My name is Jon, and my friends call me Jon Bon. I work for the Federal Government doing accounting.
I like to read about business, economics, and money. I also like having money. This blog is my record of my journey to become a millionaire by the time that I reach 40, 45. I tend to be a little impulsive with how I spend my money, I would also like to think that I am generous. I do have a bit of a problem with telling the difference between things that I need, and things that I want. So feel free to read on about the way that I live my financial life.
**Disclaimer**
This is what I choose to do with my money, and am in no way suggesting or encouraging that anyone should follow my financial decisions.
Jon,
Very nice website. I am glad to see that the Ohio State education is paying off. I actually have a lot of the same goals/aspirations with my life. You are definitely on the right track and are well ahead of your peers, which I am sure you know. I only had a few comments that may or may not be worth mentioning on your site: (1) the main key to student loan debt and mortgage related debt is the ability to write off the interest against your income. This will be a rather large tax advantage (depending on your bracket) at the end of the year and you are also building equity in a home at the same time. I would keep at least six months of living expenses in cash and also a few thousand dollars for any unexpected home improvements. My theory is to put as much down as you can and then take a home equity loan out. For example: if your house costs $100K, put down the 20% or $20K and finance $80K. The bank will then lend you at least $10K (if not the full $20K) back on a home equity line of credit. DO NOT DRAW ON THIS EQUITY LINE, yet have it as a backburner in case you lose your job or have some unexpected HOME improvements. You are able to write off this interest as well, but do not use this line unless you absolutely need it. (2) As it relates to Roth IRAs, you still have access to any principal that you invest over the years (can’t touch the gains). To get the principal out without penalty, you must have a “good excuse” meaning a medical issue or some extraordinary event. I do believe buying your first home can quality for this type of withdrawal. (3) As it relates to 401Ks, I feel you MUST invest the minimum to get the maximum out of your employer match. This is vital as it is free money and you must take advantage of it. After you invest the minimum (pretax), then pay tax on these funds and invest into a ROTH IRA or ROTH 401K (if your employer has a ROTH 401K). The large benefit of a ROTH 401K as opposed to a ROTH IRA is that there is no income requirements. Right now, for a single tax filer, the maximum your AGI can be is $95K. With a ROTH 401K, it doesn’t matter how much you make. Also it is worth noting that in 2010, the income requirements for ROTH IRAs are lifted and you can convert any traditional IRAs to ROTHs, but you must pay the capital gains taxes. For motivated young peps like you and me, we will hopefully be in a higher tax bracket when we are 59.5 and when we are able to access our ROTH, we can take this out tax free as opposed to having invested more into a 401K at a younger age when the gains have grown over time and then you owe tax on everything as it was never taxed in the first place. If you do not need the ROTH IRA contributions/gains when you are 59.5 (which I am hoping), you can gift this money to your children tax free, which will save a lot of estate taxes, which will probably be higher when we die (my opinion). Lastly, you also don’t have to take minimum distributions as you do in a 401K plan. (4) Take advantage of any stock purchase plan your company has to offer and use this as your vested interest in the company. Keep an eye on growing balances of employer related exposure in your 401K as they like the “default” to go into their stock fund. If there was one lesson we learned in business school and with Enron it is DIVERSIFICATION.
Sorry for rambling…keep me updated on any other thoughts. This is what I like to do and I hope this makes sense as it was a long day in the office.
Dan F