top of page

Questions? I have answers!

Answers to commonly asked questions. Note this information is for educational purposes and any personal situations should be directed to a Financial Advisor. 

FAQ: Text


1. What is an IRA?

An IRA is an Individual Retirement Account (IRA) and a way for individuals to save for retirement in a tax-advantaged way. The 2021 maximum amount we can contribute annually is $6,000. Many financial institutions offer them including Fidelity, Vanguard, and Charles Schwab.  The process for opening one is like opening a savings account at Chase or Wells Fargo. Upon opening, we'd link a checking/savings account to fund the account, and select investments.  Investing does present risk - the account will not always go up.  In the long run; however, the market has always gone up.  

2. 401(k) vs 403(b) vs 457(b)

These are employer-offered retirement plans and the one offered will depend on our type of employer. The most commonly referred to is a 401k as this is offered by public and private companies. A 403(b) is offered by non-profit employers, and a 457(b) is offered for government employees, though some may offer both a 403(b) and 457(b).  They all operate in a similar fashion and have a maximum annual contribution and restrictions on accessing the funds before retirement. These plans are only offered through employers - an individual cannot open one of these on their own (though if you are a Business Owner and have for example an LLC, you can open a self-directed 401(k)). More info about retirement can be found in this blog post.

3. Which is better - Roth or Traditional?

This really depends on our current income, what we believe our future income will be, and what we believe tax rates will be at our retirement.  Traditional accounts defer taxes - meaning we pay taxes when we withdraw the money in the future.  If we expect our tax bracket in retirement to be lower than the bracket we are in today, that may be a good option to consider.  A Roth account is taxed today at our current tax bracket.  This is a good option if we believe tax rates will be higher in the future, or if we believe our income will be higher than it is currently putting us in a higher tax bracket.  Right now the Government does not tax Roth interest gains; however, we never have an idea what the government will do in the future. I personally contribute to both to hedge my risk; however, I know many who solely contribute to Roth and many who solely contribute to Traditional. 

4. How much do I need to invest for retirement?

Best practice says 10%-15% of our income, though more and more are saying 15%-20% is what is really needed.  This is not an easy percentage to invest; however, how can we expect that only investing 10% of our current income will be enough to cover 100% in retirement?  Compound interest works wonders (the gains we make on our contributions) but the more we can invest today will help us to have enough in retirement.

5. How much do I need to retire?

This depends on how much we want to live on in retirement.  If we currently make and live on $50,000/year and we want the same lifestyle in retirement, we will need a savings of $1.25 million at retirement (annual income x 25).  The catch - if we contributed pre-tax money, that $1.25 million will be taxed upon withdrawal so we need to actually have more (plus every year inflation increases).  This number should be considered the bare minimum.   Check out this blog post for more info! 

FAQ: Text


1. How much do I need in an emergency fund?

This is dependent on a few factors: do we have a steady income, are others depending on our income, how quickly could we get a new job if we lost our current one?  Best practice says we should have 3-6 months saved; however, if we are the sole provider for a family that is likely not enough.  If we work seasonally or have inconsistent income (e.g. service industry relying on tips, own business such as a photographer where we are dependent on clients booking) we likely want more saved as well.  Our current health status can also impact this - if we have frequent medical visits or an ongoing medical condition we may want to have more saved if we cannot work for a period of time due to medical leave. 

2. The interest rate on my savings account is so small. Where can I find a higher interest rate?

Interest rates right now are at historic lows so unfortunately, the differences in rates aren't going to net that much more.  I personally use an online bank - Ally - which means there are no overhead fees for a brick and mortar so they can offer a higher interest rate. A quick Google search will show the banks offering the highest rates. 

FAQ: Text


1. How high of a mortgage/rent can I afford?

Best practices dictate our monthly home expense should be no more than 30% of our pre-tax income – note this should not be only our mortgage, but also our monthly property taxes, insurance, and HOA if applicable.  If we make $50,000 a year, our monthly home payment should be no more than $1,250. Know that banks and lenders usually approve mortgages for much more than that – that does not mean we need to take on a mortgage up to the limit approved by the bank (and that is partially how the 2008 crisis happened).

2. How Bad Is It If I Don't Pay Off My Credit Card Every Month?

I won’t sugar coat it – it’s bad.  Not only do we pay a large amount of interest on that unpaid balance, but this can also negatively impact our credit score if we carry a large balance. If we cannot pay them off in full, start by paying whatever we can above the minimum.  Maybe we don’t have extra at the time of bill payment, but a week later we get paid and have an extra $30 – go online and make a mid-cycle payment! 

3. How can I realistically budget?

Budgeting is different for everyone – you can think of it as a diet.  Some are Paleo, some Keto. Some people are vegetarians, and others love a weekly steak.  There is no wrong way to budget as long as our expenses are less than our income.  Personally, I follow the 50/20/30 budgeting strategy (and these numbers can be changed to what works for you!)  50% of our money goes to necessary expenses like mortgage/rent, utilities, car payment, and student loans.  20% goes to savings, investing, and retirement contributions, and 30% to flexible spending like eating out, shopping, and vacations.  For me I like having buckets of money to spend (e.g. 30% on fun for the month) versus saying I have $20 for coffee or $50 for eating out.  For some having discipline of further breaking down those buckets will help in staying within the bounds, for others like me, I like the flexibility of having buckets.

4. I’ve cut everything extra out of my budget I can, and it's still not enough. What can I do?

There is only so much we can cut from our budget.  If we are sure there is nothing left to cut, it is time to focus on increasing our income.  If our work performance is good at our job, ask for a raise!  The worst they can say is no, which leaves us in the same situation we are in right now.  If a raise is not possible, it is time to find a side hustle.  Literally anything can be a side hustle these days – think about what you are good at that others are not, or tasks that need to be done but people don’t want to do (think of Instacart, people are now shopping for other’s groceries!) TaskRabbit is great for one-off jobs.  If a side hustle is not possible and our current job will not provide a raise, brush up that resume and apply for other positions for more income.

FAQ: Text


The ideas, concepts and opinions expressed are my own for educational purposes, and nothing on this site is to take the place of licensed help or financial advice. All choices and decisions are of your own personal responsibility and I will not be held liable for any losses, injuries, or damages arising from its display or use. Please consult a Certified Financial Advisor if you have questions related to your specific financial situation.

FAQ: Text
bottom of page