How Did You Spend Your Tax Return?

Tax season can be a time of frustration or jubilation for many of us.  Getting shafted on your return and having to pay even more in to the system can obviously be painful.  On the flip-side, coming out on top and getting a swell return can cause elation for many.  So far, I have been one of the latter people, but as time goes on and my salary/income increases, that could change.

One thing that pains me is seeing folks get a solid tax return, and instantly scream, “I’m going to Disneyland!”  Or something of the like.  Many folks get a very nice first-time homebuyers credit.  Some of them put it towards their home.  Others may do less money-efficient things with it.  Getting a tax return is a fantastic way to give yourself a boost in net worth.  If you’re having trouble getting started with your financial journey, getting a solid return can help give you a kick-start.

It’s okay to reward yourself now and then.  Dropping your whole 1,500 tax return on rewarding yourself/family is not the financially ideal way of doing it.  The most important things to do are to: pay off existing debt, and get started with retirement/portfolio investment as early as possible to get those reinvestments rolling.

The past few years I was able to get very solid tax credits in relation to being a college student.  This past year, I was unable to get any of those credits due to graduating over a year ago, so I was just hoping to come out even and not have to pay in.  Turns out I was able to land a $1250 tax return!  The only credit received was a $200 credit for investing over a certain amount in my Roth IRA.  The funny thing about that was that I would have been ineligible if I had made over 30,000.  My documented income was 29,500!  I barely squeaked by, but was able to get a free $200 because of my retirement investment.

So, how did I decide to spend my tax return?  I will provide a breakdown of what I did and how much was allocated to it.

Initial Return: $1250
Step one: Pay $70 for tax service (TurboTax)
Step two: Roth IRA.  I invested $350 into my Roth IRA, which provides dividend and capital reinvestment anually.
Step three: Portfolio.  $350 went to a purchase of UHT, which provides a solid 4.47 dividend yield.
Step four: Credit card.  $200 went to credit card “debt”, which I was NOT losing money on due to 0% interest.  I decided to move my normal balance to 500 from 700.
Step five: Student loan.  $200 went to the current 6.55% student loan I’m paying off, on top of a regular $300 payment per month.
Step six: Profit!  I paid myself the remaining $80 to enjoy in whatever way I will.

Now, let’s see how much hypothetical money I made for myself over the next 10 years by reinvesting most of my tax return instead of taking a vacation with it.  Steps one, four and six are null because they have no financial implications (remember, my credit card is 0% interest and the balance will be paid in full when that time ends).
Step two: Using the Roth IRA Calculator at Bankrate.com, and using a 7% annual gain, my $350 would turn into $689!  That’s a 96% increase.
Step three: Using a DRIP calculator at hughcalc.org, I used a 5% annual gain and constant 4.47% div/yield for my UHT purchase.  My initial $350 purchase would become $865, a 147% increase.
Step five: My #6 student loan is sitting at 6.55% and I applied an additional $200 principal to the balance.  That saved me $131 in interest using a calculator at webmath.com.
Total hypothetical money saved/earned: 339+515+131=$985!  NICE!  I almost got my whole tax return back in compounded interest/reinvestment, and interest savings.  Not a bad way to spend my tax return.

Always think before you act.  Would you rather buy some fun material things or go on a vacation, or instead invest in your future and save yourself even more money with your free money from the IRS?  I would pick option number two every time!

Here are a few things that have helped me and others I know get a good tax return:
*Do your own research, and think before you just go to any random tax place.  I personally use TurboTax.  It’s cheap, user-friendly, and very thorough.
*Always exhaust your ability to get tax credits!  Even some “professionals” are unaware of college/other tax credits (I know someone who was told twice by a major tax business that they were ineligible for certain tax credits or that they didn’t exist – they went to a smaller business and found they were indeed eligible and they did exist).
*Claim the highest amount of taxes to be taken out of your paycheck.
*Invest in your future – tax credits are available for people investing in retirement & make less than 30,000/yr.  This was in my case being “Single” marital status.
*Pay off existing debt.  It’s always good for you, plus paying mortgage interest is a good way to get helpful deductions.
*Keep track of tax-return related expenses.  Per diem, work related costs, and other things help you get deductions.

I’m sure there are lots of other things, but those are ones that I have had experience with, or know of others who have.  If you have any valuable information to contribute, please feel free!  Also, how did you spend your 2015 tax return?  Did this post help you make any different decisions than what you normally would?  Let me know below!

The Plan: Phase One

Well, I made it happen.  My unemployment stint was only active for one week before I was able to land another job, and this one even pays pretty well.  It’s a warehouse job with a major retailer.  I’ll start in their shipping department loading boxes into trailers.  It’s a seasonal position and will most likely be over around January 1st.  I’ll be working Sat-Mon, 6 AM to 6 PM.  They hire about 90% of their people back for permanent positions.  It’s tough work, but there are some definite pros.

One: The Seasonal pay starts out at 15.90/hour on the weekend shift.
Two: I will be working three 12 hour shifts, with four days off.  Possible mandatory OT one day/week.
Three: I receive a 15% discount at the major retailer with a combination of 10% employee discount + 5% retailer debit card.
Four: The possibility for promotion to supervisor position is very real with having a 4-year degree –  these start at ~65,000.
Five: The permanent pay is higher.  Weekend shift permanent pay would be starting at 17.60/hour, or 16.60 non-weekend.
Six: Yearly cost of living raises, plus ~1.00 raise/year for 3 years.
Seven: Tons of time off, and an active job which helps keep me in shape.
Eight: 100% match on 401k up to 5% – Bingo! (This is if I were to get hired permanently)
Nine: If I get hired permanently, tons of training is available.  I wouldn’t be stuck throwing boxes every single shift!

Of course, with a bunch of pros, there are some cons as well:

One: Very tough work; could possibly hinder weight training and add wear/tear on back/joints.
Two: I miss the majority of my weekends, which means less family time and less fun with friends.
Three: Exposed to a hot and cold warehouse – although protected I will be protected from wind/rain, etc.

As far as I can tell, the pros definitely outweigh the cons.  Even if I don’t get a promotion (which I hope I do of course!), this is still a good company to work for, with great benefits, an active job, at lots of time off.  The pay is fair.  My ideal range would be upwards of $19 like I was making at Deere, but I am pretty close, and if I get hired permanently the potential for ~$20.50  an hour after a few years is definitely real.  So far, I am able to provide a breakdown of what my expenses and savings should look like with three different spending brackets.

Working 36 hours per week:
15.90/Hr / 23.85/Hr OT
572/Wk Gross / 435/Wk Net
2288/4Wk / 1740
29744/52Wk / 22620

1: Spending 955/month with minimum SL payment: +11160/Yr / 930/Mo
2: Spending 1245/month with 350 SL payment: +7680 / 640
3: Spending 1555/month with 660 SL payment: +3960 / 330

So, looks pretty good, yeah?  Of course it does!  660/month has me on track for a four year payoff, saving me a total of almost 6,000 in interest.  Not to mention if I stay tight with spending, I should be able to take that ~330 at the end of each month and either put some into Roth/Personal portfolio, or continue to slam out the student loan, which is more likely.  Of course, my savings only goes up from here.  If I were to get hired permanently, I would get boosted up another dollar or so, plus raises from there!

Things are looking up.  While it may take me several weeks to get adjusted to busting my azz again, and probably even harder than before, and during longer periods, that’ll be the most difficult challenge to overcome.  Everything else after that will be smooth sailing.  The potential for promotion, as well as another second job during my 4 days off, is definitely keeping me thirsty.  Not to mention the accelerated payoff plan I will be getting on once I get the paychecks rolling in!  I’m happy to say that “Phase One” of “The Plan” is now operational!

Have any of you readers faced a similar situation before?  How did you structure your student loan (or other debt) payoff schedule?  What helped you overcome the adversity of losing your job and finding a new one?  Has anyone had to sacrifice weekends or significant family/friend time for a job?  Feel free to share in the comments.

Take care!

The Plan

Well, I am officially involuntarily unemployed (due to layoff) for the first time in my life since I was 12 years old.  It’s kind of a scary feeling, but I know I will get a job soon and get back on track.  My savings over the past five months have skyrocketed.  I was at about $500 cash when I went into my new job, and now I will be at approximately 5,200 after my last paycheck/next weeks expenses.  A nearly 1,000/month savings isn’t too bad.  I was pretty dumb the first month or so of my new job and spent a lot of money going out to eat and out to bars, etc., plus a big month taking a trip to Green Bay for Packers training camp.  With all that in the past, I was able to crack down as soon as I heard news of my layoff and save as much as I could while still having a good time.

While I’m pretty bummed I lost out on a job that had me on track for a nearly 45,000 gross first year, I’ll get over it.  I have an interview tomorrow with a company I’ve worked with before, doing seasonal warehouse work.  I would be at 14.90/hr for the first four months, and then if I were hired on for good it would boost up to 16.60 plus raises up until about 19.50.  The main goal with this company is to get on full-time, and then utilize my 4-year degree to get in with a management position.  All they require are 4-year degrees, and they start at roughly 65,000/year.  This would be fantastic, and allow me to work for about 10 years and make my dreams come true.

After crunching some numbers, I decided that if I were offered the job, I will accept it.  As long as it doesn’t break my back (loading semi trailers with merchandise) I will remain there and hope to get on full-time.  I did this job for them before for over 3 months and I survived, so all should be well.  I would then apply for every management opportunity I can manage, and eventually it should work out.  My plan is to get this job, or an even better paying one, and live comfortably but on an “Extras” budget like I’ve been doing the past 2 months.  I will pour excess money into my student loan debt and get it paid off within four years.

Here’s what I’ve got for some of my numbers and outlooks:

Monthly expenses
Student loan – 60
Food – 160
Gas – 70
Phone – 55
Ins/AAA – 35
Rent – 400
Utilities  – 75
Misc – 100

1 Total Current – 955 MO / 11,460 YR
2 Total Current w/ 350 SL – 1245 / 14,940
3 Total Current w/ 660 SL – 1555 / 18,660
4 Total Current w/ 660 SL, 160 Misc, 200 Roth, 100 Invest – 1915 / 22,980
5 Total Current w/ 860 SL, 160 Misc, 450 Roth, 100 Invest – 2365 / 28,380

New Job Salaries

Seasonal 40 Hr Weeks
14.90 HR / 22.35 OT
600 Gross / 450 Net
2400 Month G / 1800 Month N
31000 YR G / 23400 YR N

1 Available after expense categories: 11940 YR
2: 8460
3: 4740
4: 420

FT 40 Hr Weeks
16.56 / 24.84
662 / 500
2650 / 2000
34400 / 26000

1: Available after expense categories: 14540
2: 11060
3: 7340
4: 3020

FT 40 Hr Weeks w/ Max Pay
19.50 / 29.25
780 / 581
3120 / 2324
40560 / 30212

1 Available after expense categories: 18752
2: 15272
3: 11552
4: 7232
5: 1832

I get pretty obsessive about this stuff just for the intrigue.  I love to visualize my potential financial future and how well or crappy it’s gonna look with a certain job.  In this case, this is most likely the job I’m going to have for the next one or two years unless something else that pays a lot more, or is a lot more enjoyable for the same pay, comes along, which is doubtful.  With expense categories 1-4, it’s just a scale that increases with student loan payments, and then adds in extras, roth, and portfolio investments.  The last category includes the student loan payment that would allow me to payoff in 3 years instead of 4.  I wouldn’t be at that pay level for another two years anyways, but it’s just there for an idea.  So by the looks of these numbers, this job looks pretty damn good!  Even at the lowest grade, I would be able to afford to throw out my 660/month payment, and have over 8,000 left at the end of the year to add to it.  The job isn’t guaranteed yet, but with my past experience and their need for extra people to cover the seasonal demand, I should definitely get an offer.

So for now, that’s my plan.  Get a job that pays similar to this; most likely this job, of course, and blast out my student loan debt.  I have put together a simple payment vs. money saved chart as well that I will post below.  I have already thrown an extra 400 on the other day to pay off my smallest loan with a 4.5% interest rate, and saved $85 over the 10-year period.  Right on!  After my SL is paid off, I will consider purchasing a home, but only after a 20+% down payment is saved to eliminate the Mortgage Insurance cost.  Other than that, I will start maximizing my Roth contributions, match my employers 401k match (which should be 5%) and dump the rest into my own portfolio.  Things are looking up, potentially, if I get this job and am able to continue my savings without a significant stalemate of loss or money due to unemployment!

Here is the student loan table: (note that #’s are a bit off due to my new balance, and will continue to be, but they are close)

Balance – 28,181- 6% Interest
Default 10 Year Base: 312 / Mo (3,744/yr) – 120 Mo Length – 9,362 Interest
9 Yr – 338 (4,056) – 108 Mo (-12) – 8,360 – Save 1,002 (+312/yr pmt/ +1,002 total int saved vs. prev.
8 Yr – 370 (4,440) – 96 Mo (-24) – 7,371 – Save 1,991 (384 / 989)
7 Yr – 411 (4,932) – 84 Mo (-36) – 6,400 – Save 2,962 (492 / 971)
6 Yr – 467 (5,604) – 72 Mo (-48) – 5,445 – Save 3,917 (672 / 955)
5 Yr – 544 (6,528) – 60 Mo (-60) – 4,508 – Save 4,854 (924 / 937)
4 Yr – 661 (7,932) – 48 Mo (-72) – 3,586 – Save 5,776 (1,404 / 922)
3 Yr – 857 (10,284) – 36 Mo (-84) – 2,682 – Save 6,680 (2,352 / 904)
2 Yr – 1,249 (14,988) – 24 Mo (-96) – 1,794 – Save 7,596 (4,704 / 916)
1.5 Yr – 1,641 (19,692) – 18 Mo (-102) – 1,357 – Save 8,005 (4,704 / 409)
1 Yr – 2,425 (29,100) – 12 Mo (-108) – 924 – Save 8,438 (9,408 / 433)

Current Payoffs:
365.54 on Direct Loan Sub @ 4.5% Interest – Total 10 yr savings: 89.02

Cheers everyone, and thanks for viewing.  Feel free to comment if you’ve had any situations like this, or any other relevant helps or info on paying off student loans!

Mr. Money Mustache

I’ve been reading a blog lately called “Mr. Money Mustache”.  I must admit that it’s pretty feckin’ epic.  This premiere “Mustachian” has achieved his dream of early retirement, and is able to live comfortably through frugality and his investments/spending habits.  He’s got a wife and a young kid as well, and they all live a great life together due to their discipline and, one of my favorite words, “perseverance”.  I am reading through all of his posts from start to finish.  It’ll be a long journey but this is where I want to be, so I’m going to soak up everything I can from this amazing fellow and be on my way to “the good life”.

Check out his blog here: http://www.mrmoneymustache.com/

Roth IRA With Vanguard

Well, with the upcoming layoff about to happen next Friday, I will be losing my 401k account through Fidelity.  I called Vanguard today and got the process going.  This is a tough move for me, as the minimum investment is $1,000 and my 401k balance is only $400 (after 4 short months).  That means I have to dedicate $600 of my savings into this account, while simultaneously losing my job and beginning unemployment.

However, I know that A) Unemployment benefits will cover ALL monthly expenses, and B) I will have a job within 4 weeks of my last day at Deere.  Even if it’s a minumum wage job, at 40 hours per week I will still hit even.  Unemployment will actually pay me more, similar to a $10/hour wage at 40 hours per week.  I’ve got enough cash saved that I feel comfortable, even if a bit uneasy, about this decision.  It has been too long, and at 23 years old, the longer I wait, the more compound interest I will be missing out on.

I will be rolling over the 401k a couple weeks after my layoff, so Fidelity has time to get their stuff together and sent to Vanguard.  I am in their most aggressive, and lowest-entry ($1000) fund they have, which is the 2060 target date fund.  It is 90% stocks and 10% bonds, with a 1 year return of over 12%.  Once I get re-settled with a job, I will contribute around $100 or more per month to my new start to financial freedom!

Here’s to a bit of risk, and a lot of reward.  *Cheers*

How I Would Spend $1,397,480.

As I sat back on Thursday night and watched the Green Bay Packers (my team) vs. the Seattle Seahawks play on national television, I wondered what it would be like to be an NFL player.  Between the two teams, the average yearly money being pushed through for the player salaries is 239 million dollars.  Taking 239 million / 106 (one 53-man roster per team) comes out to be 2,254,716 dollars per year, per player.  Taking that average and deducting approximately 38% for taxes, that leaves a net of 1,397,480.  Here’s how I think I would spend that money.

How I Would Spend $1,397,480:

1.  Pay off my student loan: 29,000

2.  Pay off my parent’s house, dad’s student loan, and buy them a garage: Est. 75,000

3.  Pay off my sister / brother-in-law’s house & student loans: Est. 90,000

4.  Assist in grandparent’s health care costs: Est. 25,000

5.  Donate to local animal shelters: 50,000

6.  Assist friends with various debts: 50,000

7.  50 years worth of $1000 college scholarships for my alma mater high-school: 50,000

8.  Pay off girlfriend’s student loan: 20,000

9.  Open my gym (finally!): 150,000 (539,000 : 858,480)

10.  Buy silver coins for emergency economic collapse: 30,000

11.  Purchase three (3) four (4) bedroom homes in my current college town: 330,000

12.  Purchase my own dream home: 150,000

13.  Purchase a solid, decent-MPG vehicle: 30,000

14.  Invest in a diverse, mixed-aggressiveness portfolio of high-dividend yield stocks: 318,480

15.  This is an option that I would most likely do, but it would elimate the “non-income” generating numbers 1-8 and 13, which could be made up with income generated over time.  BUY FARMLAND!: 419,000 – 42 Acres

And that does it… For now I can’t think of much else that I would include.  There are a few income opportunities included in these at numbers 9, 11 and 14 and 15.  Things like future parent medical bills, future help with my unborn children and sister’s children would be taken care of with the residual income as needed.  I will delve deeper into my expected earnings for income as well as a portfolio outlook below.

For the income aspects of it, here’s what I’m thinking:

– The three houses would be in a college town, They would rent at 1200/month or “advertised as” 300/room.  As a DIYer and with access to a Master DIYer in my father, I would put maintenance at an estimated 2400/yr per house, or 200/mo.  I would add 25% tax onto the gross rent total of 1200, and come out with 900.  Subtract the estimated 200 for maintenance and I get 700.  For 3 houses, that would net me 2100/month or 25,200/yr after tax and maintenance.  Gross would be 43,200 without tax or maintenance.

– My gym would be next.  The cost for this gym includes all equipment, land, and a brand new building of 60×100 feet.  Luckily there would be no loan, but I would put monthly utilities at around 500, and monthly insurance at around 1000.  If I were to have it as a 24-7 access, no staff would be needed as long as I put in 14-20 hours per week to maintain and clean everything up.  I would price membership below market average.  I would assume average (just from my experience) is at over 35/month.  If I were to price membership at 25/month, I would only need 60 members to cover costs.  This is very attainable.  Let’s put the membership at 100 and make 2500/month.  Subtract 1500 for costs and we bring in 1000 gross (12,000/yr) per month, or about 800 (9.600/yr) net per month.

– Farmland is something that I have always wanted to own and something you can make a killing and a living off of just renting it.  It’s nearly impossible to get without mountains of money, and as you can see even with 419,000 I would only be able to purchase about 42 acres.  Prime till land is going for about 10,000 per acre around my parts.  Average rent is 270 per year per acre.  Take that times my meager 42 acres, and it comes out as 11,340/year.

– Lastly comes the low-moderate-aggressive dividend portfolio. Stocks would ideally be diverse and well-established.  Some would be prototype funds that would include high-risk, but mostly a conservative portfolio.  I would put this portfolio at an average of 4% per year in dividend returns.  If the money wasn’t needed, the dividends would go into re-investment.  Included would be companies/stocks like TGT, SO, RAI, AEP, VNQ, ETR, FE, MO, MCD, PEP, PM, T, PFE, COP, EFC, WMT, JMI, NYMT, CVRR, CYS, ORC, ARP, AT, AI, ARR, NLY, AGNC, VVC, TEG, NWN, DBD, IEP, VZ, CSCO, UNP, GD, BA, DE, CMI. CAT, GE, NVDA, ATI, MSFT, AAPL, SDR (RISK), and RNO.  These are just a few of the many promising stocks out there that provide solid fundamentals in terms of solidiity and longevity, and also offer a strong dividend yield.  Take 318,480 x 4% and come out with 12739.  That’s approx 1060/month.  1060 by about 20% tax comes out as, let’s call it, 800/month.  That’s another 9,600 per year (same as the gym)… Meant to be?

Total income:
So, after all the fun and dandy, here’s what it comes out to be.  With 798,480 of the 1.397,480 invested, I come out with a yearly gross income of 67,939.  Add the farmland and it’s 79,279.  After taxes, maintenance, and other stuff, it comes out to be approximately 49,450 or 57,950 with the land.  This is with an approximate monthly expense of about 700.  This includes cell phone, property tax, food, gas, and entertainment.  So, after all basic monthly payments, I am making about 41,000/49,500 extra per year.  This means I would more than likely be able to re-invest all of the 9,600 per year of the portfolio, as well as hire more employees or trainers for the gym, bringing in more income and more people.  I do realize I would be missing things like health insurance, etc. but the general jist of things is there.  I would be making a great income with an investment of 800,000+, and I would also be attaining my main goal of financial freedom and the ability to spend most of my time with my family, eventual children, and  friends.

This was an awesome lesson and took me over two hours to completely accomplish.  I did a lot of thinking and it was very humbling to sit down and divvy out over a million dollars to have my way with.  It makes me think how extremely blessed those players are, as well as everyone else who makes that kind of money.  They are financially free, and in a world where money is king, they have the ultimate gift.  I hope they all take advantage of their situation and never take it for granted.

Take care readers and thanks for stopping in!

EDIT: I forgot one of the most important things, a Roth IRA.  I would of course dump the max into a new Roth IRA, which I think is 5500 a year.  So it wouldn’t be much but I would definitely do that, and then max it out each year following using my net income.

Welcome.

Welcome to myself and anyone who may be reading… So, probably just myself.  I’ve never done this blogging business before so I will just wing it and hope for the best.  It’s a new thing to try and I’m hoping it provides additional motivation and helps keep me on track of my goals.  I also hope to connect with other people like myself who are starting from a limited amount of income and  are planning on maximizing it.  I’ll start off with a little about my main goals and how I plan to achieve them.  It is my wish to eventually achieve “financial freedom” through various avenues of investment.  My definition of financial freedom is being able to live a happy (not particularly celebrity rich status) life and not have to worry about spending the majority of my time at work 40+ hours per week, like many other folks do.  The avenues I have in mind are more traditional; things like long term stock & dividend investment, bonds, precious metals, retirement funds, real-estate and land investment.  Other possibilities include investing in businesses, starting small businesses, publishing books, and others.

This is something I have wanted to do for a long time and it’s time to get started as soon as I can.  I was about to get this going recently but I just found out I am losing my job (thanks John Deere) so it’s going on a temporary hold until I can get something straightened out.  I do have some student loans, and low credit card debt with ZERO APR (I pay in full every month, unless I have 0% APR).  Besides that, I am debt-free.  I had a Roth 401k going via Fidelity but I will no longer be able to contribute to that thanks to my job loss.  I am starting a Vanguard Roth IRA in the near future once I have a steady job.  I have a small portfolio that I started a while ago (literally, tiny) and will continue to expand upon when the time is right.  I also have an incredibly wealthy friend who is on my side, and has given me experience with stock trading and is there for knowledge.

A little about myself.  I’m a college grad with a Criminology Bachelor’s Degree.  My aspirations were to go into law enforcement, and still are, but I am open to all avenues that life has to offer.  Especially one that would help contribute the most to my investing goals.  My main goal right now is to look for a means to an end; that is, the best job for me that allows me to rake in as much dough as possible to build up for my future retirement.  I am an Eagle Scout and a small town kid.  I am a massive Green Bay Packers fan and even have a Green Bay tattoo.  I love shooting guns, playing computer/PS3 (Madden), and drawing.  At 23 years, I’ve had plenty of life experience but have an incredible amount to still learn.  I’ve got an insane attachment to my friends, close family members, and my girlfriend.  Before all else, including money, comes those folks.  Life would be useless without them.  And what better motivation to succeed in my goals than knowing if I do, more time can be spent with them and less slaving away at a job?  It doesn’t get much more inspiring than that.

Thanks for reading.  Stay tuned.