Don't Help Your Friends Invest...
I feel guilty because I tried to help a friend. Earlier this year, I spent a day over the weekend explaining the basics of investing to a friend. He took diligent notes, while I walked him through maxing out a Roth 401K, taking advantage of a company ESPP, maxing out a HSA, maxing out a Roth IRA, and contributing to the after-tax plan (mega backdoor). We even walked through the steps he should take if he has a money crunch: first slash the ESPP, then stop IRA contributions, change the Roth 401K contributions to a regular 401K, then stop after-tax contributions, then minimize the 401K contributions to the 8% match, and finally slash the HSA. He made about 120K at the time. Single, no dependents or major obligations. He recently got a promotion that brought him up to 140, so I let him know he needs to recharacterize his Roth IRA and then complete a backdoor and pay some of the gains as taxes. That's when it all came out: a week after I "helped" him out, he decided he needed more cashflow, and immediately stopped all HSA and 401K contributions. He's contributed ~6K to his Roth 401K this year and has been continuing the automatic withdrawal into his Roth IRA that I setup for him. Other than that, nothing. Lessons learned: 1. Don't help your friends with financial matters, they are much dumber than you think. 2. HR and the finance team have figured out a strategy that is most effective for the vast majority of people. The default of putting in the company match and slowly raising over time is effective because it plays on psychology. Most people are stupid, and don't really notice when the difference in the paycheck isn't drastic. 3. Just because someone makes good money, doesn't mean they are good investors. HENRYs are a real thing. I feel bad and feel like I need to help this guy salvage things, but I also don't want to waste my time again. Would you just smile and move on, or try and fix things? TC: 320, 5 YoE
Don’t help people that don’t want it
As long your not telling them stocks I don't see a problem of helping them if they ask, if they stop asking then don't bring it up.
People need to help themselves
Wish I had a friend like you 5 years ago. But I am thankful for the afternoon my first manager took to explain some of this to me.
I've literally helped MY manager with this stuff.
I let it slip that my investing went well, and I got family asking me for advice. Bro I am not suggesting shit 12 years into a bull market, you’ll blame me if it goes south! When I was new to investing, loved to talk about what I thought was good strategy. Not anymore. I don’t want the liability of it not working out. I imagine the psychology of people who start investing early and late into bull markets differs. An early burn could turn people off for a lifetime. I got started after the last crash.
You're kind man but you've done enough lol. Do more only if they ask In other notes, do you guys max HSA and FSA too? Or just HSA?
You can't have a FSA if you have HDHP. You need HDHP for HSA. You can add to a flex-FSA with a HSA, tho. Most companies don't have that option, tho. FSA is use it or lose it, so keep that in mind...
Have u ever calculated HSA contributions vs just putting post-tax income into index? I feel like with compounding, post-tax into index wins
What is HENRY?
Dude kudos on being so educated with financial matters so young. I wasn’t a HENRY as I had peanuts for salary and did all wrong things with savings. But financial education is a privilege you should only share with keen people and shouldn’t be invested after sharing knowledge. Never provide investment advice without the standard disclaimer. Refer them to content YouTube has literally blown my mind and put me in my place showing how uneducated I was. If one is keen these resources would help them out and save your time and effort. Just my 2 cents
He asked for my help, but I did tell him to chat up a CFP instead, which he'd have access to under his MetLife plan. He elected not to contribute to his legal plan tho... :) Got the names of those YT channels tho?
OP, how do you invest your money? Do you suggest buying home vs stock market
Index funds, mostly Vanguard, because the Amazon plan has those. Buy VTSAX in the taxable account. Add in VTIAX when you can't maintain your target allocation. Balance against bonds in the tax advantaged accounts. Occasional crypto plays and individual stock picking, but never in my 401K. Crypto and individual stock picking has gone really well. Probably just luck. Also have some pre-IPO stock that has rocketed. Pulled a Peter Thiel: equityzen > altoira > backdoor conversion. Home makes sense if you've maxed out everything else and plan to stick around for a while. Even better if you can take advantage of the tax incentives (less now that SALT was killed). I don't think I can stay in one place long enough to make that payoff, tho. Also, buying a home means you'll spend a considerable amount of your time maintaining it. I take the approach that homes are money pits, but your situation may be different.
You're too invested in this, relax