Should I Contribute To My 401K Or Invest In An After-Tax Brokerage Account?

foragingThe great thing about a 401k is that you are contributing with pre-tax money. The higher the tax bracket you are in, the more tax savings you will have. If you can start withdrawing from your 401k when you’re in a lower income tax bracket, then you’ve successfully conducted some tax engineering to boost your wealth.

The problem with the 401k is the 10% early withdrawal penalty before age 59.5. If the government gets desperate, they can raise the early withdrawal penalty percentage or increase the age limit. I ascribe a 75% chance one of these two things will occur over the next 30 years.

It’s easy to understand why saving for retirement is difficult. The value proposition is that you put your money away in an institution like Fidelity, which operates under the confines of the omnipotent government, who punishes you if you err from their rules, all for the chance that your money will grow decades down the road.

With no assurances from your money manager or the government that your money will be there in retirement, spending money now on instant gratification makes perfect sense. Give me the latest iPhone vs. the potential to have $25,000 more in retirement! Therein lies the dilemma of the 401k contributor who can’t max out his or her account every year, and who therefore doesn’t have excessive after tax savings for liquidity and other purchases.

Why Would An Aerospace Engineer Want To Be An Uber Driver?

Uber Driver

Harry Ubering

Previously, I had written about my struggling friend Jabir who was unemployed for a couple years before he discovered Uber. He drove for Uber for a year before switching over to be a dedicated hotel driver. In this post, my other friend Harry shares why he drives for Uber even though he’s financially thriving. Enjoy!    

Normally when I’m out putting around in my SUV driving people around for Uber (or Lyft – I do both), the first question they ask is: “So do you do this full time?”  Reluctantly, I usually tell them, “No, I also work for an engineering company as an aerospace engineer.” (odds are, if you’ve ever flown, you’ve been on one of our planes). It’s not that I’m embarrassed to be a full time engineer/part time Uber driver, but it always elicits a very strange reaction from my passengers.

Why would anyone who has a perfectly good job want to drive around a bunch of jokers during his free time? They don’t outright say it, but I’m sure that’s what they’re thinking. But there are actually a lot of reasons why I enjoy it and as you may have guessed, it’s not just about the money. Well a big part of it is about the money, so let’s explore that a little more first:

The Cheapest International City In The World: San Francisco

9,500 sqft for only $8.9 Million in Presidio Heights, SF

Guess the price of this 9,500 sqft, SF home.

I have been everywhere, and it is clear to me that San Francisco is one of the cheapest cities in the world based on its wealth creating potential. So many of my friends who live in New York City or around the country like to say that the median rent and home price in San Francisco are our country’s highest. It’s simply not true. Rent and property prices in Manhattan are the highest AND they only get to enjoy the outside for six months a year! Related: East Coast Living: Is It Really That Horrendous?

If I had to pay $2,500 a square foot for a condo in Greenwich Village, I’d be a little bitter too about equally amazing SF property costing 40% less. Heck, you can even get panoramic ocean view properties in San Francisco for under $800 a square foot. There’s no other city in the world that can boast such value.

The media have a great way of misleading the public because they like to take averages and extrapolate. I am in the trenches, actually visiting open houses in NYC and SF and bidding on places. I’m also a landlord who is very in-tune with market rents and wages for the 22-35 year old crowd. Based on the rents and incomes I’ve seen, San Francisco is affordable if you can land one of the many tech, internet, software, healthcare, consulting, and finance jobs.

I was just in London for Wimbledon, and places in Knightsbridge and Chelsea make Pacific Heights in San Francisco feel like Costco prices!

A Great Way To Save More Money: Visualize Your Broke-Ass Lonely Self

Graffiti Long Island No Money No Honey

5Pointz, Long Island City

Ever since I was in the 4th grade, I’ve had this mild obsession with staying in shape. There was this girl I liked in gym class that I so wanted to impress, but I already had a gut as a nine year old! So imagine my dread when it was swim season and I had to sit down next to her in only my trunks. I couldn’t wait for the teacher to blow her whistle so I could jump into the pool and exhale. I was always so envious of the bony kids who didn’t have to suck in their guts.

I never did get the girl. I blamed genetics and my lack of courage to say, “Wanna get an ice cream sandwich during recess?” All throughout secondary school I decided to get into better shape because I knew I couldn’t be poor and out of shape at the same time. That would be a disaster.

Nowadays, I no longer care as much about being in good shape because I’ve usually got my clothes on. Women don’t seem to care for hunky dory guys anymore. A nice smile, an engaging personality, a job, a car, a stack of Benjies, and a two bedroom condo with a view of jumping dolphins in the horizon will do. Can you really blame single 40-year old guys who are still having the time of their lives?

“Even if I don’t need him to take care of me, I’d like to know he can provide the life I want to lead,” mentioned a couple female friends who are 8’s, but settled for 6’s.

If we men can’t stay fit, then we must be able to at least generate enough wealth to provide. Being unfit in wallet and in wealth leads to loneliness. This is our curse from society, which I’ll discuss more in an upcoming podcast.

“No money, no honey,” as the saying goes. 

How Much Is Optionality Worth To You?

D Sharon Pruitt

Photo by D Sharon Pruitt

When we first graduate, we have little-to-no options since we know nothing. We’re a cost center that does what we are told and likes it. We develop skills that provide us more options over time. We look for better opportunities or ask for raises with more skills. Sometimes we get complacent and just stick with a company for way too long like a bad boyfriend or girlfriend.

Eventually we stop being so parsimonious with our money because our financial nut grows to the point where we can afford luxuries otherwise foreign to us in the past. The luxuries I’m willing to pay up for now are convenience, time, and less stress. I used to be OK waiting at the DMV for 3-4 hours to register a used car. No more. I used to be fine waiting 45 minutes for a bus instead of taking a cab. But no more. Waiting in line for hours to get cheaper event tickets was no big thang. Now I am more than happy to pay a premium to get access to nice seats.

I think most of us who really care about our finances have a strong frugal side. Savings is in our DNA. We know that so long as we always spend less than we earn, we’ll eventually reach an amazing financial place. But due to the confluence of old age, awareness, and more money, we eventually change our spending habits.