1. If someone taught you via skype, what would you want to learn? Tell us here!
    Dismiss Notice
  2. Take the 100 Days Positivity Challenge : Join Here
    Dismiss Notice

Need Savings Advice

Discussion in 'Money Matters' started by Caughtinbetween, Jun 24, 2019.

  1. Caughtinbetween

    Caughtinbetween Silver IL'ite

    Messages:
    232
    Likes Received:
    232
    Trophy Points:
    93
    Gender:
    Female
    hi ,
    i am confused with few things i am considering and want to know your views on it .
    let me put here my unfiltered thoughts here about where i stand financially and how to improve from here .

    1: So far , i pay about $1500/mon for the day care , buy baby stuff / my basic stuff , paying medical bills and some grocery shopping , some spend on takeouts if i have to work long hours on a day , paying loans taken during fertility treatments and such which mostly comes up to another $1300-1500/mon.

    2: i also take a pay deduction of about $1500/mon towards 401k
    then dependent care fsa , hsa and some other benefits that round up to $500.

    3: i got stock assets every year since i started working and more so since i joined my new role so this november i will have part of these stocks vest and some more next year and so on. Those stocks are worth $50k .

    here i have options (want to know your view on the best one ) :

    i) I can pay 40% tax on those stocks and keep it in my brokerage account without selling any of those. So in future whenever i want to sell those i only pay the tax for the extra amount it has grown since i bought those stocks . I think its called capital gains tax ? So here in order to pay the tax i would need around $25k approx. by november that i dont have right now . I would probably need to take a loan for that.

    ii) I can let them sell the shares , cover the money for the taxes and then they convert the remaining amount to shares again which we can keep or transact , the tax is same 40% .

    I dont see the difference in both or maybe i dont understand .

    So either way and including other previously vested shares i would have ~$35k by end of the year.

    I have about $12k in loans that I am trying to pay off asap. If I reduce the 401k contribution i would be able to pay off my loan in the next 4-5 months .

    Initially i used to think that i should transfer all of my stock earnings to child's college plan but lately i feel this strong urge to own at least a small apartment in india from my earnings even if its a one bhk or a small condo . So i am thinking I for the time being save some small amount in college plan and 401k and put max. towards buying a home in india .

    Note :I dont pay towards household expenses .

    How should i work on saving for the home , lets say with a target of 1-1.5 years to save for the down payment.

    Only I plan to put entire money towards buying the property so want something very basic , not expensive . I think I would be able to pay$1k in emi min. if i adjust 401k and other expenses . City i am planning is Hyd , in an average area.

    thank you for your help as always .
     
    nuss, KashmirFlower and Thyagarajan like this.
    Loading...

  2. Laks09

    Laks09 Moderator Staff Member IL Hall of Fame

    Messages:
    5,354
    Likes Received:
    8,220
    Trophy Points:
    440
    Gender:
    Female
    CIB - First of all, congrats. That’s a great accomplishment!

    I don't know much about options converted back to stocks. It's better to sell, pay tax and invest elsewhere since un-vested stocks are always going to be there. I wouldn't want vested and un-vested options sitting on one company, but rather would diversify. That's just me though.

    I would rethink the house in India if I were you. I’ve done that and it's good money sitting in an asset that cannot be easily converted back to cash.

    I wouldn't do the college savings plan either. College plans can be started and built over the years with small monthly contributions. Once its in the plan, its hard to take it out, for anything other than a college expense. Your baby is still small, the bulk add option is for people who have older kids who are going to college in the next few years and need to make up for all the lost years.

    When you are investing money, always think about how to get the money out if needed. It's good to have real estate assets and diversification in India. It is also prudent to know your savings are accessible and convertible quickly. In your specific situation, I wouldn't park money in an apt and buy it out with cash down. If I were you, I would invest in the US, have a target and keep that money here. I would look at specific short/medium/long term funds and invest in those. If after all this, I have surplus money that I don't need to convert and bring back to the US in the near foreseeable future, I would buy the place in India or find other investment avenues in India.

    An apt is a beautiful dream but think of the realities of having a place. You will be paying monthly maintenance, dealing with tenants or agents or both, spending money on upkeep and not living in the place you own. We have sold apts because of the difficulty in coordinating all of this. Regardless of how good your family in India is, you will be pulled into these things. Its a complication you don't need. There are other investment avenues in India.

    Btw- you need a financial planner. You should look for someone who will help you with all this. Investing is work and you can't rely on the internet for investment advice. Until you are able to manage yourself, find someone who can help create a portfolio, diversify, give investment advice etc. Once you have that person, all you have to do is ask questions and whys and then follow that person's advice.
     
  3. Thyagarajan

    Thyagarajan IL Hall of Fame

    Messages:
    3,899
    Likes Received:
    4,302
    Trophy Points:
    315
    Gender:
    Male
    :hello: I am proud of your achievement or and accomplishment .
    2. I happened to read your post out of curiosity and remembered awrite up in the link below

    Nri Investment Avenues For $ In India

    Ideas in it probably might help to judge and conclude your investment in India. At present Indian currency taken a severe beating vis a vis$ and Indian exporters in dollerermsare a happy lot.
    As for real estate, I tend to agree with @lak09 analysis/views & suggestions.
    God bless
     
    Caughtinbetween likes this.
  4. Caughtinbetween

    Caughtinbetween Silver IL'ite

    Messages:
    232
    Likes Received:
    232
    Trophy Points:
    93
    Gender:
    Female
    Thank you @Laks09 for your comprehensive reply. Thats very helpful and puts my thoughts in perspective .

    Right now , I'm working on getting debt free in the next couple of months before the end of the year as a priority.
    I have read about the importance of a financial planner in your previous replies to some other posts as well. those replies were on my mind and i was thinking of tagging you but thought you would be very busy as such with kids vacation and stuff but silently expected you to answer :) I have never approached a financial planner ever in my life. So when I am close to it , i will ask you again about some more details about it . No hurries , I know you are extremely busy so whenever you get a chance . Thank you very much for taking time out .

    You are right with my need for liquid cash . With all the history that you know of , I would like to have as much cash as readily available as possible . Its just that its a small dream somewhere that i should own a small place of my own , that no one thinks that i have no place to call my own - is behind my thought process.

    I have a college plan but right now i only save like $100 in it a month .

    Honestly , until when we are in the U.S is not in my hands .Its completely controlled by H and ILS .I would expect we would be here for the near future . Because ILS family jointly i.e ILS , H and SIL invest in properties in india for which H takes loan . So i assume he cant afford to go back with loans unpaid at least in the immediate future . But i am completely out of the picture there. thats why I am confused about how and where to investing .

    However I also bought about 15 tolas gold in the last two-3 years.

    You rightly pointed out hassles in buying and maintaining the property . I would need to depend on my father to do the same and he is not very experienced in handling these matters . So thats another thing to consider as well. Besides I should have easy access to the money whenever i need it .

    thank you very much , i will think more about it and revert .
     
    Thyagarajan and Laks09 like this.
  5. Laks09

    Laks09 Moderator Staff Member IL Hall of Fame

    Messages:
    5,354
    Likes Received:
    8,220
    Trophy Points:
    440
    Gender:
    Female
    I just got lucky CIB. A friend was changing careers to do this FT and we were his first clients. He has done well over the years and is a trusted friend so I've never felt the need to find anyone else. It is hard to find the right one though.
    Here is a WSJ article I passed on the other day to a friend. This is a good starting point for anyone thinking about getting financial planning help. It talks about hiring the right professional to help with FP needs. Hope this helps. I've heard of insurance brokers or others claiming to be estate planners/asset planners/financial planners. Beware of those folks. They do get commissions for their ins sales and may not give you the right advice. The article says more.

    Of course, I completely understand. A home is a home. Nothing can replace it. There are ways to keep money aside for a home without actually having a home. I believe there are REIT index funds available in India that you can buy. It grows with the real estate market and when you are there and ready for your own nest, you can switch from the fund to buying a house. Or you could have mutual funds dedicated to "house" in other investment avenues and keep it for when you are ready to invest.Just putting it down in an asset plan and earmarking those funds for the house and going by the plan when you make investments will ensure the money won't be used elsewhere unless its an emergency.

    That's my favorite kind of investment in myself. People talk about gold index funds too but nothing beats shopping for jewelry with one's own money. Way To Go!!!

    Tag anytime, CIB! I'm in awe of your resilience and persistence. It's so refreshing to see these posts from you. Despite everything, you have moved forward. You are a true role model to me and many others out here. I got a lot of positivity and perspective from your recent posts! You are an inspiration to many of us.
     
    Caughtinbetween and Thyagarajan like this.
  6. Viswamitra

    Viswamitra IL Hall of Fame

    Messages:
    10,451
    Likes Received:
    18,601
    Trophy Points:
    538
    Gender:
    Male
    Dear Caughtinbetween,

    Let me try to address one question at a time.

    1) Why do you say you don't pay anything towards household expenses. Day care, baby stuff, medical expenses, groceries, etc. are household expenses contribution from you.

    2) Loan towards fertility treatment related is repaid @$1,500 per month. When you said $12,000 in loan you would like to pay immediately, are you referring to this loan or different? If it is the same, @1,500 per month, it will be paid in 8 months anyway.

    3) Benefits deduction of $500 is worth especially when you have a baby to take care and that is a good investment. I am assuming it covers the baby also.

    4) $1,500 contribution a month towards for your age is fabulous and you are already doing a great job towards your retirement. Keep it up.

    5) Regarding real estate you would like to buy in India, it is a great investment. I have bought an apartment in India @Rs 23 lakhs 10 years back and it is currently valued @ Rs 1.25 crore and I am still not ready to sell. The value appreciation itself is good even if you don't have a rental income. But if you want to buy for cash, you need to save a lot in the next year or two. You can probably plan 50% cash and 50% bank loan India and pay the loan out of rental income. If you are able to save more in the next few years, please go for a two bed room apartments and actually appreciation in value for such types are higher.

    6) College savings at this point in your life is not necessary and feasible. You can plan for it may be a few years later after you clear off your debts and have surplus cash.

    7) Always assume you need to have at least 6 months family expenses as cash reserve in liquid form and that is what most financial advisors would tell you.

    8) Lastly, stock option - You have not mentioned anything about the strike (exercise) price of the option. If your strike price is lower, you can exercise the vested stock and don't sell for 12 months. Some tax advisors consider the difference between the exercise price and the market price at the time of exercise is still a taxable event while others think that unless there is a sale to a third party, there is no tax. If you keep those stock for 12 months, it then, becomes a long term capital gains and therefore you pay only LTCG @20%. If your advisor tells you not to exercise because it is a taxable event, you can keep it as vested but not exercised. That is one option.

    The other option is, if the market value is $50,000 and you have more options vesting in future, you can probably exercise and sell and pay @40% as regular income tax, pay of the loan of $12,000 and reinvest the balance of $18,000 towards the house in India. That will allow you to save $1,500 you are paying towards loan now which you can accumulate for real estate investment in India.
     
  7. Thyagarajan

    Thyagarajan IL Hall of Fame

    Messages:
    3,899
    Likes Received:
    4,302
    Trophy Points:
    315
    Gender:
    Male
    :hello:Such a sound advise - considered views from all angles .
    @Caughtinbetween would find it highly useful.
    I too learnt some very good perspectives.
    Thanks and regards.
     
  8. nuss

    nuss Platinum IL'ite

    Messages:
    846
    Likes Received:
    1,517
    Trophy Points:
    263
    Gender:
    Female
    Dear OP,

    Kudos for being financial savvy!



    i) I can pay 40% tax on those stocks and keep it in my brokerage account without selling any of those. So in future whenever i want to sell those i only pay the tax for the extra amount it has grown since i bought those stocks . I think its called capital gains tax ? So here in order to pay the tax i would need around $25k approx. by november that i dont have right now . I would probably need to take a loan for that.

    I have no idea about this since we don't have stock options in academia. I do get paid for overload days but that is receiving extra retirement-eligible salary for overload days and that is quite different.


    I have about $12k in loans that I am trying to pay off asap. If I reduce the 401k contribution i would be able to pay off my loan in the next 4-5 months .

    If your loan has a lower interest rate and you are earning more in 401k (remember you get the compound interest and more is better in 401k contributions), you might want to keep contributing towards 401k. If the interest rate is high on your loan, then it will probably be wise to get rid of the loan.

    Initially i used to think that i should transfer all of my stock earnings to child's college plan but lately i feel this strong urge to own at least a small apartment in india from my earnings even if its a one bhk or a small condo . So i am thinking I for the time being save some small amount in college plan and 401k and put max. towards buying a home in india .

    I am not very financial savvy but what I have learned, if you have extra money and you are ROTH eligible, you might want to put maximum allowed in ROTH IRA and then rest you can put in 529 for your child and save some for the downpayment on a flat in India. I am a big proponent of saving for kids' college and we have 529 plans for both kids that we started as soon as they were born. However, remember, you can get a college loan but not pension without saving enough. You might want to start with a $100-200 monthly contribution to the college fund and then deposit lump sum if you have extra money.

    How should i work on saving for the home , lets say with a target of 1-1.5 years to save for the down payment.

    First, you have to figure out how much money you will need. Where do you want to buy your apartment? What is the current cost and what is projected cost in 2 years? Then you can save your stock earnings towards that goal or make a monthly contribution in a separate account.

    Only I plan to put entire money towards buying the property so want something very basic , not expensive . I think I would be able to pay$1k in emi min. if i adjust 401k and other expenses . City i am planning is Hyd , in an average area.

    Okay, I am sorry, you already answered my question. Again, you need to know what is the average cost in Hyderabad.

    I totally understand your desire to have your own place in India. I had a flat in India even though we were only using it for a few weeks a year. I sold it a few years back and now my husband and I are planning to buy a flat near Delhi where my sister lives. 2 BHK flats are ~35L there. These are nice apartments in a good society. You can ask your friends/relatives about a decent community in Hydrabad and start saving money accordingly. If you can find something in 30-40L range, you might be able to pay upfront with your bonus/stocks option in about 2 years.
     
    Caughtinbetween and Thyagarajan like this.
  9. Caughtinbetween

    Caughtinbetween Silver IL'ite

    Messages:
    232
    Likes Received:
    232
    Trophy Points:
    93
    Gender:
    Female
    Thank you all for your advices . I will come back to respond in detail shortly . Thank you.
     
  10. Caughtinbetween

    Caughtinbetween Silver IL'ite

    Messages:
    232
    Likes Received:
    232
    Trophy Points:
    93
    Gender:
    Female


    Thank you for your response @Viswamitra Uncle . To answer your questions here :

    1: Besides day care expenses and medical looks like H thinks everything else that i spent on was not needed because he thinks mostly it was waste of money.

    Including fertility loans and other CC bill , need to pay 19K in total . So I opted for a loan on 401k of 10K (because the interest was less) which will have a monthly deduction of 400$ and the other 9 K i will be able to pay back in next 3 months .

    2:
    Surprisingly he asked me about my plans of buying a home . He wants me to save for downpayment in the next 6 months and get a 2bhk . I informed that I first plan to pay back the loans and then save in cash few months of salary and then plan to save for downpayment . This i guess would take me about one year or little more or close to two years . He was very upset about it .

    3: In Hyd , if I were to look for a 1bhk its around 30-40L and 2bhk about 60L . Which I believe in next 1-2 years would further increase .

    4: Regarding stocks : So I will get stocks every year but the number would vary and would not be as much . So i dont have a exact figure on it . However between this and the next year I would have about 80k available (before taxes) . Out of which roughly 50k in this year and 30K in the next year. Lets say the value of a share is 1700$ . I tried googling about exercise option you mentioned above but didnt understand much of it .

    So when the time for the vest comes , the company offers options like : 1) Sell Shares to Cover Taxes (the default), 2) Sell All Shares, and 3) Pay Cash to Cover Taxes.

    if i take option 1 -- i pay about 40% taxes and then the remaining money is converted to shares and gets transferred to my personal brokerage account . This I can later transact .

    My question to you : If I keep these remaining shares in my personal brokerage account for say more than an year then then I pay LTCG tax of 20% on the amount the share price increased by ? (ex : if the price increased to 2000$ from 1700$ I pay 20% tax on 300$ ?)

    And if I sell the shares within the year of vesting and already having paid 40% i dont pay any tax ?

    If I go with option 3 , I have to pay the 40% and they transfer all the shares to my account and I keep it for whatever time I want and pay the taxes at that time .

    Sorry to get confused and ask you a lot of questions . And thank you so much for your replies . its really helpful.
     

Share This Page