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Executing on Tax Loss Harvesting for End Of Year

I am sure a large amount of people are just like me wondering what, if anything, they should do as the year closes out to take full advantage how much you owe in taxes. I know this is the first year I have learned about the Financial Independence movement and I am excited to document what I am doing so I can look back on it a few years from now and thinks of many mistakes I made.

Step 1: Look at all my taxable accounts to see how everything has performed for the year. This has been a terrible end of the year for the stock market, BUT this is exactly what I was hoping would happen early on in my path to financial independence. The more I continue to dollar cost average and continue purchasing index funds while the market goes down, the more shares I will buy.

Account 1: Vanguard Holdings

Now let’s look at how the actual accounts did to see if we have any room to do some tax optimization!

Taxable Account Total

Well that is a part of the game. Total losses for first taxable account: -$19,887.52

Now time to look at my E Trade account:

One of the biggest mistakes I made over the course of my investing has been getting into BitCoin. Looking back, I was a dumb and naïve young investor and I have tried to turn it around for the better. I have sold all my shares of the GBTC, but unfortunately lost over $8k in the stock…this isn’t to mention what I lost in actual purchasing of Bit Coin.

Bitcoin Loss

Now to look at my current positions on my E-Trade account:

E Trade Pic 2

The only stocks that I am going to be able to sell and re-buy to increase my Cost Basis are going to be CF (+$255.85), GNKWF (+$5.80), and WMT (+$1,046.55).

  • Total Gains: +$1,308.20
  • Total Losses: -$10,525.32

 

Total Taxable Accounts Summary

Account Gains/Losses
Vanguard -$19,887.52
E-Trade -$9,217.12
Total -$29,104.64

Step 2: Now that I have a good understanding of how my accounts have performed, I need to determine the best next steps to take. From my understanding of tax loss harvesting, there are three main things I can do. First, I am going to ensure dividends are not automatically re-invested to prevent a wash sale. A wash sale, from my understanding, is an elimination of getting any tax benefits if you sell something for a loss and then immediately buy it or something like it back. If done you would not be able to harvest any losses for tax purposes. Second, because all my vanguard account is invested in VTSAX, I am going to find another fund I can purchase that will prevent a wash sale. After doing some research, the fund that I have decided to purchase is VLCAX. This is the Vanguard Large Cap Index. From everything I am reading these two funds are different enough to ensure the IRS would not see this as a wash sale. Now it is time to sell my VTSAX and buy VLCAX in each account. Third, I will sell any accounts I have made a gain on and re-purchase the individual share. This will be very easy this year as there aren’t many shares I have made money on.

Selecting all the available shares from my VTSAX taxable account. Note I have setup my account to be able to sell by individual times purchased in order to better harvest gains/losses.

Vanguard Pic 2

Moving investment to VLCAX

Vanguard Pic 3

Step 3: Purchase back the VTSAX fund after 31 days to ensure it isn’t considered a wash sale. Since today is Christmas and the markets are closed, the actual purchase of the fund will happen on 12/26 meaning that I can purchase the shares back on 1/28/19. This will ensure I can take advantage of tax lost harvesting.

Step 4: Coming home for the holidays, I found out that I also have a large amount of bonds relatives purchased for me years ago. After doing some research I found that bonds are treated as capital gains if you sell them before the full maturity date. Since I have so much in losses that I can harvest, I can offset some of the losses by all the gains from the bonds. This is the perfect year to do this because I will still have losses after accounting for the interest earned on the bonds. Below is a snapshot of the bonds I have. I found the estimated value of the bonds at this website by putting in the bond number and issue date: https://www.treasurydirect.gov/BC/SBCPrice

Bond Pic

So now I will be able to claim $4,324.64 in gains from interest earned on the bonds.

Full Summary: I know this post has a lot of content in it so I am going to do a really high level overview of what I have done and provide specific numbers

  1. Determined total amount of gains/losses in my taxable accounts
    1. $19,887.52 in losses from Vanguard
    2. $9,217.12 in losses from E-Trade
  2. Looked for a Vanguard fund to purchase after selling my VTSAX to prevent a wash sale. Landed on purchasing VLCAX.
  3. Sell any taxable account stocks that have increased in value from my E-Trade account
    1. I will end up selling and re-purchasing CF (+$255.85), GNKWF (+$5.80), and WMT (+$1,046.55) for total gains of $1,308.20
  4. Sell positions in bonds I currently hold to harvest gains of $4,324.64

 

Tax Implications:

Accounts Gains/Losses
Vanguard  $ (19,887.52)
E-Trade  $   (9,217.12)
Bonds  $     4,324.64
Total  $ (24,780.00)
  • Able to reduce taxable income by $3,000 for this year based off current tax limitations. Since I am in the 24% tax bracket, this will save me $720 in taxes this year
  • I will be able to carryover $27,780 of losses going into the future so this will be able to save me more money in the future. I think I will be in the 35% tax bracket for next year, so if I max out $3k/year then I will be able to take the max amount of losses for the next 9 years. This means I would end up saving $1,050 per year for the next 9 years totaling up to $9,450!

Dang, putting this together was a lot of work but I really hope someone can read through it and action on some of the things I did. Please note that everything outlined here is what I have done. I am by no means advocating others to do this or giving tax advice. I am just documenting exactly what I am doing in order to try and reduce my taxes this year!

Let me know what you think and how you are going to crush the game in taxes closing out this year!

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TheYoungRetireeBy33 Entering the Blogosphere

DANG, it has been a little over 3 months now since I first found the Financial Independence community. I cannot believe that I am finally doing this. We are actually about to go on this journey together and I cannot be more ecstatic about it! I have come so far, yet I have just started on my path to true financial independence. I would like to set the stage for this blog and start the first post with a little background about myself and what I hope to get out of this blog.

Who am I? I am just your everyday average Joe who is 26 and currently living a great life. To be clear to anyone who stumbles across this blog, I am not retired at this point in my life. I wanted to create the name TheYoungReitreeBy33 as it is catchy and it outlines my goal to be financially independent by 33. I grew up in a very nice household having two amazing parents who were hardworking and always taught my older brother and I the core values of respect, hard work, and above all else to always give back to others. I have had a crazy and eventful life up to this point. I will go into much more detail in a later blog post, but for the time being, I have had the opportunity to live across the US from Dallas to Buffalo to Fayetteville, AR to Bethlehem (the holy land 😉), PA to Orlando. My career and schooling have given me this great blessing and I wouldn’t change anything for where I am currently at in my life.

 

Why Create a Blog? The question that I have continued to ask myself now for a few months. I have been debating on whether to create a blog to track my journey or just continue down the path without sharing anything. I think the main reason I am going to take a leap out and do this is because I want to hold myself accountable. Whether nobody ever reads any of my posts or I have the privilege to reach hundreds of readers, I am excited to follow-through with this. There have been too many times in my past where I would start something but never finish it. Time to see where this path to FI will take me and to document all my steps along the way.

 

What I Plan to Share? The main point of this blog will be to document my path from knowing absolutely nothing about the Financial Independence community to working my way to Financial Independence Optional Retirement (FIOR). I heard this term on a podcast I listened to a while back and it really resonated with me. There are a ton of people who are all about the FIRE movement (and I love that they are all about it!!) but I want to ensure people understand exactly what I am going after.

 

What Are My Goals? I have so many different goals it is hard to write them all down here in a concise condensed down version, but I will write out what I currently read every morning during my Miracle Mornings.

  1. I commit to becoming financially independent where my investments will be able to sustain my spending levels by the age of 33 no matter what. There is no other option.
  2. I commit to save 75% of my take-home pay each month no matter what. There is no other option.
  3. I commit to engage in more conversations with random strangers to learn about all the unique people there are in this world no matter what. There is no other option.
  4. I commit to engage in random conversations with girls I have never met no matter what. There is no other option.
  5. I commit to work out twice a day no matter what. There is no other option.
  6. I commit to eat healthy foods in which keep me energized and alert no matter what. There is no other option.
  7. I commit to read 2 Mr. Money Mustache articles each day no matter what. There is no other option.
  8. I commit to read 2 books per month no matter what. There is no other option.
  9. I commit to listen to 1 Impact Theory or related video every day no matter what. There is no other option.
  10. I commit to use the counting down from 5 method once a day no matter what. There is no other option.
  11. I commit to track my finances at the end of every month no matter what. There is no other option.
  12. I commit to empty my mind of negative thoughts no matter what. There is no other option.
  13. I commit to meditating at least once a day no matter what. There is no other option.
  14. I commit to doing a Miracle Morning each morning no matter what. There is no other option.

 

I feel this is a good starting point for setting the stage for this blog and I am very excited and grateful that you have read up till the end of this post! There is a lot more to come on this journey.

 

Please also follow me on my Instagram account to see when I started tracking my path to FIOR at : TheYoungRetireeBy33

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Childhood Filled with Conflicting Messages: Why You Shouldn’t Always Listen to Your Parents Advice

How the hell do I keep getting all these conflicting messages about what is happening in my life, how I should be acting, and why I am crazy for doing the things that I am doing. This has seemed to be the constant message I receive from work colleagues, friends and my family for the past 3 months since I have entered my obsession with the Financial Independence community. I want to be a financial badass! The main point of this blog post is to give anybody who might be reading this a good understanding of the mindset I had ingrained into me from a young age.

About My Childhood and Parents: I was very fortunate growing up the way I did. I was born in Dallas, TX and had a very stable home life with my two amazing parents and my brother who was two years older. Both my brother and I were extremely competitive in the spots we played growing up and most of my childhood I remember my parents taking my brother and I across the state to play in tournaments for various sports. My mom is your classic Jewish mother who is very loving, always looks out for her boys, and very “Jewish” when it comes to spending money. My father on the other hand was raised Christian but doesn’t really care about religion all too much. They both agreed to raise my brother and I Jewish with the one stipulation from my dad being that we would always celebrate the Christian holidays.  My parents both had steady jobs making a median income throughout my childhood. Since I graduated college, both of my parent’s careers seem to have taken off, although they don’t really like to talk about it. My mom is currently working as a Senior DBA for Oracle and my dad is a Regional Sales Rep for Matco tools. I think they both make over $150k/year now which may be why they have seen some sever life creep.

My Parents Money Mindset: This is interesting to think about now that I have started down the path of Financial Independence at an early age. My parents NEVER discussed money in the household from what I remember. Looking back, it seems strange that this topic was never brought up. I don’t know if that was my parents plan or if they just never thought to discuss money. I don’t know if they felt insecure about the living they made and didn’t want to share with my brother and I or if there were any financial struggles they had that they wanted to ensure they kept from my brother and me. I know my brother and I had to have been very expensive kids as we trained at a tennis academy twice a week, we traveled to tennis tournaments once a month where we had to stay in hotels and drive 4-5 hours to get there, and my brother liked to frequent the Emergency Room with broken bones and concussions. Maybe my parents were extremely tight with their budget and lived paycheck to paycheck. It is weird trying to bring up money with them now, but they still don’t seem to want to discuss when I try to begin the conversation. The one thing I do know to be a fact is that my mom stresses every day on whether they have enough saved up in their nest egg for retirement. Every day she and my dad are contemplating retirement, but it seems as if they haven’t pulled the trigger (at 61 and 62 years old) because they don’t know if they have enough money saved. One thing I do know for a fact, this is not what I want to be worried about when I am that age. There are so many other things I want to have completed in my life and the last thing I want to be worried about in 40 years is whether I will have enough money to be retired. Things I don’t agree with at all that I see from my parents in the life they live now:

  1. My parents pay $300/month in tv/Netflix subscriptions that only my mom uses really because my dad is always traveling. THE FUCK YOU DO THAT FOR? CUT THAT CORD AND INVEST THAT MONEY INTO ASSETS!
  2. Both my parents work jobs that seem to make them extremely stressed because of their fear of not having enough of a nest egg for retirement. FUCK THAT!!! WHY DO SOMETHING YOU DON’T LOVE? WHY ADD THE ADDITIONAL STRESS IN YOUR LIFE AT THAT AGE?
  3. My parents don’t seem to acquire any assets and are of the Poor Dad mindset of their home being an asset. They currently don’t have any assets that are producing cashflow for them each month. RICH DAD, POOR DAD…YOUR HOME ISN’T AN ASSET, unless you house hack 🙂
  4. My parents have seen what I have done with house hacking and renting out the two additional bedrooms in my home to live for free and they still think I am absolutely nuts for doing so. They literally have my aunt and uncle living with them in their basement and my parents aren’t charging them a dime. WHY ARE YOU WASTING ALL THIS INCOME POTENTIAL!?!? I HAVE PEOPLE WHO LIVE WITH ME AT MY HOUSE AND PEOPLE THINK I AM CRAZY, BUT FUCK IT, JOKE IS ON THEM, I AM THE ONE WHO IS LIVING FOR FREE!
  5. My parents live lavishly and love to spend money on going out to eat often, drinking alcohol for dinner each night, and they continue to spoil family and friends because of being good hearted people. COOK AT HOME MORE OFTEN AND CHANGE YOUR DIET TO BE HEALTHIER! DON’T CONSUME AS MUCH ALCOHOL.
  6. My parents have always told me to just put into my 401(k) what my employer would match because it was free money but there is no reason to put any more than that. Why the hell would I not want to max that sucka out every single year!! Even more free money they are missing out on. WHY HAVE I LISTENED TO THIS FOR 4 YEARS NOW AND MISSED OUT ON AN ADDITIONAL $56K IN MY 401(K) PLAN. IF ONLY I KNEW!!!
  7. My parents don’t sign up for a HSA account to get the tax advantages the account has to offer! WHAT ARE YOU THINKING! THIS IS FREE MONEY AND SO SIMPLE TO DO!
  8. My dad has this fantasy of camping up in the mountains and without even trying it with my mom and the dogs, he decided to buy a supped up $40k truck as well as a brand spanking new camper. Why the hell would you buy a $40k truck and then proceed to buy what was probably a $10-15k camper. SAY ADIOS TO $60-70K.

 

I know most people reading this (hopefully at least one person has read to this point 😊) might think that I hate my parents and think they are dumb with finances…well that is partially true. I do think they have made a ton of mistakes financially. It is clear they are not dumb people, they have just not been fortunate enough to know there are hundreds of thousands of posts that describe how to be a financial badass! Why not take all that information in and become a freaking Rockstar who crushes it and can feel comfortable later in life from a financial perspective? The last thing I want to do when I get to be my parents age is working a job I don’t truly love and worrying about if what I have saved up in retirement will last for my lifetime.