Comments for jlcollinsnh Money - Life - Business Sun, 01 Mar 2015 13:34:23 +0000 hourly 1 Comment on Stocks — Part XXV: HSAs, more than just a way to pay your medical bills. by Steve F Sun, 01 Mar 2015 13:34:23 +0000 Hey Jim — Great site. I’ve been reading through the old posts and came across this one. Perhaps I can add to the discussion.

As mentioned, you don’t have to contribute to your employer’s HSA; however, you do get the benefit of reducing your SS and Medicare taxes if you do (SS only if you are below the max). What if you don’t like your employer’s plan? Open up another HSA account and rollover the balance (limited to once per year). It doesn’t satisfy your KISS mantra, but it is another option.

My employer’s options aren’t great so I opened up an account at ELFCU (now Elements). Once a year I roll over the balance and invest in some low cost ETFs. I’ve decided to keep a minimum balance in my employer’s plan + plus the non-investment side of the ELFCU plan to avoid the account maintenance fees, but that’s optional.

The Finance Buff has two good articles on this.

Best HSA provider:

How to Rollover an HSA:

Keep up the good work.

Comment on YNAB: Best Place to Work Ever? by Yabusame Sat, 28 Feb 2015 22:25:20 +0000 I made my first budgeting spreadsheet in 1996. I continued to tweak and rewrite it until I bought YNAB in 2011. Jesse was awesome at the time. He communicated with me via email personally and he set my mind at rest. I had money worries and I really didn’t want to throw more money away on software (the fact that the owner of the company would talk with me as an individual really impressed me). He was kind enough to extend the free trial period and becuase of that care for a customer I bought YNAB as soon as I had the cash to do so. I’ve been using it ever since. If I still worked in IT I’d love to work for YNAB. Hmmm, maybe a second income stream… You reading this Jesse? ;-)

Comment on YNAB: Best Place to Work Ever? by Sean Fri, 27 Feb 2015 23:59:02 +0000 Hm. I’m a server side programmer. You certainly made this sound tempting.

Comment on Ask jlcollinsnh by Kara Fri, 27 Feb 2015 20:23:42 +0000 Thank you so much! I’m so excited by all the possibilities of the future. You are doing a great service to us all who are a little confused or unsure.

Comment on Ask jlcollinsnh by Curlie Fri, 27 Feb 2015 12:10:04 +0000 Hey there, Jim,

I’ve been perusing your site for a while now, and am so fortunate that you share your knowledge with us in such accessible (and free) ways. Thank you. You’re a deity.

I’ve been “struggling” with a decision for a little while now, and was wondering if I might get your input.

I am a new university professor; I invest in 3 retirement vehicles with each (monthly) paycheck. My monthly contributions look like this:

1) Our state pension fund (6.5% required employee contribution, with a 6.5% university match)
2) $540 into a 403b (pre-tax, no match)
3) Anywhere between $500 – $1000 into a Roth IRA (the monthly contribution tends to vary – I’m making sure I max it out for the 2014 year). My Roth IRA consists of index funds, advice I implemented given my age (34).

I am unable to max out my 403b any given year (I do not make enough). Attempting to max it out will mean that I am unable to fund my Roth IRA. So, I’ve decided that $540 into the 403b (monthly) will have to do for now.

However, I’ve been wondering. There is not a university match for the 403b, and I”ve been toying with stopping contributions to that account in the interest of investing that money ($540 monthly).

For example, I have an Admiral Shares fund through Vanguard that I invest in, monthly, but only about $100 per month.

Or, I can put that $540 toward student loans (I am 27k in student debt).

Basically, are the 3 retirement vehicles I invest in on a monthly basis necessary, or can I get away with 2 vehicles? It would look like this:

1) State pension fund (required pre-tax contribution, usually means around $450 per month out of my check; the university match means that over $900 goes into this fund monthly; I assume it will continue this way, unless a policy changes somewhere. I can tell you that required contributions are decreasing over the next couple of years, so my current 6.5% could easily look like 4% or 5% in a few years’ time.)

2) Roth IRA maxed out annually

Investing in only two vehicles would mean that I stop investing in the 403b and use that money ($540) toward other things (e.g., a more hefty contribution toward my Vanguard index funds, paying off student loans sooner, etc).

Love what you do, and am so appreciative of your support as we all attempt to learn this game and not kick ourselves in old age.

I will be 35 this year, by the way, and only started investing less than one year ago (front-loaded my education, which means I was broke for a long damned time. Now I make 57k across a 9 month teaching contract.)

Thank you for everything, Jim-

Comment on Ask jlcollinsnh by jlcollinsnh Fri, 27 Feb 2015 03:41:11 +0000 Hi Mark…

Always nice to hear from a “super-fan!”

Well, you are certainly right, evaluating farm land as an investment is out of my wheelhouse.

That said, let me offer a couple of thoughts.

First, I’m assuming you are only renting the land and there is not a house also being rented that requires maintenance?

If this is the case, and if you have reliable renters as it appears you do, I love the passive nature of it all.

Further, from the (very) little I have read, with populations increasing farm land should become steadily more valuable.

My guess is that the 4% rent + 4% land increase equaling the ~8% (~2% dividend & ~6% cap gain) average from an index fund is mostly coincidence. My guess is also that the land will be less volatile in price swings and it will certainly be less liquid.

I think I’d be inclined to keep it and, as you are, I’d funnel the rents into the index fund. If…

—this land doesn’t represent the vast majority of your wealth.
—it is in a part of the country likely to stay productive. I’m thinking about potential water shortages here.
—the 4% rent is a reasonably reliable expectation. You mentioned that average rents in the area run ~2.8% and that they fluctuate quite a bit.
—an 8% total annual return is a realistic expectation.

Hope this helps!

Comment on Ask jlcollinsnh by jlcollinsnh Fri, 27 Feb 2015 00:36:18 +0000 Hi Dex…

Matt is absolutely right, I prefer to avoid these “homework” assignments thrown my way.

But, for whatever reason, I did open and scan this one. Seems the author is following my advice in this post: :)

Whenever someone is trying to predict the future and says something like “But a crash is a sure bet, it’s guaranteed certain,” I roll my eyes and hope my boots are tall enough, ’cause it sure is getting deep.

I tell my daughter, and have said on this blog, that sometime over the next ~50+ years or so she’ll be an investor she should expect a drop like what we had in 2007-8. Maybe even two.

Will that be in 2016? Possibly. Could be one of those other 50 years instead? Odds are 49 to 1 it will be.

If it is in ’16 and makes this guy right, it will be no more than sheer luck.

Here’s my forecast:

If it turns out to be right, that too will be sheer luck.

Comment on Ask jlcollinsnh by Richard Thu, 26 Feb 2015 22:23:26 +0000 In addition to Matt’s response, I would add: ups and downs in the market are inevitable. If you are in it for the long haul, the ups and downs shouldn’t change your plan.

If the article is correct….or incorrect….or partially correct….who cares? Just keep investing!

Sidenote….I hope there is a crash….I’m looking to buy some stocks on sale!!

Comment on Stocks — Part XXI: Investing With Vanguard For Europeans by RD Portfolio Thu, 26 Feb 2015 21:53:15 +0000 Hi Micks,

This one has a 100.000$ minimum. Out of my league….
On iShare I could only fin d EURO bond EFTs. Can you help with info or a link where I can find any bond ETFs for US government bonds? Like you, I have enough risk elsewhere.

Comment on Ask jlcollinsnh by Mark Thu, 26 Feb 2015 20:33:51 +0000 Jim,
I’m sure the specifics are outside of your expertise, but I’m hoping the principles apply. I’ll keep it as simple as possible, but let me know if more detail is required.

My family has owned a small farm for decades. It has been rented out for the majority of this time, and responsibility is now passing to me to assess current value, update rent, etc. Mostly it is an incredibly passive investment. The tenants send a rent check for the full year January 1st and that’s the end of it. I’ve never even met them but this relationship has been maintained for years. After becoming a Jim Collins super-fan, I encouraged the family to funnel these small rent profits into an index fund and let it keep working for us, but then I got to thinking.

The current average cash rent rate for the part of the country is only about 2.8%. Not great as far as investments go. This fluctuates greatly over the years, as it is typically assessed by crop yields. The land value itself has increased by about 6% per year for at least the past 5 or so. Average land value annual percent increase for the state over the past 100 years is 4%.

I said I would keep it simple and I’m starting to complicate it, so I’ll try again. Assume for argument that the rent of the land is 4% per year, and that the value of the land increases by 4% per year as well. This requires reassessing the rent with the tenant every few years or so as the land value increases. I know everyone says never sell land, but I’m not much one for conventional wisdom and I know you aren’t either. My thought is if we sold the land, put the lump sum in an index fund, reinvest the gains and not touch it for 20-30 years, our investment becomes more valuable in the same period than if we kept renting it. Does the 4% rent + 4% land increase equal to the magic 8% average we hope for in an index fund, or is this coincidence? Seeing as we don’t tend the land or have the option (or desire) to buy more, there’s no way to reinvest the 4% gains into the initial investment (other than funneling the rent profit into an index fund).

I’m in numbers up to my eyeballs so I’m losing perspective, and I hope for both of our sakes that I didn’t oversimplify the math. If this interests you even slightly, I have links to the actual historical numbers for the state and specific county.