Author Topic: Big raise: now what?  (Read 2900 times)

forthwith

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Big raise: now what?
« on: September 08, 2014, 07:13:58 PM »
I'm so happy to have been given a giant raise for a ton of hard work and results at work. [High five!]

....And now I have so many questions. What do I do with the extra dough? How do I reduce my tax burden? How can I maximize this opportunity? I'd appreciate any advice as I need to create a plan

Here are the stats, let me know if there's anything else I should share.

New Income: $148,000 annually
New Take home: $6800/monthly (after 401k and Heath Ins)
401(k): $1450/monthly
I don't own a home. I split expenses with my partner. Avg $850/month.
Car: $440/month ($16,000 left on that loan.)
Other expenses (gym, auto insurance, phone, etc):$300
I have $3500 on a credit card

Retirement:$83000 over a 401(k) and a Roth IRA.
I have been putting $ into an account for a down payment on a rental property. That account has $5000
Emergency fund: $4300

My priorities:
Pay down CC ASAP
Get 911 find to $8000 min
Keep funding rental prop fund to buy a property ASAP

My concerns:
My raise is $48000 but my tax bracket and single filing status mean I'll only see $2000/month. Can I do anything to help this?
What do you MMMers think? What would you do?

Muchas gracias for your help and advice!!
« Last Edit: September 08, 2014, 07:22:53 PM by forthwith »

Workinghard

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Re: Big raise: now what?
« Reply #1 on: September 08, 2014, 07:26:44 PM »
To "reduce your tax burden", you need to max out your 401k. That's $17,500 year unless you're 50 or older then it's 23k.


mxt0133

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Re: Big raise: now what?
« Reply #2 on: September 08, 2014, 07:27:53 PM »
Seems like your are maxing out your 401k, max out your HSA if they are available to you.  You will no longer qualify for a Roth next year but you still might this year.  You are going to have to get creative to get your tax liability any lower with no deductions.

Your next priority might be working on your expenses since you have such a high income and still carry a CC balance.

Catbert

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Re: Big raise: now what?
« Reply #3 on: September 09, 2014, 12:52:31 PM »
With your new income level make sure you understand how taxes work on rental real estate. When your taxable income  is over 100k you start losing the ability to write off losses.  That means that mortgage interest and depreciation may not be deductible.  Not the people at your income level shouldn't own rental property, but the great deductions aren't there.