Personal Finance

A lot of my views on personal finance come from Mr. Money Mustache.

Budgeting

I don’t practice anything formal like YNAB. I do keep track of my finances using ledger with ledger-autosync to automate syncing that, and I occasionally review the status of where I spend money to reduce expenses.

Overall, my system for spending follows this order:

  1. Rent & other debts (car payment, internet, phone, etc.)
  2. Food & other necessities (clothing, etc.)
    • I prefer to spend on groceries vs. eating out. While the notion that a $5/day coffee habit keeps you poor is ridiculous, you generally end up with better food once you learn how to make it yourself. It’s better to reserve eating out as a special thing.
  3. Everything else.

In general, anything that falls under “everything else” is something I spend at least a day thinking about before I decide whether to get it or not. The more expensive it is, the longer I spend thinking on it.

For especially large purchases, I actually do set up budgeting. This works out as a using ledger’s virtual postings feature to place money in an account prefixed with “Budget” every time I get paid. That is, it’s envelope budgeting for a single large purchase.

Buying Used vs. New

I’m really bad at this. I should prefer used, but I often go for new just because it’s easier and faster. This is a habit I’m working on correcting.

Investing

Any money you invest, treat it as if it no longer exists. Especially for 401k or other retirement accounts that have a penalty if you access them before some age.

401k

Always contribute at least the minimum to get your company to max out their matching. For example, if your company does matching up to 4%, then at least put in that 4%.

  • For 2019, the 401k contribution limit is $19,000.
  • If your company offers both 401k and Roth 401k, then do a pre-tax contribution and invest the tax savings.
    • If you don’t think you’ll invest the tax savings, then contribute to the post-tax 401k.
    • On the other hand, if you’re currently in a high tax bracket (and have low expenses), then put the money in the pre-tax 401k.
      • Because you should have low expenses, therefore being in a low tax bracket.
  • Just set it, and check on it every year as the contribution limit changes, or your company changes their matching policy.

Index Funds

Taxes

Federal Income Tax Brackets

CA Tax income brackets