Evaluation: How am I doing?

**jIM_Ohio** · 05-11-2010, 07:44 PM

Can you list

1) total monthly expenses and total yearly expenses for self
1a) do the same for rental (mortgage costs and taxes)

2) list total monthly gross and net income from employment
2a) do the same for rental (rental income)

3) itemize the debts- interest rates, when paid off

4) Investments- how is the Roth and 401k currently invested
% stocks and bonds
% domestic and foreign
large cap vs small cap vs emerging markets

thx

**jpg7n16** · 05-11-2010, 10:18 PM

Seems like your retirement accounts are low compared to the non-retirement brokerage account. Are you maxing the 401k/ROTHs first?

Doesn't seem like much debt, but I like having a paid off car, so I'd put a good chunk of the extra cash each month towards the car debt to knock it out.

Other things to consider:
Married?
Will made/updated?
Proper insurance on life/health/disability/car?

**psuicyde king** · 05-12-2010, 08:36 AM

jpg:

Are you maxing the 401k/ROTHs first?

401k yes as of last year.
Roth yes for the last 3 years, though this year I believe I exceed the salary limit to contribute to roth ira

Married?

divorced

Will made/updated?

no *gasp* my bad

Proper insurance on life/health/disability/car?

yes, very well covered all of the above (could use a boost on life insurance)

jim:

1) total monthly expenses and total yearly expenses for self
* monthly:

rent: 1700
cell phone: 100
cable tv: 50
car: 300
airline tickets (long distance relationship): 400
food: 300

* annual:

sports season tickets: 2,000
performing arts tickets: 2,000

1a) do the same for rental (mortgage costs and taxes)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

2) list total monthly gross and net income from employment

gross: 15,000
net: 8,000 (i'm rounding down quite a bit to be conservative)

2a) do the same for rental (rental income)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

3) itemize the debts- interest rates, when paid off

car: 13k 5.5%, complete in about 4 years
house: 115k, 800/month, 2 loans (forget the exact details)

4) Investments- how is the Roth and 401k currently invested
% stocks and bonds
* roth

CAPITAL WORLD GROWTH & INCOME FUND CLASS A: 2800
FUNDAMENTAL INVESTORS INC CLASS A: 7100
VANGUARD CHESTER FDS TARGET RETIREMENT 2050 FD: 8200

*401k (through ML)

INTERNATIONAL EQUITY FUND: 10,100
MYRETIREMENT 2050 FUND: 39,900

% domestic and foreign
large cap vs small cap vs emerging markets

not completely familiar with this, but i believe pretty much all large cap

**jpg7n16** · 05-12-2010, 10:52 AM

Originally posted by psuicyde king View Post

jpg:

Are you maxing the 401k/ROTHs first?

401k yes as of last year.
Roth yes for the last 3 years, though this year I believe I exceed the salary limit to contribute to roth ira

Married?

divorced

Will made/updated?

no *gasp* my bad

Proper insurance on life/health/disability/car?

yes, very well covered all of the above (could use a boost on life insurance)

Good deal on the 401k

Oops! I missed the "single" comment in post 1. Sorry! Thought you might still have hope for a ROTH...

Will needs to get updated asap if you had one while married. Unless you still want everything you own to go to your ex...

4) Investments- how is the Roth and 401k currently invested
% stocks and bonds
* roth

CAPITAL WORLD GROWTH & INCOME FUND CLASS A: 2800
FUNDAMENTAL INVESTORS INC CLASS A: 7100
VANGUARD CHESTER FDS TARGET RETIREMENT 2050 FD: 8200

*401k (through ML)

INTERNATIONAL EQUITY FUND: 10,100
MYRETIREMENT 2050 FUND: 39,900

% domestic and foreign
large cap vs small cap vs emerging markets

not completely familiar with this, but i believe pretty much all large cap

I'm sure Jim will deal with the expenses and all.

But your funds are in a lot of foreign and/or income (bond) type funds.

The Capital WORLD Growth & INCOME - prob has a high % in foreigns and is also structured to provide growth with a side of income. Ergo, prob has a moderate bond allocation.

The INTERNATIONAL Equity Fund, will be just that - international equities (stocks). aka more foreign.

And the Fundamental Investors INC (for income), is geared towards income generating securities - so again you're probably looking at a higher bond allocation.

If you're a low-moderate risk investor, you should probably move some (not all) out of the foreigns and into more domestic large cap stocks.

If you're a moderate-high risk investor, you should probably move some (not all) out of the income (bond) oriented and into more growth focused.

**psuicyde king** · 05-12-2010, 11:13 AM

Originally posted by jpg7n16 View Post

Good deal on the 401k

Oops! I missed the "single" comment in post 1. Sorry! Thought you might still have hope for a ROTH...

Will needs to get updated asap if you had one while married. Unless you still want everything you own to go to your ex...

I'm sure Jim will deal with the expenses and all.

But your funds are in a lot of foreign and/or income (bond) type funds.

The Capital WORLD Growth & INCOME - prob has a high % in foreigns and is also structured to provide growth with a side of income. Ergo, prob has a moderate bond allocation.

The INTERNATIONAL Equity Fund, will be just that - international equities (stocks). aka more foreign.

And the Fundamental Investors INC (for income), is geared towards income generating securities - so again you're probably looking at a higher bond allocation.

If you're a low-moderate risk investor, you should probably move some (not all) out of the foreigns and into more domestic large cap stocks.

If you're a moderate-high risk investor, you should probably move some (not all) out of the income (bond) oriented and into more growth focused.

Super helpful, thank you so much! I want to act on your advice in regards to being a moderate-high risk investor. I understand conceptually what you mean, though I'm struggling with the specific actions to take. Are you saying to move away from Fundamental Investors and Capital World Growth & Income and move into a different US-based mutual fund? (I'd have to research what's available inside the ML offerings)

**jIM_Ohio** · 05-12-2010, 11:57 AM

Originally posted by psuicyde king View Post

jpg:

jim:

1) total monthly expenses and total yearly expenses for self
* monthly:

rent: 1700
cell phone: 100
cable tv: 50
car: 300
airline tickets (long distance relationship): 400
food: 300

* annual:

sports season tickets: 2,000
performing arts tickets: 2,000

1a) do the same for rental (mortgage costs and taxes)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

2) list total monthly gross and net income from employment

gross: 15,000
net: 8,000 (i'm rounding down quite a bit to be conservative)

2a) do the same for rental (rental income)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

3) itemize the debts- interest rates, when paid off

car: 13k 5.5%, complete in about 4 years
house: 115k, 800/month, 2 loans (forget the exact details)

4) Investments- how is the Roth and 401k currently invested
% stocks and bonds
* roth

CAPITAL WORLD GROWTH & INCOME FUND CLASS A: 2800
FUNDAMENTAL INVESTORS INC CLASS A: 7100
VANGUARD CHESTER FDS TARGET RETIREMENT 2050 FD: 8200

*401k (through ML)

INTERNATIONAL EQUITY FUND: 10,100
MYRETIREMENT 2050 FUND: 39,900

% domestic and foreign
large cap vs small cap vs emerging markets

not completely familiar with this, but i believe pretty much all large cap

1) total monthly expenses and total yearly expenses for self
* monthly:

rent: 1700
cell phone: 100
cable tv: 50
car: 300
airline tickets (long distance relationship): 400
food: 300

* annual:

sports season tickets: 2,000
performing arts tickets: 2,000

1a) do the same for rental (mortgage costs and taxes)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

monthly expenses are $3300 per month (I added $2000+$2000 then divided by 12 for just over $300/mo)
monthly rental expenses are $800/mo

2) list total monthly gross and net income from employment

gross: 15,000
net: 8,000 (i'm rounding down quite a bit to be conservative)

2a) do the same for rental (rental income)

800/month (recovered with 800/month rent from tennant) - taxes included in the payment

Monthly gross income is $15k and net income is $8k
Monthly income from rental is $800/mo

3) itemize the debts- interest rates, when paid off

car: 13k 5.5%, complete in about 4 years
house: 115k, 800/month, 2 loans (forget the exact details)

knowing "your exact details" is important (read my signature LOL)

4) Investments- how is the Roth and 401k currently invested
% stocks and bonds
* roth

CAPITAL WORLD GROWTH & INCOME FUND CLASS A: 2800
FUNDAMENTAL INVESTORS INC CLASS A: 7100
VANGUARD CHESTER FDS TARGET RETIREMENT 2050 FD: 8200

*401k (through ML)

INTERNATIONAL EQUITY FUND: 10,100
MYRETIREMENT 2050 FUND: 39,900

% domestic and foreign
large cap vs small cap vs emerging markets

not completely familiar with this, but i believe pretty much all large cap

Why do you own retirement 2050 fund and all the others? For simplicity sake, just put all moneu into 2050 fund, and sell the rest.

If you do not know what is in world growth and income or international equity fund, and do not know your % stocks and % bonds, then just own the fund of funds (2050 fund) and be done with managing investments or choosing investments. If you choose investments, but do not manage them, you are not investing properly IMO.

Can you suggest where the $5000 you do not spend each month goes?
You have 8k of net income and only $3300 of monthly expenses. There is $4700 per month not accounted for.

**psuicyde king** · 05-12-2010, 12:02 PM

Thanks, Jim, I really appreciate the thoughts. Between the feedback from both of you, I definitely need to look at the allocation in my retirement accounts and adjust appropriately.

Am I sitting ok in regards to income/savings/retirement? I'm really trying to balance my love for experiences in life (it might be short) with financial stability - all the while understanding that if things don't go right, I could have a much smaller income in the near future.

**jpg7n16** · 05-12-2010, 12:37 PM

Now I don't know what exactly the asset allocation of your funds currently are. I'm just helping you understand what the funds are invested in, by using their names as clues - a solid practice if you ask me

For a moderate investor, over all the funds, you want about: (in general)
30% Large cap growth
25% Mid cap growth
20% Small cap growth
15-20% Foreign Stocks
5-10% Bonds

You can find a more specific listing at: Asset Allocator Found that link from the info at the SEC: Beginners' Guide to Asset Allocation, Diversification, and Rebalancing

But if you're around those numbers you should be fine. Don't ever worry like "OMG I have 21% in small cap! That's too much!!" - no that's dumb

It's a guide to make sure you're not overloading somewhere. Like you wake up and have 35% small cap 40% foreign and 25% bonds. That would be a problem!

Right now I'm giving you advice by guessing at asset allocations of funds I haven't looked deeply into. Look at the prospectus, or look up the fund on Morningstar.com. use the quote search box at the top, and start typing in the name of the fund, and choose from the options it shows.

I looked up your Vanguard targeted one here: Vanguard Target Retirement 2050 Report (VFIFX) | Portfolio

If you scroll down to the middle, you'll see that there is 17.8% in Foreign. That's a good allocation. It also has 10% in bonds. Which is the upper end of where you're wanting to be. That fund is well allocated to a moderate-high investor - so it's good that you've got a lot in it.

It wouldn't be a bad idea to move everything into a fund like that, but I personally like to supplement those type with my own thing. I'm on the extra high risk tolerance though, so I've added on more equity growth funds and foreign funds in addition to my target fund, to get me to the higher risks.

Now I don't know which specific "International Fund" you're in, so I can't pull it up, but I did find these ones:
Huntington International Equity A Report (HIEAX) | Portfolio

You'll notice that of the 92% in stocks, 91% of them are foreign - exactly what you'd expect from an international fund. You'll just have to look up the funds you're in and find out what %-ages you currently have.

American Funds Capital World G/I A Report (CWGIX) | Portfolio
Fidelity Capital & Income F Report (FCLFX) | Portfolio

And I assumed the INC in the Fundamental Investors was for Income.. but I can't seem to find that fund on Morningstar... so maybe I'm wrong on it. I found some American funds that are called "fundamental investors ______"

But after all that up there ^^^ what I'd suggest you do is use that 2050 fund as a baseline, and use other funds to amp up certain areas. More growth, more international, more small cap - do what you're comfortable with, but don't get too far away from the numbers up top. (No 75% developing markets! hah)

**jIM_Ohio** · 05-12-2010, 01:13 PM

without the 5 letter ticker symbols, finding funds can be tough... and I don't necessarily agree with this statement

The Capital WORLD Growth & INCOME - prob has a high % in foreigns and is also structured to provide growth with a side of income. Ergo, prob has a moderate bond allocation.

LOL there are times when world and global funds are 75% US stocks (Janus worldwide comes to mind) and there are times when "growth and income" means 60% stocks and 40% bonds, and times when "growth and income" means value stocks which pay a dividend (100% stocks).

So I would never want to judge based on fund name. The same way you should never buy a beer because of its commercials (the two best commercials are miller lite and bud light, and both of those taste terrible).

Most funds have a 5 letter ticker symbol. Like PRFDX for T Rowe Price Equity Income (I own this fund). Look up the tickers on websites like this

PRFDX: Summary for T. ROWE PRICE EQUITY INCOME FD- Yahoo! Finance

and then once you have all tickers looked up, plug them into morningstar.com xray

Morningstar Stock, Mutual Fund, Hedge Fund, ETF Investment Research

What it will do is take the 10k you have in a fund which is 90% mid cap and the 20k you have in a fund which is 40% small cap and the 30k you have in a global fund, and tell you what you really own.

You want to focus on 3 levels of asset allocation
1) % stocks-% bonds
2) % domestic and % foreign
3) large cap vs mid cap vs small cap vs foreign large cap vs foreign small cap vs bond vs foreign bonds

For me, I do not want more than 25% of my portfolio to be outside US (in foreign stocks and foreign bonds). I also do not want more than 10% bonds right now either.

My 2 primary mid cap funds own some large caps and some small caps
My 3 primary small cap funds each own about 30% mid cap

a tool like xray tells me if I have enough small caps and too much large caps.

**edit to add, I see no free version of xray available... I can get mine thru t rowe done for free**

**psuicyde king** · 05-12-2010, 02:55 PM

Perfect, thanks jpg!!

**psuicyde king** · 05-12-2010, 02:56 PM

awesome, thanks Jim! very helpful - I have to learn more about bonds...time to research!

**psuicyde king** · 05-12-2010, 02:57 PM

everything else is good though? i.e. no concerns about save/spend rate or anything?

**jpg7n16** · 05-12-2010, 05:53 PM

Originally posted by psuicyde king View Post

everything else is good though? i.e. no concerns about save/spend rate or anything?

Well you've got an amazing income so a lot of your spending is fine. Rent is well within the 28% rule. And what's the point of trying to make so much, if you don't spend on anything you want? (after you've saved of course)

If you've maxed your retirement vehicles, and still save an additional $4000 a month - you're entitled to spend your money as you see fit

Congrats!

The only other concerns would lie in paying off the car and rental property early. ummmm... You might be able to sell unused season tickets online? I'm tryin to think, but you're not doing anything terribly wrong! hah

Sooooooo:
1) Update/create will
2) Update beneficiaries on bank accounts, brokerage accounts, life insurance, etc.
3) Adjust asset allocation
4) Pay down debts faster than scheduled
5) Keep making smart decisions about where you spend your money

**psuicyde king** · 05-12-2010, 06:24 PM

Originally posted by jpg7n16 View Post

Well you've got an amazing income so a lot of your spending is fine. Rent is well within the 28% rule. And what's the point of trying to make so much, if you don't spend on anything you want? (after you've saved of course)

If you've maxed your retirement vehicles, and still save an additional $4000 a month - you're entitled to spend your money as you see fit

Congrats!

The only other concerns would lie in paying off the car and rental property early. ummmm... You might be able to sell unused season tickets online? I'm tryin to think, but you're not doing anything terribly wrong! hah

Sooooooo:
1) Update/create will
2) Update beneficiaries on bank accounts, brokerage accounts, life insurance, etc.
3) Adjust asset allocation
4) Pay down debts faster than scheduled
5) Keep making smart decisions about where you spend your money

5 great steps to take. Thanks so much for your time, I really appreciate the help!!

Evaluation: How am I doing?