my current card.

We’ve all been there! Considering we live in an almost cash-less society where the cost of doing business using a credit card is factored into almost every product or service, it makes sense to make a return on your expenses.

Of course there are different cards catering to different categories. Travel, shopping, gas and what not! But for everything else, rewards cards usually offer 1% cash back or less.

I don’t know your spending patterns, but If I were to recommend a good ‘catch-all’ card, I would recommend Priceline Visa. It offers 2% cashback equivalent on all purchases (and 5% on priceline.com deals). No categories to remember, no hassles. Not one of the big boys, but a good card to keep in your wallet.

ROTH or Traditional?

roth-or-traditional

With Roth, you contribute after taxes, but you can withdraw funds tax-free when eligible to do so. With a Traditional IRA, you contributions are before taxes, but will be taxed at the time of withdrawal. There are other differences, but this is the most striking one.

If you think your tax rate will be more after retirement, it makes sense to contribute to a Roth. But if your tax rate will be less, or if you need to reduce your current taxable income, contributing to a Traditional IRA makes more sense.

Look, no one can predict the future or what the tax rate will be. Rather than investing on a whim, why not choose both?

Currently the contribution limit for Roth and Traditional is limited to $5,500 (6,500 if you are 50 or older) combined. You can contribute to both and adjust your split percentages as you get closer to retirement.

Mitigate risk due to uncertainty.

Fund choices in my 401K are terrible. Should I contribute?

First, find out if your company does a match, either partial or full, contribute up to the match. No matter how bad the fees are, depending upon the match, that’s a 50% or 100% return right there. Don’t throw away free money.

Next, see if you qualify to contribute to an IRA (Roth, Traditional, Spousal). If you still have money left, congratulations on being more successful than the average Joe! Now, put the remaining money back into your 401K. Despite the fees, 401Ks allows your money to grow tax-free and on the brighter side, when you leave the company you can always rollover your 401K to an IRA where you have the freedom to choose where to invest.

Retirement or College fund?

If you had to choose between the two, go with Retirement. Always. There will be tons of lenders willing to lend junior money for college and maybe he/she might even get a scholarship. Getting a loan without an income isn’t easy.

About the recommendations…
The products and services mentioned above are what I think are the best. If you think there are better options out there, I’d like to know!

13 thoughts on “Life is full of choices. But these money decisions are easy!

  1. Nice list of suggestions, MC! Nice to see you back in action as well. I definitely missed your wisdom.

  2. I heard good things about Charles Schwab for $0 ATM fees banking, in the US AND abroad so that is some saving for travelers.
    Whatever you choose or don’t choose, the thing is to start somewhere, with a small amount, get into investing/saving/managing your money and the rest will follow.

  3. I’ve never been good at picking stocks. I usually invest in ETFs or funds and also get advice from a financial advisor. I also use multiple banks to take advantage of their different offerings. I’m a rather low risk investor so I like to diversify.

  4. I like the fact that once I open a Roth IRA that I will never have to pay taxes on the dividends once I am 60 and make withdrawals. I hope to grow my Roth IRA account to the skies during the next 20 years and never have to worry about paying taxes on it.

  5. Great advice for people who are always either scared to pull the trigger or are on the fence about investing. I do traditional up to the match at work, and Roth with any surplus. Keep up the great content.

  6. When you put the choices like this, they seem really easy! I agree with Uncle El above, so many people are scared to do just something that they don’t ever end up doing anything; for things like retirement savings vehicles, do both!

  7. Good advice, Money Cone! We put our retirement money into a managed fund that adjusts the risk levels to our ages. We feel pretty secure about that.

  8. Solid advice as usual MC! I’ve been contributing to my 401k and Roth. Never thought about doing both a Roth and Traditional. Need to look into that. Also opened a 529 just to get things going for junior. Great point about other options like loans and scholarships. Thanks!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title="" rel=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>