Grownup Escapades: Handling Finances

Alastair Paragas
21 min readJan 25, 2021


An enhanced revamp down the memory lane of the original Grownup Escapades: Handling Finances article I wrote more than 3 years ago, which looked at investments, high-yield checking and savings accounts as well as apportioning the paycheck, featuring additional personal finance tidbits of knowledge accumulated and improved upon in that time.

Note: ** — This calculation and the information was initially wrong and was corrected since its publishing (01/26/21 at 11:01AM PST), thanks to Andrew

In this 3-part writeup, we will dive into planning and strategizing cash flow — from day-to-day checking and savings to retirements and tax liabilities, a case of financial automation and personal financial surveillance to last but not least, the act of investing through the stock market. This is intended to be a whirlwind tour at some of the ways one can manage and develop their financial assets. Note also that there are other ways one could invest — but in my experience, the stock market is one of, if not the path, that requires the least knowledge and inertia to get started.

Take the average high/low price of the S&P500 for a given day from 1970 to 2020, average those out for a given year, and calculate the percent differences year-over-year, plotting those rates out along with the compound interest graph accounting for a.) the raw/actual growth in US dollars (not taking inflation into mind) and b.) consumer-price index adjusted inflation. Hypothetically investing in total market indices like the S&P 500 and the Wilshire 5000 allows us to diversify our investments cross-sector as well as our portfolio, which in turn controls our risk in the market. The code and datasets used to generate these plots are at

Note again that I am NOT a licensed financial advisor or a professional financial analyst — and that this writeup is mostly meant for informative purposes. Take this and any grain of information — especially about personal finance, with as much scrutiny and suspicion as even details of this writeup can be wrong. Look-out for “get rich quick” schemes/products (especially in the internet) that mask worthless/harmful information as financial literacy services/products and that takes a grip in our innate greed for financial comfort, suggesting overnight success over decades and years of strategy and effort. On average, no one gets rich quick overnight, and far fewer, on so-called shortcuts. However, on average and using the simple mathematical principles of compounding interest, the average market return/yields and the ever-present inflation of any currency (and yes, that includes the US dollar) — the act of doing nothing already puts the average do-nothing saver at an effective loss in today’s financial system.

Apportioning the Paycheck: Automating cash in-flow and out-flow

Traditional Bank Accounts: A finite serving table

With the state of the majority of consumer banks today offering zero interest rates for checking accounts, the traditional debit/checking account should never be seen as a location where one should store their money for months and much less, even years. Instead, one can imagine the account as a finite serving table, with one’s fixed expenses as the diners in this proverbial serving table — this can range from monthly car payments, rent to credit card payments. Adjust for a fixed small breathing room to avoid overdraft fees in case an unexpected payment/recurring payment price hike (a “hungrier” unexpected purchase) comes in for the month. For example, one can set a rule of calculating all your predictable monthly expenses and storing an amount equal to 1.5x that amount on your account — nothing more. Just like we are taught not to leave food to waste after dinner on the dinner table, don’t leave too much of your money out on a debit/checking account, subject to rot to the ever-present inflation in our monetary system (and in essence, you providing your bank an interest-free/low-interest source of money to grow themselves).

Offload as much of your expenses, whether they be fixed monthly payments or spontaneous shopping spree purchases as possible into a cash back/rewards-earning credit card, but only if you are not being penalized for using a credit card. It does not make sense to use a credit card for a 1.5% cash back on a monthly payment/purchase that penalizes you a 3% transaction fee for using a credit card. Read your merchant’s terms carefully. Be on top of your credit card expenses and strategize your monthly credit card expenses into the amount stored on your debit/checking account. Savings accounts can maintain your 3, 6 or 12-month emergency funds — there is no exact math to this as especially proven by the past year’s pandemic — but keep in mind that even the most aggressive savings interest rates alone are still lower than today’s rates of inflation. Balance and strategize with those two thoughts in mind. Taking a look at the US Bureau of Labor Statistics (, 59% of unemployed persons during February 2011 were jobless for less than 27 weeks (6–7 months), but 41% were jobless for 27 weeks or more.

There are multiple higher-yield checkings and savings accounts than the typical brick-and-mortar banks you would know about. For example, banks like Ally and Citi offer 0.50% annual interest rates on savings accounts (and even higher during more “normal” times — the pandemic has forced the Federal Reserve to drive interest rates down to encourage spending). Analyze their benefits, your ability to pull out money out of their network of ATMs/banks, bank services you would find yourself needing (cashier’s check/etc), partnerships with investment brokerages (making transfers faster) and many more.

Growth of $10K in a savings account given a 0.50% and 0.01% return savings accounts respectively, yielding more than a difference in $500 ($10,010 vs $10,511 for an initial $10,000 savings balance over 10 years). This may not seem much, but amounts to more than $5K difference for an initial savings of $100K, or $50K for an initial savings of $1,000,000. The code and datasets used to generate these plots are at

Retirement Accounts: Roth vs Traditional 401K

Roth 401K are retirement accounts where one makes contributions post-tax, where you put in money to the account after the appropriate amount of federal/state taxes have been applied against your income. On the other hand, one makes pre-tax contributions to a traditional 401K account. Upon withdrawal from a Roth account, withdrawals are not taxed, whereas traditional 401K withdrawals are taxed as normal income, using IRS income tax brackets.

Roth accounts are especially advantageous when one is confident if one will have higher income in retirement (and thus, will fall to a higher tax bracket where a traditional 401K withdrawal can hurt them compared to Roth’s tax-free withdrawal). Roth accounts also hold the advantage of tax-free/penalty-free early withdrawals even before retirement, provided the account has been held for some time and one does not withdraw above their level of contributions — once you start touching the interest you have accrued in such account, penalties are highly likely. It is also to note that retirees currently also get greater standard deductions (those over 65 can claim an additional $1,350 in standard deduction) and you may want to consider a standard 401K account if you expect to pay more in taxes while in your working years than during retirement.

Lowering Tax Liabilities with Tax-Deductible Expenses

The American Tax system is a progressive tax system, which increases the rate of taxation as one falls into higher tax brackets. For example, the IRS’s tax rates as of 2020 for single filers, are as follows (sourced from IRS’s News Release Room —

  • 35%, for incomes over $207,350
  • 32% for incomes over $163,300
  • 24% for incomes over $85,525
  • 22% for incomes over $40,125
  • 12% for incomes over $9,875

** For the purpose of simplification and not calculating in things such as the standard deduction: say you make $165,000 a year — that puts you at the 32% downwards (24% below $163,300, 22% below $40,125 and on). Another person who makes $163,000 a year, puts them at the 24% tax bracket downwards. A $1,700 difference between $165,000 a year and $163,300 is due to a tax liability of $544. Claiming a deduction of $1700 frees one up of $544 in tax liabilities.

The regular route for a lot of those who file their taxes (and the easier route) is by claiming the fixed standard deduction. However, there is also the route of itemizing deductions (thereby not being able to claim the standard deduction). These itemized deductions include making tax-deductible purchases and expenses — going to school (college tuition is tax-deductible), contributions into your high-deductible health insurance plan’s Health Savings Account (enroll for one immediately if you are in such a health insurance plan and check for your employer benefits/contribution match), contributions into your 401k, charitable donations/gifts, business costs (if you are building a company) and etcetera. Compare how much deductions you can get through itemized deductions versus the fixed standard deduction and claim the larger of the two (resulting in a bigger deduction of your taxable income, which can in return bump you down a tax bracket). Study the IRS annual tax tables and deductions you are entitled to, and strategize according to your current income, expenses and lifestyle. A starter list of deductions you can claim is at

Financial Automation and Personal Surveillance

Auto-pay and staying safe online

Most services nowadays allow for the configuration of auto-pay, from your monthly internet bills to even most apartment pay portals. As discussed above, move as much of your sensible revolving monthly expenses into your credit card and anything else, on your checking account, having an adjusted buffer of money in your bank account. You can schedule your payments and pay them by yourself manually, but if you have fixed monthly costs for things like phone bills, car insurance, car payments, rent and etc, it simply is a waste of your time to do these things manually (time that could be used for other things)— just ensure that you have the appropriate allocation for these expenses, fire and forget.

For repeated monthly payments and one-time purchases that you are not as trustworthy of (especially online), it is highly advantageous to get something like Paypal to shield you from having to dish your bank/card information to those merchants that you do not trust, which prevents them from actually knowing your bank/card information. Lock down your bank accounts and services like Paypal with a strong (as long as possible, randomized if you can help it) along with 2-factor authentication. It also makes sense to check if you’re going to lose any specific rewards interest rate by using Paypal instead of your card/bank directly (as vendors like Amazon, Lyft, Uber, DoorDash often have very specific rewards-based relationship with banks — for example, 5% cashback with Lyft Rides with a Chase card —, so do check up on that as well.

Managing revolving monthly payments with Paypal. Paypal automatically detects recurring payments and lists them out on the Automatic Payments section of your Paypal account.

Cards, rewards statements and cashbacks

Keep track of your credit cards and always opt to maximize your credit limit when you can (by calling the bank to increase such limit). Over the long run for your credit score, showing 20% utilization given 2K in monthly expenses over a 10K limit credit line will push your credit score towards a better score faster than 2K in monthly expenses over a 5K limit credit line (at 40% utilization). Usually, your credit card account duration with a specific bank, your current credit score and income are useful bargaining chips to negotiating a higher credit limit, but don’t hesitate to research out in the internet and call up your bank to increase this limit on your own accord, with some appropriate justification about your ability to be a good creditor.

Rewards-based cards usually have a cash back system that vary in the percent cash back/rewards (most starter rewards-based credit cards default to 1.5% for general purchases), with more specialized credit cards that provide greater cash backs/rewards based on air travel, gas and expenses. There are also seasonal partnerships between vendors and credit cards — for example, as stated above, Lyft currently has a partnership with Chase bank for 5% cashback.

Transaction Notifications and Expense Management

In the age of digital transactions and practically card-centric wallets, it can be hard to keep track of all the cash flow out of our accounts when it comes to expenses. There has been 1 simple, low-tech trick that I have personally used to combat this — silencing all but the most important notifications on my smartphone and enabling email and/or SMS-based notifications for ALL transactions that charge all my bank accounts. From purchases I make at the grocery store, to digital purchases on Amazon, down to recurring monthly bills — all of them pipes through to the top of my notifications and when paired with a smartwatch or enabling buzzing on your phone, provides physiological feedback that something has charged one of my accounts. I have found that this is a decent substitute for the old physiological feedback loop we got when paying using paper bills, where I get tactile feedback that something has charged me.

This is also especially great when I have a small amount of free time somewhere, where I can quickly look through my notifications and vouch for every single transaction that comes in, instead of glossing them quickly at the end of the month — which is especially useful for surveilling some sneaky monthly subscriptions that one could care less about.

Buzz, Buzz, Buzz for all those transactions

The benefits of credit monitoring services like Capital One’s Credit Wise cannot be understated, complete with weekly TransUnion credit score checks, dark web scanning as well as a credit score simulator. A host of comparisons for it and other similar services can be found at

Wall Street to Main Street

As I have stated above: there are other ways one could invest — but in my experience, the stock market is one of, if not the path, that requires the least knowledge and inertia to get started. However, many looking to turn around a fortune, especially with minimal experience, have been burned by the dreams of becoming an overnight millionaire and/or siren calls of enlightened people who apparently, with Nostradamus-like omniscience, know better than the market (“Invest in this cool X company or you’re going to miss out!”, “Invest in this plaintext currency or you’ll be left behind!”, “Refinance your home now and invest in this company that no one else knows about!”). To lay down a framework, we’ll get started with more diversified asset classes, with moderate returns, better shielded from market forces as they cut across multiple companies and/or sectors.

To get started, all you need is a:

  • Smartphone or a computer
  • Internet connection
  • Personal/Bank Info (needed so you can deposit/withdraw from your brokerage account as well as for the brokerage to report any taxes you may owe to the IRS)
  • 10–15 minutes to setup an account with any of the brokerages — simply choose from Fidelity, ETrade, Ally Invest, Charles Schwabb, Robinhood and many more

When looking for a brokerage, most reputable and well-known brokerages nowadays have commission-free trading as a feature. When selecting a brokerage, study its relative reputability, ease of user interface, vendor-specific benefits (having Vanguard as a brokerage ensures a commission-free purchase whenever you purchase a Vanguard-branded mutual fund), interoperability with any of your existing bank accounts, interest accrued on cash stored on your broker, transfer fees and many more.

Brokerage Insurance: FDIC, SIPC and Sweep Program

Ally Invest FDIC-Insured Sweep Program Opt-in
ETrade SIPC vs FDIC Sweep Program insurance programs

FDIC insurance found on FDIC member banks (most major banks you would know by name are most likely a part of the FDIC insurance program — find if yours is at is a bank insurance program backed with the full faith and credit of the United States government. Should such a bank fail, it covers up to $250,000 in such accounts per depositor, per bank, per account ownership category (for example, a single owner account under you is considered separate from a joint account you may own with a family member, affording you specifically a combined insurance of $500,000, $250,000 on each account, even if such accounts are in the same bank). Note however, that FDIC does not provide protection against stocks, bonds, mutual funds and other types of securities — even if such assets were obtained through those same banks. This is where the SIPC protection shines in.

SIPC insurance, unlike FDIC, is an insurance program backed by a non-profit organization unlike the FDIC. If you are in a SIPC member brokerage the SIPC insurance, should such a brokerage fail, covers securities (stocks, bonds, mutual funds, etc) registered in the SEC ( as well as cash balances (uninvested balances in your brokerage) up to a maximum of $500,000, with a $250,000 limit for cash balances. Note that this only insures you in case the brokerage (the company you’re using to invest in the stock market — ETrade, Ally Invest, etc) fails and NOT you making bad investments. Notice that the difference between this and the FDIC insurance is that it covers your investments/securities on a brokerage as well as cash balances should that brokerage fail, unlike FDIC who can only protect cash balances at banks.

Many brokerages now also have the option of an FDIC-backed sweep program, where any of your cash balances at a brokerage are insured for up to $1,250,000, not just $250,000 for what you would get with the SIPC and the FDIC insurance. Note however, that the FDIC insurance does not cover securities (non-cash assets/investments) unlike the SIPC insurance, even when your brokerage fails. Under the hood, this works as your brokerage splits up and “sweeps” your uninvested cash across multiple FDIC member banks until you buy a security, which allows for this greater limit of cash protection.

A personal strategy of mine is to split my assets across multiple brokerages, opt-in for the SIPC insurance and get the level of protection for both securities and cash that SIPC provides (unlike the FDIC, which strictly insures cash) which affords, for each brokerage, a protection of $500,000 total/$250,000 cash deposit limit, in essence providing me with (# of brokers * $500,000 total/$250,000 cash insurance limit) worth of protection combined. This also comes with the added side effect of diversifying myself across multiple brokers. For example, if you have 3 brokerages (say, Charles Schwab for one, Fidelity and Vanguard for another) where each hold some uninvested cash and investments in securities — this in effect, affords you a total of $1,500,000 total/$750,000 cash deposit protection combined instead of just $500,000/$250,000 cash deposit protection with just 1 broker. Under rule 201 of the SIPC insurance program ( — the key phrase being “accounts introduced by different brokers or dealers shall be protected separately”.

All accounts of a person which are introduced by the same broker or dealer shall be combined and protected as the single account of a separate customer, unless such accounts are maintained in different capacities as specified in the Series 100 Rules; accounts introduced by different brokers or dealers shall be protected separately.

What is in a name? Market indices, ETFs, Mutual Funds, Bonds, Expense Ratios and budget setup

Market indices are simply, a labeled group of holdings of securities — you have probably heard them in the news as S&P500 (representing the top 500 largest companies in the United States, weighted by their market capitalization aka a company’s entire stock market worth), Dow Jones Industrial Average, Nasdaq Top 100 Tech Sector, etc. Each index is typically used an economic benchmark and are topics of economic and academic study. One cannot buy a share of a market index out in the stock market out of the bat, but can do so through either an Exchange Traded Fund (ETF) or a mutual fund.

For example, one can purchase/sell a share of IVV, VOO or SPY ETFs to have an instant diversified holding into the top 500 largest companies in the United States as represented by the S&P500, and can do so at any time of day just like a share. On the other hand, a mutual fund is only typically sellable/buyable at the end of the day, (the time of the day where a price is quoted for it unlike an ETF which is quoted in real-time during the market hours) and also typically have lower expense ratios than an ETF. Expense Ratios signify the amount of money relative to the earnings of the tracked index, that a managing firm of that mutual fund/ETF considers as an expense (cost of hiring employees that manage the fund, transaction costs when ejecting/adding new shares to match the index, etc).

Typically, a lower expense ratio translates into greater returns on your investments (as less of the managing firm’s expenses takes away from your investment return). For example — SPY and VOO both track the S&P 500 index — but SPY has an expense ratio of 0.09%~ and VOO, 0.03%~. VOO and SPY has tracked the same index, but this has resulted to a superior annual rate of return for VOO of 13.38% for the last 10 years, over 13.31% for SPY. Given an initial investment of $1000, this small difference would have given you $21.61 more in profit with VOO over SPY in 10 years, or $794.13 more in 30 years. On the flip side, there is also more liquidity for SPY in the market (more transactions out in the market that buy/sell this ETF).

Bonds, unlike shares of a stock that represent ownership of a company, represents a loan to some entity for an agreed upon fixed interest over time as well as a re-payment of the original price and typically have an inverse relationship with stocks. In scenarios where stocks perform well, bonds don’t perform as good and vice-versa.

Note that on the longer term, stocks have generally out-performed bonds by huge margins in terms of both total return and annual interest rates on investments, but high-quality bonds (e.g. government and investment-grade bonds) serve as a stabilizing agent during recessions by making returns more predictable (reducing years where you may have negative returns). Adjust as expected. Plotting out an efficient frontier and visualizing your returns over risk (especially if you happen to know how to program and Python — libraries like are abound)

Efficient Frontier/Sharpe Ratio for Return/Volatility calculations on an investment portfolio — courtesy of

Preliminary Investigation: Bid and Ask Spread, PE Ratio, Market Capitalization, Dividends

Whenever you come to the decision of buying a specific security, you will come across the words bid and ask spread, P/E ratios, market cap and many more. Here they are explained:

  • Bid-and-ask spread is simply the difference between the highest price some buyer in the stock market is willing to buy for that security and the lowest price some seller in the stock market is willing to sell for that security. Whenever users place a buy/sell limit order, this information is propagated publicly (without the user’s personal info) out on the market, which forms the bid-and-ask spread.
  • P/E ratio, or the Price-to-Earnings ratio, represents the current price of a share compared to the earnings per share price of some company. A high P/E ratio is taken usually as a signal that investors in the market are willing to over-evaluate a stock, with respect to its current earnings, for a very positive future outlook while a low P/E ratio is taken usually as a signal that investors in the market have a more bleak outlook on a stock.
  • Market cap: Total dollar market value of all of the company’s shares of stock. It is calculated simply by the number of shares for a company being sold out on the market * the price per share.
  • Dividends: Some companies, not all, provide their shareowners dividends — meaning that not only can you make a potential profit by buying a stock and selling it at a higher price, but the company pays you money for holding a share of their stock as part of their earnings on a repeating basis (companies vary on this, but some pay out quarterly, some pay out annually and some pay out semi-annual dividends). Huge corporations who have enough free cash flow are typically more likely to hand out dividends than those who are smaller.

Order Types

You will find yourself coming across couple of different types of orders whenever placing an order out on the market to buy a security. These order types undergo through 2 typical durations — day orders and GTC orders. Day orders are cancelled/expired if not satisfied by market close around 4PM EST when ordering through the American stock markets like NASDAQ and NSYE. GTC (good till cancelled) orders keep running until are satisfied, cancelled or expired (with most brokerages expiring such orders within 2 to 3 months). The most common types of orders are:

Ally Invest Order Preview Screen, with the Market, Limit, Stop, Stop Limit
  • Market orders: orders that are executed as soon as possible, without a guarantee on the price one is buying a security for. The market price for a security always evolving (not just in terms of seconds, but down to milliseconds and nanoseconds) and usually, there is a bias of geographical/brokerage-based locality as to who can fulfill your orders the fastest based on the time one placed an order. Market orders are usually good for the day.
  • Limit orders: orders that are executed only if the requested price or better, is met. For example, in the case of you buying a stock, this means that the stock will be purchased for you at a price at or lower than your set limit price (a guarantee that the purchase will only be executed at the requested price or lower). In the case of you selling a stock, this means that the stock will be sold for you at a price at or higher than your set limit price (a guarantee that the sale will only be executed at the requested price or higher). Limit orders are configurable to be good
  • Stop-loss/Stop orders: orders that upon the arrival of the configured stop price, gets converted into a market order (stated above). This allows a pattern-based trader to start a market order when a desired price is hit. Unlike a stop-limit order, though the order is triggered when a desired stop price is hit, a stop-loss order prioritizes the fulfillment of purchasing the requested amount of securities rather than the price of the actual order itself.
  • Stop Limit orders: orders that upon the arrival of the configured stop price, gets converted into a limit order (stated above). This allows a pattern-based trader to start a limit order when a desired price is hit. This is usually desired when the price of the actual executed order is of higher/highest priority rather than the fulfillment of the order itself, provided that a stop price is hit.

Tax liabilities

There are 2 main tax configurations for investments in securities (stocks/bonds/etc) in the stock market — short-term capital gains (the purchase and sale of a stock under a year) and long-term capital gains (the purchase and sale of a stock for more than a year). It is quick to note in these 2 tax tables that the long-term capital gains rate, irregardless of your income level, is more forgiving (as low as 0% and as high as 20% of a tax on your net earnings in investments) compared to the short-term capital gains tax rate (as low as 10% and as high as 35% on your net earnings in investments). Also ensure that your brokerage accounts are configured correctly for tax purposes, with FIFO (first-in/first-out) as a good default option for your security purchase/sale — which means that whenever you sell a certain amount of a specific security (stock/bond/fund/etc), those that were bought chronologically earlier are sold first, which is great for the purpose of long-term/short-term capital gains tax rates.

Short-term capital gains tax rates, 2020 — IRS Schedule D:
Long-term capital gains tax rates, 2020 — IRS Schedule D:

In closing

It is important to implore upon here the concept of laying down a financial framework on your professional life, which should involve investing, should you have the capacity to do so. Should you not — do not gun it by refinancing your house mortgage to enter in a crazed gold rush with the stock market. Stick with the basics — find ways to cut down your costs if possible, strategically prioritize your debts, especially high-interest ones and when you have that breathing room, lay down the tracks for your emergency fund and investments to follow. Especially with real-life responsibilities like managing a family — do not be attracted by siren calls of single-company/cryptocurrency stocks/“next stock poised to explode” videos on the internet, unless you know what you are doing and have the capacity to take the risk. Diversify your portfolio cross-sector, markets and asset classes. Chase long-term growth and slower but less volatile returns.

In a recent Gallup Poll, 55% of Americans say that they, through a spouse or themselves, own at least 1 stock. This leaves a good chunk of the American population without any investments in the stock market. As can be seen through this graph — the faith in the market has taken a toll during the housing bubble and market crash around 2007.

Image courtesy of the Gallup —

Interestingly enough in the same article, stock ownership disproportionately climbs down based on college education (85% of postgrads has some kind of asset in the stock market vs 33% of those who do not have a college degree) or income level (84% of those who make above $100K a year vs 22% of those who make below $40K a year). There might be many challenges along your way before you can build a savings net/emergency fund as well as pay off some debts that you may currently have — but the importance of investing cannot be understated. The late financial crisis (as well as the dotcom boom and bust not too long ago) has painted the market as a place of greed and get rich quick schemes — but if you play the long game of modest annual returns with a good, diversified portfolio that crosses asset classes, sectors and with due diligence and research, investing provides a wellspring of financial growth and a semblance of stability and fighting ability for the foreseeable future, especially in times of stagnating salaries and increasing price of goods.

Some other additional resources from around the ‘net:

If you found this story, please smash that clap button once 👏, or multiple times 👏👏👏👏👏 if you found this helpful — don’t hesitate to reach out if you have any of your own tips and tricks — I would love to hear from you!



Alastair Paragas

Machine Learning Platform, Apple. Physics, UW. IA, Georgia Tech. I build apps/systems with Scala, Java, Javascript, Python, GoLang and many more.