4th Annual Review Thread

[Gardenhand]

Hey gang- well these have been hit or miss over the years. Last year was a miss except one friendly responder. It was probably over detailed and booring so Im going to try and keep it simple this time around.

The Good Stuff

Cash- 22,800 in saving (21,800 at .5 percent and 1k in 6 percent DCU)

Roth IRA- 18,000 (17,500 contribuations)

Precious Metals- 16,500 (silver and gold)

Expected Tax Return for 2021- about 7,600

Gross Income- 80k to 90k (job and child support)

Monthly Net Income- about 5k

Pension fund Vested in 2023, full pension in 2036

Net Worth including house equity about 250K not including pension.

The Bad Stuff-Debt

Amex zero percent offer ending in June 2022- 5,500 balance

Truck- 745, balance remaining 22,600 out of 45,000 original loan (1.9 percent), 2019 Tacoma Pro estimated value 45k plus currently.

Mortgage- 1275 with taxes, principle, interest, insurance all in, balance- 120k, estimated value about 290k

Utilities, electric, gas, vehicle fuel, food, subsriptions, cable, etc... Roughly 1,000.

Total- about 3020 per month plus extra activities.

I pay my car insurance and cell phone once per year with my tax refund. Usually I fund my Roth Ira at the same time. I overpay throughout the year because my dependent situatuion has changed a few times and I dont want to get caught with my pants down.

My state union job is secured with excellent bennifits including health insurance. I have had my share of emergencies this year with a flood and a recent pretty hard hitting case of covid pneumonia. I feel likie we are pretty good with immunity for some time and dont expect that to be a financial factor moving foward at least for a while.

Decision time-- cash plus tax return is roughly 30k. I dont want to sit on cash with hyperinflation worries. I want to make my 6k Roth IRA contribuation for 2021 which needs to be done by April 15 2022.

Other considerations and ideas:

Roth IRA contribuation for 2022 max of 6k

Pay off the truck and free up 745 per month of cash flow

Pay off the AMEX card on zero percent promotion until June 2022

Buy more precious metals (not generally a popular opinion on here)

Emergency Fund- I am cursed with popup lawyer bills for ongoing child custody. Last round ended in April but there is always another round around the corner. I usually open a new card with zero percent promotion and pay it down before the offer expires. Ive never paid a penny in credit card history. I also have the Roth IRA that I am able to withdraw contributions. In a way this has been my emergency fund that I have not had to tap since opened.

This is a Fico forum so I will add my scores. All Fico scores are around 825 out of 850 give or take a couple points.

Well shoot this is long, detailed and booring again... sorry about that. Any and all critique, advice and pointers is welcome. I wouldnt put myself out there if I was easily offended. So let the roasting begin!

Any advice on how to split up that 30k is welcome.

Happy New Years everyone and thatks for posting in the forums. Loads of good folks and information on here!

[jmw1]

You're doing great. Nice job.

This is the order I'd do things with the cash:

I'd set aside the expected litigation expense for all of 2022. Try to settle out of court. Litigation is a pure waste of time and money when you guys should be settling the differences like the other 98% of all civil lawsuits. I'm aware it's different in family court. But still...

Then fund the Roth. Roth space is valuable. Use it or lose it. It doubles as your emergency fund.

Not a fan at all of precious metals. Rather have equities or real estate instead.

Your truck is actually a partial hedge against inflation. I'd sell sufficient precious metals to payoff the Amex and truck if there isn't enough cash for both. Then use the old $745 truck payment to buy equities like a S&P 500 ETF or the total stock market ETF in a taxable account once the Roth is fully funded.  We had crazy inflation this year, but a lot of businesses did well even if it's only due to supply scarcity. I don't see this changing anytime soon. Equities do even better in non-inflationary times too. 

[Gardenhand]

Thanks for the response and tips. I've been considering the way you stated would move forward if delt my cards. It's definatly got my brain working and im itching to make some moves with this cash. Here are a couple thoughts. 

1- use the tax return to make my 2021 Contribution to my Roth IRA in the max amount of 6k. This must be done by April 15. The leftovers which could be a couple thousand can pay my car insurance and phone bill for the year. I have a super budget phone plan. 

2- pay off the truck. I can do that today with the cash on hand. It would tap out my cash on hand for the most part. I do have a credit union deduction through my job in the amount of 100 per week. I generally don't include this in my calculations and just randomly withdraw for unexpected expenses or holidays. It's probably about 300 bucks currently but goes up 100 every week. I mention because if I tap out my cash accounts I still need to pay my mortgage payment on Feb 1. Which won't be a problem with regular income. This extra little cash can make a little buffer. 

3- float the credit card debt and pay it down before the June zero percent offer ends. 

4- NOT sell my bullion but not add at this time until the AMEX is paid off.

5- NOT keep cash on hand for pop up lawyer bills. I reached out to the ex and she says she doesn not plan to go back to court in 22. If she changes her mind my lawyer has always let me make monthly payments and that buys me time to open a zero percent credit card. Worst case scenario I have the Roth IRA I could withdraw contributions. I would avoid this unless absolut necessary.

This would leave me with 745 dollars less per month on my bills with no truck payment. I could use the extra cash flow to pay down the AMEX on zero percent. Once that is accomplished I can build up my cash savings again and continue with my investments (bullion, Roth 22 and regular trading account).

It's a little different then your plan for sure. I tend to lean a little towards the more risky side and get bored when running a marathon. I need excitement and a little bit of risk. 

As for the bullion especially silver. I would like to continue growing this investment. I believe one day we will wake up and the spot price will be repriced

to something closer to it's true value. With tech, smart phones, battery cars, solar, medical equipment, etc... The demand is not going away. At current prices most miners can't get it out of the ground for a profit. The indigenous people can't feed their families on the peanuts they pay these people.  It's not a sustainable system and something has to break. Furthermore the market manipulation is becoming more widely known. The cat is getting out of the bag. The Wall Street powers that be have sold every ounce of silver something like 200 to 500 times. They have to cover this short position. It's the perfect storm and I believe an opportunity of a lifetime at these levels. The best part is it's like buying lottery tickets that can't really loose that much value since its so cheap. It's the best risk to reward situation to ever manifest. I like miner stocks, junior and big board. Most of all physical bullion. 

But I'd like to pay off that truck and then work on that Amex card before June. Then with zero credit card debt and only my mortgage and utilities i can continue funding my 2022 Roth contributions, build up some cash again, fund my regular trading account and of course keep stacking my bullion. 

Thanks again for the insight and ideas! 

[Anonymalous]

If you're worried about hyperinflation and emergency funds, I(inflation) Bonds might be worth a look. Their APR is currently 7.12% and gets adjusted to match the CPI-U twice a year, so they retain value when prices are rising. They work as an emergency fund because they're liquid after an initial hold period -- while you can't cash them in for a year, you can cash them any time after that (suffering a 3 month penalty if it's been less than 5 years, but that's minor). While it wouldn't be a good idea to lock up an entire emergency fund for a year, gradually converting one over several years is a good option. That also works well with the purchase cap of $10,000/year (which can be bumped up another $5,000 if paid with a tax return). I Bonds are only available through the federal government's Treasury Direct.

How are you holding the precious metals, and how far are you from retirement? As investments, they retain value during inflation and they're uncorrelated with the movement of the stock market. So they can be a good hedge when prices go up, and they can even out the volatility in a portfolio. One reason they're not popular in the US is they're treated as commodities, so there's a real tax penalty for holding them. Another reason they're not popular is for long periods they may not gain or may even lose in value. The final reason is, over time long periods, they don't grow as fast as investments in the stock market. So if you have several decades to go for retirement, the best bet (assuming the economy doesn't completely collapse) is to have a portfolio heavily weighted towards stocks. Gold can serve as a good anchor, but it should be an account like a Roth, and even a relatively small percentage is enough to help smooth out downturns. And since you are investing for speculative reasons, that also argues for a small stake.

Definitely max out your 2022 Roth, as well. If possible, try to move away from relying on lump sums, like a tax refund, to fund your Roth. You seem worried about the state of the economy, and one of the better ways to protect against up and down turns is dollar cost averaging. The basic idea is to set aside a certain amount every month, or every pay cycle, and have it automatically invested. What it essentially protects against is bad timing. If you think the market might drop, and you invest now, and it does drop, then you overpaid for what you bought, and might not have money to invest when the market plunges. That could really hurt in the long term. But if you put in some money every two weeks, that means you may be buying overpriced stocks now, but as the market drops, you'll be buying cheap stocks as well. You won't do as well as if you timed the market perfectly, but trying to time the market is a fool's errand. But you'll do far better than if you timed it poorly.

If the interest rate on your truck is only 1.9%, I wouldn't prioritize paying it off. I'm a fan of paying down debt on principle, but that's pretty low. I'm not suggesting you spend that money on luxuries, but important and/or high return things like an emergency fund and retirement accounts can come first.

Not financial advice, of course.

[Gardenhand]

Thanks for the reply and sharing some thoughts/ knowledge.

I have seen these Bonds brought up on here in the past and started looking into it. I dont totally understand them yet but will look into them further. I like the idea of being diversed. It was this forum that turned me onto Roth IRA accounts so I know its worth learning more. Thank you for mentioniong it.

I hold my bullion in physical form. I mean Im not a complete idiot. I know the risks of theft and fire. Theft being the biggest risk of course. Pirates have been hiding this stuff at the bottom of the ocean, burried in the ground, etc... for a long long time. It comes from the ground. Im not really a collecter but just want the weight alone so Im not that concerned about toning or whatnot although I havent had any issues. I can be crafty with dummy safes and Im not afraid to open up some drywall. Also as my stash gets bigger I like the idea of spreading my treasures around a little bit. Maybe one chest here, one at my trusted family, one over there. I try to be safe as possible but if anything did happen I wouldnt loose the whole stash. You can pay to store the stuff. I dont. I want my physical hard savings where I can touch and feel them not in some crypto twilight zone or whatever...

I love the idea of cost averaging into my Roth and investments. That will be a plan with my 2022 Roth contribuations. Thank you for that idea. About the truck-You are correct. Very roughly it ends up being about 50 dollars in interest every month. Again very roughly Im getting 15 to 20 dollars on the cash savings interest every month. So I suppose there is not huge rush to transfer the funds around as its not making a significant difference in the bigger picture. Honestly putting that cash towards the mortgage principal at 3.75 percent interest would save over the long run. It just wont help with cash flow for quite some time. I do realize my mortgage rate could be lower but I dont want to add new closing costs into the principal. Im sticking to the plan with the mortgage for now and Im happy with my rates.

Im about 15 years away from hanging up the job and collecting my pension. I can work longer if I want to. Ive got to see the pension numbers cut up, see how my Roth is doing, dig up that sIlver and gold, etc, see what home prices are like... I dont know that I will never work again after I start collecting but this is my last full time job I believe. I got a late start at retirment planning. At some point Id like some land and cabin in the mountains, NC, TN, WV, VT, Tahoe... maybe do some traveling, help some folks out as I do think that the economy is heading towards big changes and I hope to be as prepared as possible. Just get closer with nature and get more into sustainable living.

Thank you for taking the time to respond and bouncing some ideas around.

[Anonymalous]

I not a fan of holding physical bullion, but if you've got that much, you might want to consider 100% equity in your Roth. Your Roth won't be diversified across uncorrellated asset classes, but thanks to the gold (and your cash holdings), your total overall asset portfolio would be. (A typical target for non-stock assets in your total portfolio, like gold/bonds, would be 10-40%.) Index funds are ideal, because professional management can't reliably beat them, especially when expense ratios are taken into account. A total stock market or S&P 500 fund would be the core, and maybe a dash of index funds focused on small cap/value/international/emerging markets/REITs as you see fit. 15 years is long enough for that to give the highest return under most scenarios. Though not all scenarios -- it did take 25 years for the stock market to recover from the Great Depression. But if you're playing catch up, you may want to take a little risk.