This year saw income from a handful of sources other than a regular paycheck. This year I received:
- bonuses for opening new bank accounts – $3,800
- payment for selling trade-lines – $2,975
- another couple of thousand in new credit card bonuses, travel credits, and discounted gift cards
Point 3 is more a source of discounts that benefit the final transaction, though, to me, travel awards and credit on revenue tickets is a cost that would have otherwise required cash. This allows income to instead land inside a brokerage account or another appreciating location.
Speaking of travel, I really appreciate going to another location. A booked ticket is a bright spot to keep in mind. Knowing that when the day arrives I’ll be breaking routine and changing physical space, journeying elsewhere to spend time with my family.
Last year I spent about $40,000. That seems high, and really I haven’t kept up with correcting Mint’s expense (or income) categorizing inaccuracies, so the reports aren’t absolutely accurate. The general picture, however, is there.
On the earning side, Mint reports almost $72,000. This kinda syncs up with my expectations, realizing that some investment transactions are never logged in Mint. Investment contributions came to about $49,000 according to Personal Capital. Sounds like I have somewhere between a 40 to 60 percent savings rate, 55% if I can count correctly. I can live with that!
Taxes will be more fun this year. This year I opted for heath insurance as part of my work benefits, same as 401k and health savings account contributions. All these benefits are pretaxed — paid for from my paycheck, which means my income is reduced by the cost of the benefits. Taxes are calculated on my reduced income after the cost of the benefits has been subtracted out. This means I am not paying tax on the cost of the benefits!
My Traditional IRA contributions will again not reduce my tax liability. After $70,000 in income, the $5,500 deduction is not allowed. (From $60 to $70 thousand the amount available for deduction phases from the full $5,500 to $0.)
Again, the follow-up for me to do is to recharacterize the full $5,500 over to the Roth IRA account — Vanguard was able to easily do it last year during a quick phone call. This transfer includes the full contribution amount plus appreciation and places it inside of the Roth. Roth IRA funds grow, too, because they are invested, and the principal plus appreciation can be spent later without ever having to pay taxes on it.
The bonuses for opening new bank accounts and payment received from selling trade-lines will ensure that my income stays above that $70 thousand mark. Finally, some thousand or so in net proceeds from brokerage trading will end up being taxed.
Tax rules have been slightly adjusted for 2018. The standard deduction for me as a single filer will be about or a little over what it was in 2017 when it also included the personal exemption, so no big change there.
Really the biggest goals I have for future financial moves is to restructure my finances into two entities, splitting away certain activities to be conducted instead by a business that I own, but that also pays me living expenses. All earnings are then by the business, and treated by a different and usually more favorable series of tax rules. There are all sorts of methods to decrease tax on business income.
However, I think the mentality of giving a made-up entity such great leeway in my life and the task having to redesign a streamlined personal routine have been two factors that keep me from spending time or effect on this project. In the meantime I have sought out and read others’ success stories, and they continue to inspire me.