I wanted to do something with my cash instead of just keeping it in an Ally savings account and being inspired by the simple lazy portfolio type of investing, I decided to buy some index funds from Vanguard. Why Vanguard and not another service like E-Trade? E-Trade is a broker and does not actively manage any funds, which means you end up paying more fees. This may be fine if you decide to purchase specific stocks, but if you are planning to buy only index funds, then it’s better to use a service like Vanguard. Vanguard actually manages the index funds so you will pay for the management fees only instead of both the fund management fee plus transaction fee. E-Trade needs to put the trade to Vanguard or another fund management company (depending on which fund you purchase) and therefore needs to pay a transaction fee. But by buying directly from Vanguard, you get to skip the third party transaction fee.
I’ve finally gotten a chance to read the famous “Rich Dad Poor Dad” by Robert Kiyosaki (well I was listening to the audiobook, free trial from audible.com), though I haven’t finish, there was a lesson from Kiyosaki that left an impression on me, his emphasis on “paying yourself first, before your other creditors.” The whole idea is to make sure your paycheck benefits you first, not to your mortgage payments, electric bill or even taxes, so that when those payments are due, you find ways to pay them off. Of course, Kiyosaki isn’t trying to persuade you to not pay your debt, but instead you should let those payment dues become your motivation to look for more ways to earn money to pay them.
I’ve decided to lower my monthly contributions for the foreseeable future to just 5% pre-tax contribution and 1% for Roth contributions from 12% and 3% respectively. I’ve been contributing that amount for the past 2-3 years so I figured it was time to cut back. I will probably increase my contributions for a few months later on, but this is my plan for now.
While lowering my contributions and clicking around the website, I noticed that there were fees associated with all the funds that I’ve been contributing to so I decided to switch to index funds only and some low fee funds.
My current allocations are now: Continue reading