My long list of financial and investing to-dos

Personal finance

Recently, . Well, rather than set goals, I find that along with the new year always comes a spate of financial decisions I (as the main financial manager of our family) I need to doublecheck, reassess, and make anew. I thought I’d share these instead, because I’m sure there are plenty of others out there who find themselves in similar situations.

Re-evaluate those retirement plans

  1. Adjust 401(k) payroll contribution percentages to meet new limits: Not everyone contributes the maximum to 401(k)s, but if you do, you might know that the contribution limit has been increasing in recent years. For 2007, the limit on your own contributions is set at $15,500, so if you do aim to contribute up to this maximum, you might need to adjust your payroll deductions appropriately.
  2. Reassess 401(k) allocations and choices: Now might be a good time to decide whether you need to rebalance or change your 401(k) investment choices. Sometimes companies will provide new offerings, and depending on how your portfolio performed over the previous year, you might want to change or reallocate your money. For example, one of the funds in our 401(k), NBGEX, a small-cap fund, underperformed my expectations. It’s a 4-star fund, but I realized that the plan also offers some other small-cap funds and will be looking into one or more of those as potential replacements.
  3. Decide on which 401(k) plan to use, if you have a choice: Ever heard of a ? Some employers are now offering this as a choice to employees. Like its cousin the Roth IRA, contributions into it would be after-tax, but they would be tax-free upon withdrawal. We might have the option of choosing a Roth 401(k), but I have yet to determine whether it’s right for us.
  4. Decide whether to contribute to a Roth IRA vs Traditional IRA: You might want to contribute to both, but remember that there are, as usual, , as well as income limitations on how much of a deduction you can take for contributing to a traditional IRA if you’re covered by an employer retirement plan (like a 401k). There are also limits on how much you can contribute each year. For 2007, the contribution limit is $4000 for those under 50 years of age.

Taxes, taxes

  1. Start gathering documents for 2006 tax filing: Time to start watching the mail and your emails for tax documents you’ll need to file your 2006 1040 forms! So many things are done electronically now, so there are more things to keep track of. These include W-2s, 1099-INTs (e.g. interest from bank and savings accounts), 1099-Bs (e.g. capital gains/losses reported by your brokerage), 1099-MISCs (e.g. any miscellaneous income you’ve received), and plenty of innumerable others depending on your tax situation.
  2. Do you need to change allowances on your W-4? For most people, the answer to this will be “no”, but not necessarily. Remember that document you had to sign when you first started your job? That’s the W-4. If any major life events happen — like a marriage, a new baby, your spouse getting a job, your spouse losing a job — you might need to change those allowances on it to ensure that the “right” amount of tax is being withdrawn from your paycheck. (However, I can’t resist linking here to Jim’s recent Devil’s Advocate post entitled , just to give a different perspective.)

    Another situation in which you might need to decrease allowances is if you have a large portion of non-wage income in the form of dividends and interest.

    The US tax system is set up as a pay-as-you-go process, but to tell you the truth, my main incentive in ensuring that I pay enough tax is to avoid penalties and having to make estimated tax payments. I’ve done that before in the past, and it’s a pain. The general rule is that if you cover 90% of your tax liability, you won’t have to. (along with a couple of more specific rules that you can meet to ensure you don’t get caught by them), in case you’re interested in learning more.

Investing ideas (so far)

Well, I guess this post does end with goals of a sort. I try to think of them more as directions in which I’d like to head, though.

  1. Decrease dividends/interest income: Thanks to taxes and living in CA, I recently realized that we’d probably be using an itemized deduction rather than the standard deduction for the first time on our 2006 taxes. CA’s income tax rate is 9.3%, which for us will more than likely exceed the standard deduction of $10,300 in 2006 for married couples filing jointly. So, what I really would like to do is decrease our tax basis and while still getting a return on our investments, all without jumping in whole hog and buying stocks all at once for the sake of buying. Reading over this, I realize that might be a tall order, especially if I’m also looking for value at the same time.
  2. Reassess T-bill investments: Here’s where I show I make mistakes in investing, too. Starting in October of last year, I began laddering investments in T-bills under the assumption that they were better choices for us because they’re exempt from state income tax. However, the calculations for finding the tax-effective yield on them are different depending on whether you’re taking a standard or itemized deduction. And, guess what? I thought we would be taking the standard deduction until recently. If you take an itemized deduction, the tax-effective yield on a T-bill is simply the difference you’d be paying if state income taxes were included:

    Equivalent APY = APY of T-bill /(1-state tax rate)

    Suffice it to say that with a standard deduction, the tax-effective yield would be higher. The bottom line is that I need to recalculate and see if current T-bill rates are still better for us than taxable alternatives out there, and on top of that, decide how much we need to be in T-bills if my overall goal is to reduce dividend and interest income.

  3. Continue dollar-cost-averaging into an index fund each quarter: No change here. I’ve been using VTI (Vanguard Total Stock Market ETF) as my “index fund” since, as an ETF, it’s more tax-efficient than most mutual funds out there and costs slightly less in fees (0.07% vs 0.12%) than SPY (S&P 500 Index Spyder).
  4. Gaining greater exposure to Europe: With the dollar weak (and projecting to be even weaker), I’d like to get some exposure to Europe. I added to our tiny position in EWG (Germany) with the thought that the . However, I’m not sure if this is a safe long-term play. I still own EWJ (Japan) from a little over a year ago and am not sure what to do with it. Honestly, my biggest weakness in investing is having an exit strategy and deciding when to sell. For this reason, as a percentage of my portfolio, I really limit my positions in specific countries and specific stocks.

    I’ve also been adding to my position in EWO (Austria). No, not because I’m bullish about Schwarzenegger’s homeland (ex-homeland?), but because Austria has long been the financial hub for most of Eastern Europe. Rather than invest in Eastern Europe through a mutual fund like EUROX or MPYMX in my taxable account, I’ve decided to do indirectly via EWO. Both of those mutual funds seem to be solid, and I might still invest in MPYMX if money becomes available in our tax-deferred/exempt accounts later on.

  5. Continue looking and learning: This whole site started as a way for me to learn and interact with others about investing. In fact, I’d go so far as to say that I lay out information in posts such as these so that I can get feedback (positive or negative) to make sure I haven’t overlooked anything. (If you’ve got any to share, feel free to comment away!)

    So, please do keep that in mind if you’re using information on this site as a guideline. I make mistakes, and I’m no expert. I’m glad to say, however, that in terms of advice received and mistakes avoided, this site has already more than paid off for me.

Whew….Getting your money to work harder for you certainly takes some effort!


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3 Feedbacks on "My long list of financial and investing to-dos"


Regarding dollar cost averaging, don’t the brokerage fees add up? (And negate the tax efficiency and cost difference?)

I used to DCA using Sharebuilder but was paying around 2% of my investment to buy, whereas now I can add to my Vanguard mutual fund for free!


It’s true that the brokerage fees can add up, depending on your fee structure, how much you invest, and how often you do it.

When I decided to use ETFs to do my DCA, I opted for investing quarterly, and my trades cost $9.95. My DCA setup is basically to invest more at fewer (but still regular) intervals rather than more frequently with less money.

The reason I try to avoid mutual funds (in addition to the tax inefficiencies and, in many cases, added management fees) is also for liquidity. It’s probably not something I need to worry about, but if some unforeseen emergency came up and I needed to sell my shares, with ETFs, I can do so just like I do with stocks, whereas many mutual funds charge a significant short-term redemption fee.

Thanks for your comment though. It really depends on your situation, and investing in mutual funds is probably the right move for many people (I use them in my IRA accounts).


I started trading ETFs in my Zecco account which offers 20 free trades a month. Lets me DCA or just add extra money as much as I want for nothing. So far has worked out very well for me.