A Thanksgiving Checklist

There are many reasons to be thankful this Thanksgiving. I am thankful to have a loving family, and my health to be able to support them, be with them and enjoy my life near them. Every year there are a few items that I go over to make sure my family and I are in the best shape either financially, physically and emotionally. This list might help you

Retirement and investments:
- Tax advantaged accounts:
  - Max out 401K
  - Perform a Roth IRA backdoor
  - Max out your HSA
- Rebalance
- Do a financial checkup and review your credit reports
- Evaluate your debt (student loan, mortgage, credit card), If your APR is larger than 3% pay them off
Insurance: Make sure all of your insurances are in place to protect your assets
- Insurances for home (homeowner or renter)
- Car insurance (do you need that full coverage or can you downgrade to a great liability insurance)
- Life insurance (You don’t need to set your life insurance to 10X of your salary, as long as your life insurance covers your liabilities like mortgage and gets you 2X or 3X your income you are in a great shape)
Will and Estate Planning :
- Check your beneficiaries on all of your individual accounts , add your spouse to all accounts as the beneficiary and make sure you have contingent and secondary beneficiaries
- Review your will and make sure it is up to date, maybe set up a living trust, a document for your end of life decision and power of attorney
Donate: it is thanks giving after all
Do micro optimization:
- Check your emergency fund, is it too large?
- do you have an automated dollar cost averaging strategy
- is your HSA allocation correct?
- Review your account reports and see if there is any item you don’t recognize.
- Reduce your bills,
Tax Planning:
- Put together TAX documents and a file
- Talk to your tax preparer
Budgetting:
- Increase your budget for travel
Health and mental health
- Schedule your annual physical, dental cleaning and checkup, eye exam, lab work, fitness test
- Sign up for a gym if you don’t have one
- Mental health: what is your hobby this year? what classes are you taking?

FIRE Automation Steps: Dollar Cost Averaging using Vanguard

One of the questions that is probably on your mind is how can I get the most out of my by weekly paycheck?

One great solution is to ask your employer to direct deposit it in a high yield saving like Ally, American Express or Discover savings and collect a 2% interest. This by itself is a $2,000 free money on a cash reserve of $100k that most people keep in their savings anyways.

My wife an I did not have a high yield savings account and I looked into whether or not I should open one. The plan was for our salaries to go into a high yield saving from American Express and then from there for us to deposit it to various investment accounts or pay our mortgage and bills. This is still on my todo list. We have an account with First Republic that is a relatively local bank and we are happy with their 0 international fee ATM cards. However their savings account gives us peanuts compared to any of the online banks.

We however religiously do a dollar cost averaging through Vanguare, we feel this is more appropriate for us. Our salaries go directly to our First Republic account and then every week Vanguard takes $1,250 out of it and invests in VTSAX (VTI is more tax efficient but I have not figured out how to automatically invest in VTI). That way we can get a dollar cost averaging benefit and also not manually modify our strategy.

You can set it up very easily by going to

My accounts > Account maintenance > Automatic Investments

And setting it up to deduct weekly cash from your bank and invest into a Vanguard mutual fund.

I am personally comfortable doing a weekly investment in VTSAX and do not feel the need to diversify that further. I am slightly bothered that I cannot invest into VTI directly and I hope there is some way to correct that. The only remaining optimization is for me to move our cash reserve to an online savings account to get that $2K funny money back from our bank.

Why you should automate your HSA investment

We talked about HSA accounts and why you should have one. If you still need more convincing you can look into my other post “What is an HSA anyways“.

When it comes to investing, automation is your best bet. You should automate your investment so 1) you cannot fiddle with it too much and as a result get a better return, that’s why dead investors often outperform active investors. 2) you want to spend your precious time on family or on yourself, you shouldn’t constantly be on a call with Vanguard or some other bank.

My HSA used to be a mess. Every two weeks I had to log into my account, rebalance, and move my excess money to the investment part of my account. It took me a few months to realize that my bank can automatically take any new deposits from my employer and transfer them to my pre-determined diversified portfolio.

If you have not done this yet, you should stop what you are doing, log into your HSA account and automate investments.

What is an HSA anyways

Imagine you are saving for an early retirement, you are maxing out your 401k, doing a backdoor Roth, and putting the rest of your money in a Vanguard investment account. You are doing great but unless you plan to die at 65 you should also think about maxing out your HSA account to pay for your retirement after you are 65. HSA is a wonderful tool and still one of the few vehicles that is accessible to everyone regardless of their income level. If you are into the FIRE movement (financial independence and retire early) you should absolutely have one.

So what is an HSA? HSA is a triple tax-sheltered account and if you live in the US and you are not maxing your HSA you are probably losing money. I see only one reason to not max out an HSA account and that is if you are saving for a big purchase like a house or a wedding or you have a huge unhealthy debt like a high interest credit card debt. Even if you have a mortgage you are probably better off saving for HSA assuming your interest rate for the mortgage is within healthy levels.

Triple tax sheltered means your deposits are tax free, your money grows tax free and your withdrawals are also tax free. I use HSA as part of my retirement planning and you should too.

A Health Savings Account (HSA) is a bank account, a combination of a savings account and trading account that are both tax deductible and work even better than your Roth IRA and your 401k. As we said, you invest in it tax free and withdraw from it tax free. I do use it to plan for my later days and you should too. An HSA won’t help you much when you are in your 30s or your 40s but after you are 65 you can withdraw from it without any penalty. Even before that, you can use it to pay for your medical expenses, your dental work, or whatever your insurance does not cover, I don’t touch my HSA money however and just leaving it there to grow. So imagine you expect to live until you are 90. My personal plan is to have enough money in my HSA to pay for the last 25 years for myself and my wife. With that reasoning whatever I can save in my HSA is justified and I do in fact max out my HSA every year ever since we bought our house (before that we were too focused to save for the down payment).

For an HSA you have to be enrolled in a high deductible healthcare plan. Which means you pay a smaller amount of money for your healthcare (big plus), your company will probably deposit some money into your HSA account too, say $1,500 (another big plus) and you can also deposit another $5,600 to your HSA to save for your retirement (the maximum you can add to your HSA is $7,100 for the year of 2020. This means the sum total of your contributions and your company’s contribution cannot exceed $7,100 in the year of 2020).

That said, if you are one of those people who get sick frequently and burn through your deductible every year then a high deductible plan is not probably useful for you but if you are healthy I recommend looking into switching to a high deductible health plan.

In your HSA account you can invest your money in various investment options. Below is the breakdown of my diversified investment. This is what I am comfortable with and you should set your own diversification plan. Plan to have a good mix of various investment options.

For more information, these series of videos can help you understand HSAs

https://www.youtube.com/watch?v=6dBfodn7NH0

https://www.youtube.com/watch?v=4-mWawt3bAM