Just like when Harry didn’t open his letter to Hogwarts, we’re a little backed up here at the Money Wizard headquarters.
Back in the good ole days, this blog was (un)popular enough that I could easily answer every single reader email.
Surprisingly, the site has grown far faster than I imagined. On a good day, it’s not uncommon to see 5-10 reader questions and comments come through my inbox. A couple days of slacking, and this waterfall can add up in a hurry.
I think it’s safe to say that it’s just not reasonable that I’ll be able to answer every single email these days, unfortunately.
Which is a shame! Because I love chatting with readers. In fact, it’s easily one of my favorite parts of running this blog.
And since I don’t want to discourage hearing from you guys, I thought up a new experiment.
I’ve got a blog with thousands of daily visitors. Typing up an answer for just one person seems extremely inefficient, when I could publish that same answer on my site and potentially help thousands more.
Enter the newest series on MyMoneyWizard.com – The Reader Mailbag.
I’ll still read every single email, and may respond personally to as many as I can manage. But every so often, I’ll also pick out some of the more popular questions to publish here.
Grab the envelopes, and let’s get opening!
- 1. How to access retirement money early
- 2. Stocks are expensive. Is it too late to invest?
- 3. Can a family of 3 live on half their income?
- 4. Investing in real estate for the first time.
- 5. Debt.
- 6. Long time reader is killing it.
- 7. Passively managed funds are great, buuuut….
- 8. Diamonds are forever… forever… forever…
- 9. Resources for deals on hotels
- 10. The most legit investment opportunity ever
1. How to access retirement money early
You plan to “retire” at age 37, which looks like is about 10 years from now. You seem to be contributing most of your money in deferred retirement accounts like an IRA or 401K, meaning you would not be able to withdraw until you reach 59.5 without incurring a penalty.
Are you planning on shifting your contributions to more more accessible investments like your individual broker account? I am just struggling trying to figure out what your plan is if you retire at 37 and you can’t access the bulk of your nest egg for another 20+ years.
A-ha! Right out of the gates with the most common question in my inbox!
401k money can be accessed early through a Roth IRA Conversion Ladder. I’m going to lift my explanation from this post, where I considered whether I’ve got too much money in my 401k:
Here’s the cliff notes of that strategy:
- Continue maxing out your Traditional 401(k) every year. (And enjoy thousands in reduced taxes)
- Build up a small pool of taxable investments. (like Vanguard index funds)
- Retire at an age young enough to shock the world, living off your small pool of taxable investments while you…
- Rollover your Traditional 401(k) to a Traditional IRA. (This incurs no taxes or penalties, since the two accounts are functionally identical)
- Convert that Traditional IRA to a Roth IRA in increments equal to one year of your living expenses. (You’ll owe taxes on the amount converted at your ordinary income tax rate, but if you’re an early retiree living on peanuts, this could be as little as 0-15%.)
- Wait 5 years, then withdraw your living expenses from the Roth conversions, one year at a time, penalty free. (Thanks to an IRS rule on Traditional to Roth IRA conversion after 5 years.)
2. Stocks are expensive. Is it too late to invest?
I’m going to be opening Vanguard accounts for myself and my wife this week but the big question now is when to invest. I missed the low points of the market last year and now most commentators seems to think it’s on the high side at the moment – but they’re very often wrong of course!”
Great to hear you’re getting started!
Don’t worry too much about when to invest. If you’re in it for the long run, a couple months of highs and lows don’t really matter.
Consider this: Even if you invested a massive $100,000 lump sum in October 2007, just days before the second-worst stock market crash in modern history…. you’d still have $180,000 in your investment account today. An $80,000 profit! Just for choosing one of the worst times in history to invest.
PS – I first wrote this response anywhere from a few weeks to a few months ago. In the short time since, the market’s dropped and everyone is freaking out that prices are too low! Just goes to show you how silly it is to worry about short term market concerns.
3. Can a family of 3 live on half their income?
I’m a 35 year old wife and mother to a 2 year-old, and I want financial freedom.
I have a great job and together we bring in over 120k a year. We have a modest home and only a few thousand in credit card debt. Our biggest problem is student loan debt, over 80k! We also have to pay for part time daycare because we both work.
We are committed to paying the loans down. My husband started driving for Lyft on the weekends, we cut our cable out and only pay for Hulu, and so we are able to put almost 1k extra toward our loans per month.
My question to you, how in the world can we live on half our income? Our utilities alone seem to cost so much ($300 per month) and we spend almost $500 on groceries for the 3 of us. Would you be willing to provide me some money saving tips for a young family paying for daycare?”
Congrats on the steps you’re taking so far towards financial freedom!
I truly believe anyone can live off half their income if they’re willing to make some adjustments.
Government surveys show that over 60% of the average family budget goes towards housing, cars, and materialistic purchases. Get these under control and the rest will follow.
When you say only a few thousand in credit card debt, are you paying that balance in full each month? Paying any sort of interest on a credit card is a recipe for disaster; there’s simply no way to get ahead if you’re paying 16% interest on your purchases.
My biggest tips for saving money on groceries:
- Shop the outside isles. Everyone complains about the cost of healthy food, but nobody thinks twice about a $4 for a bag of chips.
- Most importantly, find a cheap grocery store. I’ve seen the prices at Whole Foods and the like – you’ve gotta be a millionaire to shop there! Ethnic grocery stores are often more organic than the big boxes and ridiculously cheap.
Student loan debt is tough. Focus on saving the stuff you can control (housing, cars, materialistic stuff, impulse buys, groceries, etc.) and once those loans are gone you’ll be amazed how much easier it is to save. Consider refinancing to a lower interest rate via SoFi or LendEdu.
Without knowing more specifics it will be hard to give any more advice. Start tracking your spending with Personal Capital (it’s free!) to get a feel for exactly where all your money is going. You can do it!
4. Investing in real estate for the first time.
Hey, I’ve been reading your articles for a few months now and noticed that you want to buy your first investment property. I’d like to know what type of property you are looking for because I am saving up cash to buy my first investment property as well.
Shout out to the future real estate moguls! This article of mine has your back.
I a debt of 220k.”
I don’t see a question?
6. Long time reader is killing it.
I came across your site sometime in 2016… Went from having $17k in credit card debt to having basically $0. More importantly, I started changing the way I thought about money and finances. Systematically lowered my expenses each month until I got to where I am now which has me saving *almost* 50% of my income after taxes…”
So awesome to hear success stories like this! Keep it up!
7. Passively managed funds are great, buuuut….
I know you are a big fan of vanguard index funds, and I see the value of them for the casual investor. However, with the exploding popularity of these funds, it makes me wonder why the sole focus in choosing investments has become lowest cost rather than highest net return. That doesn’t really make sense to me.
A few years back, I hired a professional advisor to help manage my retirement funds. While the sample size is not all that big, thus far his fund recommendations have consistently outperformed most passive index funds, net of all expenses. I’ve had this same conversation with him, and he is a firm believer that QUALITY actively managed funds with good managers and good track records will outperform passive funds in the long run.
So, my question to you, why is your focus on low expenses rather than net return?”
It’s true. Most financial advisors are firm believers in actively managed investment funds; the kickbacks and sales bonuses for referring clients to those actively managed funds help them believe!
The reason I focus on low expenses is because I’ve simply never seen any valid research showing that actively managed funds can beat the index with any reliability. In fact, there’s a lot of research that shows the opposite.
In this post I talk about how roughly 90% of actively managed funds under-perform the index over a 10 year period.
And those 10% that do manage to outperform? They almost always significantly under-perform over the next 10 year period.
Meaning when a financial advisor shows me a fund with years of outperformance, that’s great… but that doesn’t mean those funds will continue to outperform (or even match the index) moving forward. Hell, my own stock picks massively outperformed the index fund… until they didn’t.
To be clear, I’m not saying there aren’t any managers who can beat the market. Warren Buffet might have something to say about that claim. What I’m saying is there’s no way to reliably pick the extremely rare fund that will.
And while actively managed funds over-perform then under-perform over multi-year periods, the fees stay constant. Paying a fee for something that’s statistically a losing bet is just not how I’m interested in risking my money.
8. Diamonds are forever… forever… forever…
What is your thought process on saving cash for larger purchases like weddings and rings. Any insight on how you are addressing this area of your life when it comes to money would be very insightful!
I think diamond rings are an absolute scam, and wedding spending is completely out of control. I made this opinion known very early in my relationship and luckily, Lady Money Wizard has an even bigger opinion about this than I do.
We hope to have a cheap wedding in a public park, use some jewelry from her grandmother for the ring, and go on a nice vacation instead.
I wrote about this topic in a mega two-part post that I think you’ll enjoy.
- How One Brilliant Marketing Scam Created the $32,641 Wedding (Part 1)
- How One Brilliant Marketing Scam Created the $32,641 Wedding (Part 2)
9. Resources for deals on hotels
Hi…like your site. Can you recommend sites for cheap accommodations (similar to google flights)?”
My favorite places for hotel searches:
- Hotels.com – I like their map feature and price filter to scour all the traditional hotels in an area. They also have a rewards program that gives a free night for every 10 nights booked.
- Trivago.com – compares hotel prices across a bunch of platforms.
- Tripadvisor – best for hotel and bed and breakfast reviews.
- VRBO.com – best for individually owned vacation condos. This is where I usually find deals for my big group ski trips.
- Airbnb – full of quirky individually owned houses.
Not a perfect system like google flights, but between those resources you can usually find the best deal on lodging.
10. The most legit investment opportunity ever
Hello, I am looking for someone who can organize capital for the biggest project of all time. We have made an invention with which one can build land on the water. We have registered for the patent last year and now we want to make it. Now we are looking for strong personalities who can organize the capital for it. Are you interested in this?
If so, just sign up with me.”
Sounds legit… Where can I send all my money?
Readers – what do you think of the reader mailbag series? Too long? Too short? Favorite question? I’d love to hear some feedback!
PS – want to submit a question to the next reader mailbag? Head on over to the contact page.