Financial Spring Cleaning

Springtime means tax time, which means logging into every website to get statements and to analyze whats been going on over the past year. The beauty of being overseas is filing your taxes 2 months late, and even extend to October. If you withhold correctly you can usually extend without any penalty. However if you know you own money you will need to prepay your taxes on time or just file on time to not incur any interest on taxes unpaid. I was charged a late fee as well as a failure to file fee, but sending in my orders got them to drop some of the charges for being overseas.

So here is my most humble check list on what you should do at least once a year:

  1. Rebalance your TSP, if you from the Dave Ramsey camp stick with your 60,20,20:CSI funds. I have been following this dude who suggests 85% C and 15% I. This dude says 50/50 in C and S who smartly moved it into 100% G prior to the January market correction. You can always pay $15 a month to people like this guy which I don’t recommend because in reality you can’t really loose that much money in the 5 funds, and rather take the $180 a year I would of spent and use it on something else. Bottom line you get two interfund transfers a month to rebalance your tsp, but you also get unlimited transfer to G fund if you want to take your earnings and feel like there is going to be another correction. Lots of info on Bogleheads.
  2. Rebalance your Roth IRA and Stock Portfolio.  You should keep in mind that your TSP tracks the following indexes: C: S&P 500, F: U.S.Agg. Bond Index, I: EAFE Index, S; DJ U.S. Completion TSM Index, and G is always around 2% since its a special product from the US Treasury made just for TSP. So keep this in mind for example if you got money in the C fund and the S&P 500 you just stuck all your money in the exact same stocks. If you got tons of stock in Apple, well that one stock already made up 3% of S&P 500. Bottom line, don’t double dip, diversify for reals. You may think you are spread out with G, S&P 500, AAPL, but guess what, you own a lot of the same things. I would consider your balancing between TSP as well as your Roth IRA to maximize diversity and minimize cost. So I have all Admirals shares of Vanguard Funds in indexes not covered by TSP. Then my TSP is in all indices that Vanguard does not cover. From the TSP site: Expense ratios may also be expressed in basis points. One basis point is 1/100th of one percent, or .01%. Therefore, the 2015 TSP net expense ratio of .029% is 2.9 basis points. Expressed either way, this means that expenses charged to each TSP account in 2015 were approximately 29 cents per $1,000 of investment. Here is a comparison of overlapping funds and their expense ratios:
    TSP Fund ETF Vanguard Admiral Fund
    S&P 500 C .029% SPY VFIAX .05%
    U.S.Agg. Bond Index F .029% BNDS VBTLX .06%
    EAFE Index I .029% EFA VTMGX .09%
    DJ U.S. Completion TSM Index S .029% MDY VIMAX .08%

    You can see that TSP is the cheaper version of these respective Vanguard Funds. The name of the game is to limit your fees with passive investing, and then even more so with TSP. If you use a stock broker that is constantly rebalancing your portfolio, guess what that jerk is making money if your portfolio goes up or down. He’s paid on commission by the selling and buying these active funds, your a sucker because you you think he’s got an edge, but in reality you could of done it yourself since is not 1999 and everyone has access to buying their own securities. Index funds are so cheap your paying 30 cents per $1000 with TSP so your million dollar portfolio would only cost you $300 a year to manage! This new philosophy is reverberated by the one index card dude from University of Chicago. Even good old Warren Buffett put this all in as a sure bet. Are you thinking of dumping all your money into Blue Star Airlines since you got some inside information? Don’t be an idiot, you can’t beat the market!!! On the opposite side we have some funds with an expense ratio of 3% with no better earnings which make up a frightening large component of Mom and Pop accounts managed by “financial managers”. Fascinating stuff that is now mainstream is how this boring passive investing popularized by John Bogle and Vanguard was hated by people as being Un-American, but has proven itself very profitable for many years.

  3. Sell your stocks or at least think about when you want to get out and what price you want to sell them at. Don’t hold on to them forever and not have an end game for them. You picked some good companies and now what? They become overvalued and you should of taken your earnings and moved them to an index fund. Think about what Bogle says, below are his eight basic rules for investors:
    • Select low-cost index funds
    • Consider carefully the added costs of advice
    • Do not overrate past fund performance
    • Use past performance to determine consistency and risk
    • Beware of stars (as in, star mutual fund managers)
    • Beware of asset size
    • Don’t own too many funds
    • Buy your fund portfolio – and hold it
  4. Go though those credit cards, downgrade the ones that will soon incur a non waivable SCRA fee, don’t close the account if it’s less than 2 years as it will decrease your account age average and thus your credit score.
  5. Submit annual paperwork to Studentaid.gov and you loan servicer to ensure your in compliance with the student loan forgiveness program. Minimize each payment if you are going to do 10 years.

Hope that gives you something to do in the next few weeks. Also a shout out to discount deals 4 military for the recognition!

-Derp

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