Finance questions from a young'un

[Lenaxia]

Hey SBers, I'm looking for some financial advice. I'm still, by any standard, young at 24. I'm hoping that people can give me some advice on where I should start working towards and also had a few questions about finances in general.

I have a stable tech job, though I may be looking to return to medical school in the future. I am in a good financial position right now and do not have any debts.

1. My first question is a more immediate question regarding ESPP. I have been holding onto my ESPP for over 1 year to avoid the short term capitals gains tax. My current set that I'm looking at selling is over 1 year old but less than 2 years old. It already has accumulated a 175% gain from the purchase price so it was well worth holding onto. The question is, do I hold onto it for another year to make it a qualifying disposition, or should I just sell it right now?
   
   Would selling it right now allow me to make it worth harder for me? Or is the extra 1 year worth it? I am not in need of excess money right now and am asking purely from a perspective of maximizing gain.
   
   
2. What exactly is a disqualifying disposition? or a qualifying one for that matter? From what I could find on the internet, the only benefits I could find for a qualifying one was that I would not have to pay Social Security or Medicare on the sale. I believe I still have to pay income tax on it even if it was more than 2 years.
   
   
3. Do you guys have recommended readings for stocks? My dad used to manage my stock account as it is his hobby to play with things like that, but I am interested in picking it up on my own.
   
   
4. How much liquidity do you like (assuming the ability to maintain excess). I have been aiming to have about 5-10k worth of liquid cash at any given point with the rest going in to my 401k/roth. I don't have excess income beyond that, but if I were to max out my 401k and roth, it'd then goto stocks. Do you usually aim to keep more or less liquidity? Where do you put your excess?

My career is still in it's relative infancy and my exposure to the financial world is even more underdeveloped. I spent far too much time in school studying and as a result, am just barely starting to tread out into this world, so any advice would be appreciated!

 

[garyd54220]

Spend every cent you can get your hands on buying dive gear. That's what the rest of us do.

Gary

 

[SC_Hoaty]

When making decisions about taking a gain now or later, remember the tax law later will NOT be what it is now. You can determine the consequences of taking it now, but the consequences of taking it later will always have an element of risk, because the "rules" are not set in concrete.

This advice came to me years ago, but with the current economic situation, seems more true than ever!

 

[Lenaxia]

Spend every cent you can get your hands on buying dive gear. That's what the rest of us do.

Gary

Just bought a dry suit so already on that, lol

 

[DeputyDan]

When making decisions about taking a gain now or later, remember the tax law later will NOT be what it is now. You can determine the consequences of taking it now, but the consequences of taking it later will always have an element of risk, because the "rules" are not set in concrete.

This advice came to me years ago, but with the current economic situation, seems more true than ever!

Tax planning past the next presidential election (regardless of which election) is a fool's errand!

 

[mrfixitchapman]

It's only money. Go make more.

Excellent advice given to me by my AOW instructor.

DC

 

[lulubelle]

My Dad would be proud of you for thinking about such things. Well done.

Regarding your ESPP, when is your enrollment date for your current enrollment? If you are not at the 2 year mark from your enrollment date, then holding the shares for 1 year does not buy you the long term capital gains rate.

Personally, if you meet the 2 year mark from your enrollment date, and have held the shares for 1 year, I'd probably sell at least some of it. Chances are that the capital gains rates are going up, and chances are the market will correct again. I just sold 1/3 of my shares after a quick 30% increase.

You do not pay "income" tax on these sales, you pay only the capital gains tax which is appropriate.

As for reading, read general stuff. Read the Wall Street Journal, really. And if you are really wanting to get jump up and down, The Economist. And just for fun, I like the Harvard Business Review.

 

[Lenaxia]

My Dad would be proud of you for thinking about such things. Well done.

Regarding your ESPP, when is your enrollment date for your current enrollment? If you are not at the 2 year mark from your enrollment date, then holding the shares for 1 year does not buy you the long term capital gains rate.

Personally, if you meet the 2 year mark from your enrollment date, and have held the shares for 1 year, I'd probably sell at least some of it. Chances are that the capital gains rates are going up, and chances are the market will correct again. I just sold 1/3 of my shares after a quick 30% increase.

You do not pay "income" tax on these sales, you pay only the capital gains tax which is appropriate.

As for reading, read general stuff. Read the Wall Street Journal, really. And if you are really wanting to get jump up and down, The Economist. And just for fun, I like the Harvard Business Review.

We have two enrollment dates (and thus two purchase dates). The purchase date in question is 8/19/2009.

I have not met the 2 year mark from enrollment but I have met the 1 year mark for capital gains.

I'll pass the 2 year mark before the next presidential election though not so sure about the tax increases, but either way, if Obama gets his way, I'd still fall within the middle which shouldn't get a tax increase (isn't that a misnomer? It's a tax level restoration, we were at reduced rates anyway so its not really an increase?).

As mentioned, as I'm already at a 175% profit, I can sell for a good amount of money right now, just trying to decide on whether or not holding for one more year will be worth the extra money. The stock won't move much, it's Intel... it's blue chip and its big...

I may just sell it and throw it into the stock market...

 

[lulubelle]

We have two enrollment dates (and thus two purchase dates). The purchase date in question is 8/19/2009.

I have not met the 2 year mark from enrollment but I have met the 1 year mark for capital gains.

I'll pass the 2 year mark before the next presidential election though not so sure about the tax increases, but either way, if Obama gets his way, I'd still fall within the middle which shouldn't get a tax increase (isn't that a misnomer? It's a tax level restoration, we were at reduced rates anyway so its not really an increase?).

As mentioned, as I'm already at a 175% profit, I can sell for a good amount of money right now, just trying to decide on whether or not holding for one more year will be worth the extra money. The stock won't move much, it's Intel... it's blue chip and its big...

I may just sell it and throw it into the stock market...

If you are not 2 years from your enrollment date, you will be paying the short term capital gains rate if you sell those shares now.

Capital gains rates are going up, period. Not likely to matter who is in office, and that change will be across the board, regardless of income level. You are thinking of income taxes when you state that you won't be affected, not capital gains taxes.

Do not make a bold statement about what Intel will or will not do. Take a look at what it did in 2001. It moved. A lot.

Consider having a strong cash position. A lot of people in the know are right now.

 

[sylpha]

Spend every cent you can get your hands on buying dive gear. That's what the rest of us do.

Gary

buy good quality dive gear which will last for years