I'm prompted by @bryanl to share what little I know about financial literacy for folks in tech who might be making good money, perhaps more than they can need (right now). I learned a few things this year about how to think long term after growing up poor. https://twitter.com/bryanl/status/1338889812003213315

There's a lot to cover and not all of it will apply. Just like engineering the "right" answer is often, "it depends." I'm not a financial advisor, accountant, or tax expert. I'm not a lawyer. I'm just a dude in tech who realized at age 40 he might want to stop working some day.

A lot of my observations are US-centric, or US-market centric. It's what I know and it's the context I'm living in.

Credit scores: they matter. If they're bad you can fix them. @myfico is the best tool I've found. You pay for the service. You get your credit reports and your real FICO scores, including the alternate algorithms used for credit cards, houses, and cars. This is real data.

There's an extremely active community on their forums for repairing credit. You'll learn a lot and you can do most of it yourself. It takes time to fix things you can influence like collections or outstanding debt payoffs. It takes seven years for something bad to disappear.

401k: Max it out every year. If you're in a high tax bracket now you may want to keep that traditional. If you think you're going to be crazy rich later use a Roth 401k. You pay taxes now for Roth, later for traditional. Either way that's a good savings for retirement.

Your 401k is an investment. By default it'll be invested in a pretty safe long term mutual fund designed not to lose the money you invested (with luck). Your employer might let you use some (or all) of that in a self-directed account, meaning you can pick the investments.

If you're allowed to use a self-directed 401k fund, and your risk tolerance is higher than, like 2/10, do it. You get all the tax advantage and you can diversify to riskier (higher growth potential) investments. You can pick ETFs and Mutual Funds, you don't have pick stocks.

Old 401k: You can roll an old 401k into a traditional or Roth IRA. That lets you pick the investments for this retirement account, based on your risk tolerance, and decide when you pay taxes based on your expected future rich-ness. You pay taxes on Roth now, traditional later.

HSA: High deductible health insurance is terrifying if you grew up poor and without any like me. But if you do the math, and if you're able to pay the deductibles when they come up, you often come out ahead. HSA accounts help. Often your employer matches or contributes, too.

An HSA isn't just a medical costs tool. It's actually the most tax free money you ever make. It has "triple tax advantage." You don't pay taxes on contributions, growth, or withdrawal. You can actually invest some (or all) of your balance in mutual funds, so do that.

Your HSA funds don't need to be used for medical expenses. Once you're 65 you can withdraw for any reason without penalty. Max out your HSA, invest the funds in the market, and keep as much of that money there as you can.

Social Security: You can create an account on @SocialSecurity and see how much you've contributed and what you can expect in return. It varies depending on which age you start withdraws. Typically the later the better, in terms of monthly income, but do the math on lifespan.

Federal taxes: You can create an account on http://irs.gov  and see all your old tax filings, anything you might owe, and you can pay it right there. Don't be afraid, do it. They already know where you live.

RSUs: If you're paid in actual stock (not options) they represent real income and they're taxed at income tax rates. Not capital gains rates, income tax. At a minimum your employer will withhold 22% of a vesting amount to pay taxes. You can elect for that to go up to 37%.

It's likely 22% withholding for RSU vesting is not enough to cover your real federal tax obligations on RSUs which means you'll owe taxes for the year. Plan for that. Accountants help. Increase withholding percentage, pay with cash, or sell RSUs yourself to pay.

Your situation will dictate how you handle RSU taxes. There's a penalty if you pay less than 90% of expected taxes each year, but the penalty might be worth it. Owing taxes means you might be able to invest that money over the year and earn on it, more than the penalty. Do math.

Selling RSUs: Look up the tax rates for capital gains. Chances are you're going to pay either 15% or 20% if you sell RSUs held for over a year (long term capital gains). If you sell RSUs held for less time it's taxed at your normal income tax rates (short term capital gains).

Generally you want long term capital gains, but not always. For example, if 10 RSUs vest today your employer will hold 22-37% of that for taxes leaving you with (let's say) 6.3 shares vested at market rate. If you sell them immediately it's short term but the gain was zero. 0*.35

Investing: The market has never fallen over any 20-year period in its history. Long term investing is going to grow your money, so you should do it. Picking stocks and trying to game the market is a losing strategy for most people. That means us. Look up dollar cost averaging.

Dollar cost averaging is essentially investing the same amount (fixed or percentage of income, say) at regular intervals (every paycheck, say) regardless of the state of the market. This is passive managed investing and studies show it beats professionals and active management.

Diversifying your investments is important. This goes for 401k, IRA, HSA, and individually managed investments. Mutual funds and ETFs are great for this. Generally, picking a handful of funds that track market indexes does the trick. The primary factor is Net Expense Ratio.

Net Expense Ratio is the amount a fund charges you to be a part of it. Look up a few and you'll see a vast difference: QQQ, VUG, FDIS, CLOU, SDOG. General guidance is, unless you know the fund will outperform the market enough to justify, go with a low net expense ratio. <=0.3%

Cash: keep some, but in any given year making a tech salary it's a good idea to invest more than you hold in cash if you can. Consider inflation and where your emergency fund/cash hoard is sitting. Shop around for a trustworthy high yield savings account.

I don't know about: cryptocurrency, real estate, commodities, gold, bonds, CDs, and many more things. Keep doing research. My research suggest that, even though I'm 20 years late, it is possible for me to stop working some day and still live a long time. I didn't know till now.

@threadreaderapp unroll this thread please