The Sunday Best (12/17/2017)

The Sunday Best
The Sunday Best is a collection of articles I’ve curated for your reading pleasure.

Expect most of the writing to be from recent weeks and consistent with the themes presented on this website: investing & taxes, financial independence, early retirement, and physician issues.

 

Presenting, this week’s Sunday Best:

 

I’m an index fund investor, and there’s a good chance you are, too. The Biglaw Investor ponders a possible dilemma If Everyone Bought Index Funds.

 

What if everyone bought a home? Home ownership is touted as “The American Dream” and a great investment. The Canadian Physician at Table for One says You Should Buy a Home. Or does she?

 

Home ownership can put a real strain on the budget. So can a baby, as the Drs. Darko of Docs Outside the Box fame can attest. Budgeting for Baby is the focus on Keeping Up with the Darkos.

 

You know what else can bust a budget? Car commuting. I prefer biking to work when the weather allows, but admittedly I drive all winter long (and to and from our second home). How much does commuting cost you? Transportation Evolved has The Real Cost of Commuting Calculator to help you answer that question.

 

The annual Mountain of Debt data for graduating medical students was released this fall. Anesthesiologist Dr. Charles Cochran of Life of a Med Student dissects the numbers in Medical Student Debt: The 2017 Numbers.

 

How could a physician possibly pay off the absurd levels of accrued debt? With a great job, of course! Radiologist Dr. Walter Nguyen, the Senior Resident has some advice for residents and others when it’s Time to Look for a Job.

 

Someone I know had an ER visit for a migraine that resulted in an $8,000 bill. And that’s with no imaging. Pediatric Emergency physician Rogue Dad, MD also recognizes The Financial Folly of the US Healthcare System.

 

I’m not aware of any health systems accepting Bitcoin as payment. I don’t have much else to say about Bitcoin at this point, but my blogging friends do:

 

Are you ready to be inspired by some non-Bitcoin millionaires? The latest batch includes a foreign aid worker with a $69,000 a year salary and a father / son team who have similar multimillion dollar net worths. From ESI Money:

 

Would millionaire status make you happy? For the millionaire readers, does it? Amy @ Life Zemplified has some ideas on what it takest to be happy. How to Be Happy? Do These 3,677 Things and It’s Yours!



Track your investments for free with Personal Capital. That's how I track the PoF portfolio.

 

Never a Better Time to Open Your Donor Advised Fund

 

It looks increasingly likely that tax reform will be signed into law and take effect in two short weeks. Everyone will be affected differently by the changes to the tax code, but there are two provisions that make it more likely that you’ll benefit significantly less from future charitable giving compared to giving now in 2017.

First, the standard deduction will nearly double under proposed tax reform. This means many fewer Americans will benefit from itemizing deductions. If your total deductions don’t exceed the new $24,000 standard deduction, your donated dollars won’t lower taxes one bit.

Second, your marginal tax rate will most likely be lower in 2018 and beyond. A couple earning from $165,000 to $315,000 (married filing jointly) will be in the 24% federal income tax bracket. Currently, most of that income would be in the 33% federal income tax bracket.

Why start a donor advised fund now? Doing so will allow you to take a full deduction at this year’s presumably higher marginal tax rate (assuming you itemize currently). Let’s say, for example, that you plan to donate $10,000 a year over the next five years.

If you donate $10,000 to charity in each of the next five years, you would not receive any deduction unless your other itemized deductions total at least $14,000. The donation would only be fully deductible if your other itemized deductions total at least $24,000. And you will probably be receiving the deduction at a lower marginal tax rate. I expect that to be 24% for us based on my income in the coming year(s).

Conversely, you could start a donor advised fund with $50,000 in appreciated funds today. You’ll eliminate the capital gains in those funds, get a tax refund of your marginal tax rate (for me, that would be 33% of $50,000 = $16,500 plus a state tax refund). You could then give $10,000 (plus investment returns) from the DAF to your selected charities each of the next five years.

To me, it’s a no-brainer, particularly if you already have a taxable account with one of the “big three” brokerages that have low cost funds and similar charitable DAF programs. Those being Vanguard, Fidelity, and Schwab, and they make it simple to open a DAF. The latter two can be opened with as little as $5,000 and allow grants from your fund starting at $50. Vanguard’s minimums are steeper at $25,000 to open and $500 for a grant from the fund.

Finally, don’t think of tax optimization of charitable giving as getting the most back for your donated dollar. Think of it as getting the most money to charity for each dollar you actually part with. You could hand the food shelf a $100 bill or you could give $180 in a tax-deductible manner and it would cost you $100. Which do you think the charity prefers?

For more information, please see the following posts of mine on the subject:

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The 12 FI Days of Christmas

 

The moment I’ve been waiting for since I first conjured up the idea of this blog has arrived. It’s the surest sign that a blog has “made it.” Some bloggers want to be featured on Forbes or CNBC. Some hope for a post to go viral on Facebook. Others measure success by money, looking to earn six figures per year or even per month with their blog.

But every blogger aspires to this. It’s clearly the pinnacle of the blogging world. Nothing could possibly be better than:

 

To be featured as a LEGO character in a Christmas music video.

 

Without further ado, grab some popcorn and check out what our friends at I Dream of FIRE, My Sons Father, and Budget Epicurean have put together featuring Dave Ramsey, Mad Fientist, Physician on FIRE, Mr. Money Mustache, Brad from Choose FI, Root of Good, Broke Millennial, J.L. Collins, Dividend Diplomats, Afford Anything, Fiery Millennials, Budgets are Sexy, Retirement Manifesto and 1500 Days.

Be sure to stick around to see what my character does to LEGO Dave Ramsey. It’s explosive!

 

 

To learn more about how this video came together, visit I Dream of FIRE’s post.

To help support this site and its charitable mission, consider finishing your Christmas shopping list with the Amazon links below. Thank you for your support!

 

Have a cheerful week!

-Physician on FIRE

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32 comments

  • Love the video. Had to watch it a couple of times in order to catch all those funny exchanges. It’s pretty clear so much talent went into it.

    And yes it def confirms all of you featured have made it. #Goals 🙂

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  • Thanks for the feature!

    Speaking of that mountain of debt – I should probably do a full disclosure – my personal pile just got refinanced through one of your links! Go charitable mission, go!

  • hatton1

    Millionaire 27 is very interesting. Basically made a lot of money as a medical equip sales rep who became an exec. Amy ‘s post on happiness great. I followed your lead and opened a DAF. I have not watched the video yet but I will. Cheerio

    • When I first started my career, I met up with a college friend who had become an ortho equipment rep. He lived down the street from a very famous NFL QB and made more money per hour than I did.

      I love hearing from readers who have opened DAFs after reading my posts. I think it’s WCI’s turn.

      Cheers!
      -PoF

  • Hey thanks for the shout out!
    I didn’t think a post about Bitcoin would make it onto the Sunday best.

    I did have a goal to have X amount of views on my blog but now my goal has completely changed. I gotta be featured as a lego somehow. #lifegoals

  • Wait, Pete had the chainsaw. I’m sticking around to see what he does to all your lego-butts if you don’t get on your bikes now – blood will be spilled!

  • I’m not sure how to admit that I made $100 from speculating for one day on Bitcoin. I am so thoroughly against it as anything but a gamble, and yet I tossed $2,000 of my own money into GBTC basically on a dare.

    But despite my view of the Bitcoin Bubble as more of a drinking game (shot every time the value drops by over 20% in one day, chug your beer every 20% gain!) and less of a viable investment opportunity, I recently admitted to /r/financialindependence that I actually kick myself every time I hear a Bitcoin story.

    This is because I recall a time back around the end of my undergraduate career (circa 2009/10) hearing about cyrptocurrencies/blockchain and thinking “Oh, this is cool, solves a lot of currency problems…probably the future of money! But I have no idea which one will be worth a $h!7, and all but one will probably end up being worthless…” Bitcoin happened to be the first one I heard of. I opened a Bitcoin wallet way back then, considered mining, and said to myself, “Nah, the electricity isn’t even worth it if this isn’t the currency that takes off. Screw it.” Doh! I’d have tens or hundreds of thousands of dollars today in exchange for a couple hours of computing time overnight in 2010!

  • I really enjoy ESI Money’s millionaire interviews – they are definitely inspiring and make me want to continue to follow his teachings of Earn, Save, and Invest.

    I bought a little BTC and LTC back in August… I’m fairly pleased with the performance – let’s just hope it doesn’t go poof! 🙂

  • Druggedzebra

    Have started our Donor Advised Fund, just haven’t funded it yet. Have been waiting for the chips to fall for the new tax law. Thinking that we will place about 8-10 years worth of giving into it this year. It looks like most of the tax law sunsets after 8 years (for the personal side).

    • That’s a smart play, DZ. I didn’t realize you could open one without an initial donation. I would get on it the day after Christmas, and wait for the ex-dividend date. Apparently it’s possible to donate prior to dividend, but only get credit for the post-dividend value. Strange, but apparently true.

      Best,
      -PoF

  • Anonymous Regular Reader

    POF –
    I had been thinking about a DAF for some time, and finally started it this past week. Doing so was incredibly simple at Schwab, and was completed in three days. It was $100k, which will represent a number of years of giving at our typical rate. All of the transferred securities were individual stocks that were bought in the late 90s and had a basis of less than $30k.

    To me, there is no better year to do so than this year. First, as you mention, the upcoming tax code changes are favorable. Second, the market returns have me ahead of where I expected this year. Lastly, we had a higher income due to some work transitions and buyouts.

    I write this to thank you for your role spreading the message of charitable giving, as well as to perhaps convince others that now is the time. I’m not sure there is a better way to celebrate how fortunate many of us have been.

    • That’s great to hear. Thank you for letting me and the readers know about your generous gift!

      I topped off my DAF for the reasons you mentioned and the fact that I’ll be working part time most or all of next year. I’m fairly confident we’ll be in the new 24% bracket if tax reform passes.

      Thanks again!
      -PoF

  • Thanks for the mention, PoF! Appreciate being included with all these great posts. That video is amazing! Merry Christmas to you and yours!

  • Lots of great posts, your Lego character is freakin awesome!

  • Mark T

    Can you clarify one can only fund a DAF with only thirty percent of one’s adjusted gross income in2017 and any excess is carried forward and deducted over the next five years.

  • We couldn’t be happier with the reception of our video! Blushing with all the nice things y’all are saying. Your Lego flames guy is definitely one of my personal favorite characters, and yes, you’re an “it guy” now!

  • Gasem

    For your calculating pleasure, Phil DeMuth sent me this link

    http://taxplancalculator.com/

    I keep reading about how BTC is a “bubble” and “going to zero” “has no value” I don’t see that but I’d like to see a true reasoned explanation as to why? It started in 2009 and has had great growth with great volatility but it’s never gone to zero. Google started in 2004 and FB was listed in 2012 and AMZN in 1997 so it’s been around 5 years less that google and 3 years more than FB so why is it a bubble?

  • Hilarious video and great Sunday Best as always PoF!

    Good information on how the new tax plan will affect charitable giving. First info I think I’ve actually seen on it!

    Cheers!

  • Nice roundup. I enjoyed BLI’s article on indexing — the concept of too much money in index funds is something I’ve thought about as well. I just don’t think you need that many active traders to run an efficient market, and there are still plenty of people in the mutual fund / hedge fund industry looking to grab any edge they can find.

  • The video was fantastic. I tried to have my family watch it, but they weren’t familiar with the characters so it didn’t make sense. Still Bike or else…

    As to Bitcoin, did not. Almost every time I decide to venture out on my own, I lose money. So I figure at this point, if I did buy some, it would drop like a rock and I would be responsible for people losing billions. I just can’t live with that. I do wonder though if the person feature in the CNBC article has already cashed in? If not, then they aren’t a millionaire yet and Greed may be their undoing.

    I also read Rogue’s post on the heath care system. We had a $10K ER bill once. Our deductible at the time was $8K plus 20% up to $10K. Thankfully we were able to pay it back interest free over a number of years. I wish I had answers or solutions, but I don’t.

    cd :O)

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