Financial Tune Up

No Gravatar

Financial Tune Up

After Jeff’s ‘quick and dirty‘ post became an intriguing set of discussions around his business / investing aspirations, I hope that you are finding these exercises worthwhile following along with?

Even better, if you find an issue raised – or financial situation disclosed – that has some parallel with your life, you should feel free to weigh in with a comment, opinion and/or question … the more the merrier!

Josh is also master of brevity, but it appears that he has made a major – and, uncomfortable – change to his ‘retirement savings’ strategy: basically eliminating it entirely, in favor of a more direct / hands-on investing/saving strategy. Is he wise to forgo the tax advantages and potential employer match?


The latest improvements made to increase my net worth faster (while maintaining the ability to access the capital before I’m 59) is to drop the 401(k) bi-weekly contribution to 0% while adding the after tax cash to my bi-weekly saving and investing/trading. It has been difficult to accept this route because I know I will be forfeiting the free employer contribution, but it’s clearly best since I plan to withdraw the funds within 7 years.  I will continue to actively trade the SDRA account, from the research I’ve done, it seems once I leave my current job, I can withdraw the vested funds with 40% going to taxes and  penalties…at least I get the bigger piece of the pie.

The current exercise of recording all monetary expenditures for the month of April has been enlightening. I clearly need to spend less money and will continue to work toward minimizing unnecessary purchases.

It is also clear I need to increase my income as soon as possible. Over the next 3 years (approximately) I’ll be studying and taking tests’ to earn membership within the CFA Institute. I hope within the next year to land a position in finance, leading to an analytical position and finally portfolio management. Or maybe I’ll just open my own private equity group, we’ll see what happens.

Be Sociable, Share!

Information and Links

Join the fray by commenting, tracking what others have to say, or linking to it from your blog.

Other Posts

Write a Comment

Take a moment to comment and tell us what you think. Some basic HTML is allowed for formatting.

You must be logged in to post a comment. Click here to login.

Reader Comments

To discontinue the regular 401(k) contribution which would include the employers contribution seems like giving up a sure thing? Wouldn’t it be better to leav that alone and let it serve as a foundation to bujild on? I guess I say this only because I wouldn’t be willing to give up the sure thing.
But that’s just me, JOSH if your have the courage and faith to do it, so for it.

Josh, why do you need to stop the 401k if you have 7 years left before you withdraw it? Does your company require the funds to be there longer? My old company gave us 100% vesting immediately, but I know others take longer – usually 1 year in my industry – but that is only the amount of time one must work there before they are 100% vested and can withdraw it all. Your company seems to have another plan. Can you explain it to us?

Your plan on getting a promotion/raise is a good one for increasing your earnings. I think getting your CFA is a good thing. Good luck!!

Lee and Diane,
I’ll break the 401(k)down into the good and the bad, first the good.
I receive a 50% match up to 8% of my salary, this is a free $1900 per year. 1,900 X 7 = 13,300 over 7 years.
so thats a free 13,300 over 7 years. (this is negligible when compared to My Number).

The bad.
I cannot short the market with these funds.
I cannot leverage these funds (margin account)
When I finally withdraw the funds at the age of 31, I will immediately loss 40%, which includes 30% tax and a 10% penalty. I’m expecting the 10% penalty to exceed the $13,300 employer contribution alone, so every dollar I continue to contribute is destined for penalties.

With the extra capital I receive in my paycheck, I can invest it by shorting the market, leverage when appropriate, or even use it to start a business.
The greater the ROE, the more sense it makes.

@ Josh – The only issue that you need to cover – IMHO – is a ‘safety net’; right now, it seems – at least on the surface – that you are flying without one, which is fine if you are pretty sure of your plans (after all, who would pay to see a guy walking the tightrope with a net underneath?).

But, what happens if you do ‘fall’? I seem to recall you being the one that didn’t want to implement any plan that potentially left you broke?

Adrian, I think you might have me confused with another MIT, but I could be wrong. I have no problem risking it all on a plan I have confidence in.
If I “fall” then I simply get up and try again.

I like to say there are two kinds of people in this world, the kind that do what they can, and the kind that do whatever it takes. I’m prepared to do whatever it takes.

@ Josh – I may very well be wrong; it’s only a vague memory, but the principle is the same: if you’re prepared to “go for broke” then I have no problem with your strategy … of course we (actually, you) are putting a lot of faith in your trading system where most others have gone broke trying …