---
name: finance
description: >-
  Personal finance planning — 5-pillar framework (cash flow, net worth, debt,
  emergency fund, investing), tax optimization, insurance review, retirement
  planning (FIRE, 4% rule, Mega Backdoor Roth), and document retention.
license: MIT
compatibility: opencode
metadata:
  workflow: finance
  audience: personal
  version: "3.0.0"
triggers:
  - create a budget
  - track spending
  - plan debt payoff
  - review investments
  - optimize taxes
  - organize financial documents
  - get a financial plan
  - retirement planning
  - how much to save
  - emergency fund
  - net worth
negatives:
  - stock trading advice
  - cryptocurrency speculation
  - day trading strategies
  - options trading
  - individual stock picks
---


**Disclaimer**: Educational financial planning information. Not professional financial advice.

---

## Workflow

Follow in order. Skip pillars already covered.

### 1. Assess Cash Flow

1. Calculate real monthly income (take-home after taxes, insurance, retirement)
2. Track expenses for 30 days
3. Classify into Needs (50%), Wants (30%), Savings (20%)
4. Identify surplus or deficit

### 2. Calculate Net Worth

1. List all assets (cash, investments, property, retirement accounts)
2. List all liabilities (credit cards, loans, mortgage, student debt)
3. Net Worth = Total Assets - Total Liabilities
4. Track monthly — direction matters more than the number

### 3. Eliminate High-Interest Debt

1. List all debts with balance, rate, minimum payment
2. Choose avalanche (highest rate first) or snowball (smallest balance first)
3. Attack with surplus from cash flow
4. Debt is emergency if total > 6 months income OR rate > 10%

### 4. Build Emergency Fund

1. Phase 1: $1,000 or 1 month (starter)
2. Phase 2: 3-6 months of essential expenses (full)
3. Phase 3: 6-12 months (conservative / irregular income)
4. Keep in HYSA only. Never invest it.

### 5. Invest for Retirement

1. 401(k) up to employer match → free money
2. HSA (if eligible) → triple tax-advantaged
3. IRA (Roth or Traditional) → $7,000/yr ($8,000 if 50+)
4. 401(k) up to max ($23,500)
5. Taxable brokerage → no limits

---

## 5-Pillar Framework

```
1. Cash Flow      → Income - Expenses = Surplus
2. Net Worth      → Assets - Liabilities = Net Worth
3. Debt           → Avalanche or Snowball
4. Emergency      → 3-6 months essential expenses in HYSA
5. Invest         → Tax-advantaged accounts first
```

## Pillar 1: Budgeting

### 50/30/20 Rule

| Category | % | Includes |
|----------|---|----------|
| Needs | 50% | Housing, utilities, groceries, insurance, minimum debt, transport |
| Wants | 30% | Dining, entertainment, subscriptions, travel, shopping |
| Savings | 20% | Emergency fund, retirement, investments, extra debt |

### Budgeting Methods

| Method | Best for |
|--------|----------|
| 50/30/20 | Beginners |
| Zero-based | Detail-oriented |
| Envelope | Overspenders |
| Pay-yourself-first | Savers |

## Pillar 2: Net Worth

- Track monthly via spreadsheet or app
- Direction > absolute number
- Milestones: $0 → 3 months expenses → 1x income → 10x income

## Pillar 3: Debt Payoff

| Strategy | Approach | Best for |
|----------|----------|----------|
| Avalanche | Extra to highest interest rate | Mathematically optimal |
| Snowball | Extra to smallest balance | Psychological wins |

> **Debt is emergency if**: total > 6 months income OR interest rate > 10%

## Pillar 4: Emergency Fund

| Phase | Amount | When |
|-------|--------|------|
| Starter | $1,000 or 1 month | While paying off debt |
| Full | 3-6 months essential expenses | After debt free |
| Conservative | 6-12 months | Irregular income, self-employed |

**Where**: High-yield savings account (HYSA). Never invested.

## Pillar 5: Investing & Retirement

### Account Contribution Hierarchy

1. 401(k) up to employer match → free money, do this first
2. HSA (if eligible) → triple tax-advantaged
3. IRA (Roth or Traditional) → $7,000/yr ($8,000 if 50+)
4. 401(k) up to max → $23,500/yr
5. Taxable brokerage → no limits, less tax-advantaged

### 2026 Contribution Limits

| Account | Limit |
|---------|-------|
| 401(k) elective deferral | $23,500 ($31,000 with catch-up 50+) |
| IRA | $7,000 ($8,000 catch-up 50+) |
| HSA (individual) | $4,300 |
| HSA (family) | $8,550 |
| HSA catch-up (55+) | $1,000 |
| Mega Backdoor Roth (after-tax 401k) | $69,000 total (incl. employer) |

### 3-Fund Portfolio

```
- US total market (VTI / FSKAX):    60-70%
- International (VXUS):             20-30%
- US bonds (BND / FXNAX):           10-20% (age - 20 = bond %)
```

Target expense ratio: 0.03-0.07%. Rebalance annually.

### Savings Benchmarks (Fidelity)

| Age | 30 | 35 | 40 | 45 | 50 | 55 | 60 | 65 |
|-----|:--:|:--:|:--:|:--:|:--:|:--:|:--:|:--:|
| 1x salary | 2x | 3x | 4x | 5x | 6x | 7x | 10x |

### Withdrawal Rules

- 4% rule (25x annual expenses) — traditional retirement
- 3-3.5% for early retirement / longer horizons
- RMDs start at age 73 (SECURE 2.0)

### Mega Backdoor Roth

1. Check if 401(k) allows after-tax contributions + in-plan Roth rollover
2. Contribute up to $69,000 - $23,500 (elective) - employer match = after-tax capacity
3. Request in-plan Roth rollover (automatic if plan supports it)
4. Growth on after-tax is taxable if not rolled over promptly

> Pro-rata rule does NOT apply to 401(k) after-tax → Roth conversions

### Backdoor Roth IRA

1. Contribute $7,000 to Traditional IRA (non-deductible)
2. Convert to Roth IRA
3. Pay tax only on earnings between contribution and conversion

> Pro-rata rule: if you have other Traditional IRA balances, conversion is partially taxable
> **Fix**: roll Trad IRA into 401(k) before converting

---

## Tax Optimization

| Strategy | Impact |
|----------|--------|
| Max HSA ($4,300 / $8,550) | Triple tax-free |
| Max Trad IRA deduction | Reduces AGI |
| Tax-loss harvesting | Offset gains + $3,000/yr income |
| Mega Backdoor Roth | After-tax → Roth, up to $69,000 |
| Health insurance (self-employed) | Above-the-line deduction |

### 2026 Standard Deduction (estimated)

- Single: ~$15,000
- Married filing jointly: ~$30,000
- Head of household: ~$22,500

Itemize only if deductions exceed standard.

---

## Insurance Check

| Type | What to check |
|------|---------------|
| Health | Deductible, OOP max, HSA eligibility |
| Auto/Home | Liability ≥ $300K, umbrella if NW > $500K |
| Life | Term only (never whole/universal). 10-12x income, 20-30yr term |
| Disability | Own-occupation, covers 60% income |

---

## Financial Document Retention

| Document | Keep |
|----------|------|
| Tax returns + supporting docs | 7 years |
| W-2s | Until Social Security claimed |
| Bank/credit card statements | 1 year (unless tax-related) |
| Investment statements | Until sold |
| Real estate closing | Until sold + 7 years |
| Estate docs (will, trust) | Permanent |
| Loan documents | Until paid + 7 years |

---

## Error Handling

| Scenario | Cause | Mitigation |
|----------|-------|------------|
| Negative cash flow | Budget > income | Cut wants first, then needs; increase income |
| Emergency fund not growing | No budget surplus | Revisit 50/30/20; automate transfers on payday |
| Debt increasing despite payments | Interest outpaces principal | Avalanche to highest rate; consider consolidation |
| Investment losses panic | Market volatility | Rebalance annually, not on news; stay the course |
| Backdoor Roth pro-rata tax | Traditional IRA balance exists | Roll Trad IRA into 401(k) before converting |
| HSA ineligible | HDHP not satisfied | Verify HDHP minimums; switch plans at open enrollment |
| Tax bill surprise | Underwithheld | Adjust W-4; make estimated quarterly payments |

---

## Production Checklist

- [ ] **Income**: calculated take-home (not gross)
- [ ] **Expenses**: tracked for ≥ 30 days
- [ ] **50/30/20**: verified categories add up
- [ ] **Net worth**: baseline recorded
- [ ] **Debt**: all debts listed with rates and minimums
- [ ] **Strategy**: avalanche or snowball chosen
- [ ] **Emergency fund**: at least starter phase in HYSA
- [ ] **Retirement**: 401(k) match captured
- [ ] **HSA**: maxed if eligible
- [ ] **IRA**: funded for current year
- [ ] **Asset allocation**: 3-fund portfolio set
- [ ] **Insurance**: life, health, disability, auto/home reviewed
- [ ] **Tax**: withholding checked, prior year return reviewed
- [ ] **Documents**: retention schedule applied

---

## Anti-Patterns

| Anti-pattern | Fix |
|--------------|-----|
| Budgeting every dollar without buffer | Leave 5-10% buffer for variable expenses |
| Investing before emergency fund | 3-6 months in HYSA first |
| Whole life insurance | Term life only. Invest the difference. |
| Timing the market | Time in market beats timing the market |
| No tax diversification | Mix of pre-tax, Roth, and taxable accounts |
| Credit card debt as normal | Pay in full every month |
| No will / estate plan | Everyone needs will + healthcare directive + POA |
| Chasing returns / stock picking | 3-fund index portfolio, rebalance annually |
| Over-insuring (multiple whole life, annuities) | Term life + umbrella only |
| Keeping too much cash (outside emergency fund) | Invest surplus beyond 6-12 months expenses |

---

## Sources

- IRS Publication for contribution limits 2025-2026
- Fidelity retirement savings benchmarks
- Bogleheads — 3-fund portfolio
- SECURE 2.0 Act provisions
- Kitces.com — Backdoor Roth, Mega Backdoor, tax strategies
- Morningstar — SWR research

## Checklist

- [ ] Skill loads without errors in the AI agent
- [ ] YAML frontmatter is valid (description, compatibility, audience)
- [ ] Workflow section provides clear step-by-step instructions
- [ ] Error handling section covers common failure modes
- [ ] All referenced files (references/, scripts/, assets/) exist
- [ ] Skill triggers correctly for intended use cases
- [ ] No broken links or missing resources
