Two espresso shots for traditional versus roth post

Traditional Versus Roth

The standard advice is for young people to use Roth accounts and for older folks to use traditional accounts. To which I say hooey. From 18 to 55 your age has little bearing on your tax situation. Choosing whether to use a pretax (traditional) of after tax (Roth) account is entirely determined by your current and projected tax situation. Lets look at some of the factors that influence whether to use a traditional…

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Picture of an espresso cup for HSA post


HSA accounts are awesome and if you are covered under an HDHP you should be contributing to yours. Post done; I’m going to go have a home brew while cleaning the bike. But, if you insist I will elaborate. HSA stands for Health Savings Account. These are tax advantaged accounts that you are allowed to contribute to while covered by a HDHP (High-Deductible Health Plan). The money in the HSA can…

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Color photo of a blue cup filled with coffee for IRA posr


An IRA is a tax advantaged account similar to a 401k. The acronym stands for Individual Retirement Account. IRA accounts aren’t an investment in themselves. They are just a basket in which stocks, bonds, and mutual funds are held. By wrapping the investments in the account and following the rules for IRAs the account receives favorable tax treatment. An IRA can be setup as a traditional IRA in which contributions are…

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Coffee cups color picture for 401k post


A 401k account in the United States is a tax-qualified, defined-contribution pension account. I used a couple of words there that don’t generally come up in polite conversation. So I’ll take a moment to define them. A tax-qualified plan is a fancy way of saying that the account qualifies for deferred or reduced tax liability from the IRS. A defined-contribution plan is one in which an amount or percentage is set…

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Coffee cup sitting on a book for the Investor Policy Statement post

Investor Policy Statement

An investor policy statement (IPS) is a document an investor writes to document how they will invest. Much like a Jedi makes their own light-saber you get to craft your own investor policy statement. This document defines investment goals and describes the strategy that will be used to accomplish the goals. Having an IPS has a grounding effect on my investing. When I am tempted to make a change to my investments…

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Espresso with Spoon for compound interest post

The Magic of Compound Interest

Compound interest is interest calculated on the principal and the accumulated interest. Simple interest by comparison is just calculated just based on the principal. Compound interest can be thought of as interest that build on top of interest. When interest is working for you it’s like coasting down a hill with a strong tailwind. Paying back debt and working against the compound interest is like climbing uphill into a headwind….

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Modern Portfolio Theory post image

Modern Portfolio Theory

In the Mutal Funds post I mentioned that one of the advantages of a mutual fund is diversification. In fact more often than not diversification is treated as some sort of panacea for risk. It is taken as an article of faith these days that to chase higher possible returns one accepts more risk. And that a broadly diversified portfolio is less risky than a narrowly focused one. But, back…

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Coffee cup image for mutual funds post

Mutual Funds

I have brought up mutual funds a few times and now it is time to give them their due. When buying a mutual fund you are buying an ownership stake in a corporation. That corporation sells shares to investors to raise capital that is used to purchase securities. This activity is overseen by a board of directors that make sure the fund in managed in the best interests of the investors….

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A REIT is a Real Estate Investment Trust. REITs are an investment class similar to mutual funds that invest primarily in real estate. There are two kinds of REITs Mortgage and Equity. A Mortgage REIT invests in mortgages and makes its money on the interest paid by the mortgage holders. An Equity REIT directly owns property and earns money primarily by leasing property to tenants. Some folks will split hairs and…

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Continuing the dive into all things personal finance it is time to talk about bonds. Bonds are issued by organizations, generally companies or governments to raise capitol. One way to think about it is crowd sourced funding at an institutional level. When buying a bond you are buying a debt instrument issued by an organization. Most bonds have a face value of ten thousand dollars and pay some amount of…

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