Ms. Financial Literacy

Behavioral Finance, Financial Planning, Girlfriend to Girlfriend Money Chat, Lifestyle, Marriage and Money, Money Habits, Money Psychology, Purchase Decisions

The Funny Thing About Money Psychology (What Would You Do?)

Wishlist and Bucket List

Do you recall when you first started having a wishlist or bucket list? I didn’t have one until I was in my mid-20s. Before then, I didn’t desire much. I was simply happy just having the essentials or necessities. I understood my financial situation as a student. My mindset at the time was that my situation was temporary and wanted to focus my attention on doing well in my studies. I looked forward to the day when I finished school, secured a satisfying career and then start living the life of my dream.

What was the first item that made it to my wishlist? It was a Marc by Marc Jacobs crossbody bag. I saw that bag on a fashion magazine that I subscribed to at the time.

Around my 25^th birthday, my husband and I visited Saks Fifth Avenue. When I saw that bag sitting on the shelf, I hesitated and started having second thoughts. The price tag was $249. It was a VERY expensive bag. My most expensive bag prior to that one costed me less than $30. My husband and I walked in circles around the store as I had a very hard time deciding if I wanted us to spend that kind of money. It was just a [beautiful] crossbody bag…After perhaps 45 minutes later, my then boyfriend was paying for the bag at the cashier register. And that was my first designer bag. From there, I went on to purchase couple Michael Kors bags.

money psychology money dilemma

Deciding on the Now or Later

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Financial Empowerment, Financial Freedom, Financial Independence, Financial Journey, Financial Planning, Lifestyle, Marriage and Money, Money Habits, Purchase Decisions

My Husband and I Created a Fun Fund!

Our “Fun Fund”

My husband and I recently created a “Fun Fund”. And the size of this fund is about 39.6% of our current projected/planned annual expenses. This Fun Fund includes the following categories: travel (we’d like to do two international trips and two U.S. trips per year as a family), gifts, charity, wardrobe items, entertainment and dining (e.g., treating others to meals; we’re already allocating $1,000 outside of the Fun Fun each month to spend on groceries and family dining).

fun fund

In a previous article, I mentioned that our projected annual expenses for year 2017 (and possibly the near future years, too, at the time of writing) was $50,000. Then, early this month, we’ve decided to move that number back up to $60,000 (our annual expenses in year 2015 and 2016 was $60,000), even though we currently don’t have child care expenses.

With a budget of $50,000, we were allocating about $13,700 toward the categories aforementioned. We’ve (most, I) came to realize such a number was a little over-stretched and won’t bring me much happiness. So, my husband and I looked at our financial numbers again, and we’ve decided that we can spend up to $60,000 a year and still be able to save a lot.

In my husband’s own words: “I feel I’ve lived my 60s while in my 20s, and now I’m living my 30s in my 30s. Maybe I’ll live my 20s while in my 40s!”

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Financial Freedom, Financial Journey, Financial Planning, Retirement Planning

April 2017 Non-W2 Incomes Report

This post brings you another snapshot of our non-W2 incomes reports. We started tracking these numbers back in December 2016. You can view our past reports and why we’re doing this by clicking here.

If you’ve been reading our incomes reports, you might’ve noticed some patterns: the total amount vary from month to month and that some accounts do better in certain months than others. As such, it would be very difficult to structure our financial life around these numbers on a month-to-month basis. Once we have a full year of tracking, then we’d have a better idea.

April 2017 non-w2 incomes report

The total amount in April 2017 was $2,098.83. This number is a little misleading. I did a 401(k) rollover in mid April (you can read about my experience here) and decided not to track the dividends/interest payments until May.

My Roth account didn’t receive any payments. I only have a few stock tickers in this account. On the other hand, the financial coaching income resumed. My husband recently started working with a new client. He’s currently accepting new clients. Let’s connect if you’re interested in the financial coaching he provides.

This is it for now. Our goal is to get these reports out during the first week of each month. Now that we’re mostly settled into our new life routines, we’re making this a goal once again!

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Financial Journey, Financial Planning, On Investing, Retirement Planning, Work and Career

After-Tax 401(k) Contributions (aka Mega Backdoor Roth)

If you live in the U.S. and work for a decent size employer, you’ve probably heard of a pretax 401(k) profit-sharing plan. You can read my previous articles on 401(k) by following this link here. In this article, I walk you through what are after-tax 401(k) contributions and how this is different from a traditional (pre-tax) 401(k) plan or Roth 401(k). I cover how this plan works and why might you want to make after-tax contributions to a 401(k), provided it’s available to you through your employer. I also share the insights my husband and I have learned regarding after-tax contributions, such as rollover options.

after tax 401 contributions mega backdoor Roth

I first read about after-tax contributions just about a year ago. I recall sharing that information with my husband afterward and we wished such an option was available to either one or both of us through our employers. To our surprise, our wish came true a few months later. My husband’s employer made the after-tax 401(k) contribution option available. Since then, both of us have learned a lot more about the rules that govern the after-tax 401(k).

What is an After-Tax 401(k) Contribution?

Sometimes, the after-tax 401(k) is also referred to as the mega backdoor Roth. This plan allows qualifying participants to set aside more money toward their retirement accounts, using after-tax money (that is, money they get paid that they’ve already paid tax on).

Currently, the maximum amount plan participants are allowed to contribute to a pre-tax 401(k) is $18,000. Just like like a traditional (pre-tax) 401(k), there are no income limits/restrictions. If your employer allows after-tax contributions to your 401(k), you may be allowed to save up to the $54,000 IRS limit for 2017. This amount is an overall cap, which includes your $18,000 pre-tax contributions plus any employer contributions.

Let’s say for year 2017, you plan to max your pre-tax 401(k) contribution plus 3% match on $100,000 salary. This combined number equals to $21,000. Subtracting this amount from $54,000 gives you $33,000 max to put toward your after-tax 401(k).

However, keep in mind that some employers who offer the after-tax contributions might not allow their employees to contribute up to the IRS limit for the year. For instance, your employer might set such a rule that you’re only allowed to contribute 10% of your income per pay period toward your after-tax contribution plan. Check with your HR and plan administer to learn what’s available to you.

After-Tax 401(k) Plan is Not the Same as a Roth 401(k)

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Lifestyle, Marriage and Money, Money Habits, Money Psychology

Adopt This One Money Habit to Grow and Attract Wealth

I love free honest money. I was 10 years-old when I found my first $20 bill on a grassy field. That was shortly after my family and I have immigrated to the U.S. With my parents’ combined income being less than $2,000 a month at the time (providing for a family of 4), you can imagine what that $20 bill meant to me. To say I was super excited would be an understatement.

money habits grow attract wealth picking pennies

Are All Free Honest Money Equal?

However, not all free honest money has always been equal for me. I don’t ever recall having picked up a penny off the ground. For some reason, picking pennies just never seemed worth it to me.

As for my husband, while he wouldn’t waste calories to pick up one penny, he’d spend the calories to pick up two plus pennies. And he’d get very excited about this kind of free honest money. Just a few months ago, we even joked that if one million people on earth would be willing to share a penny with us once a year, we’d have $10,000 of free honest money. This is a large sum of money! Even pennies add up to being worth something.

For years, I teased him about this money habit of his. I didn’t appreciate the value of a penny back in the days when I was growing up in a low-income family. At our current financial standing, the value of a penny is worth even less to me. I didn’t understand why my husband bothers to pick up pennies. For a long time, I never asked him.

A Transformative and Significant Moment

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