401k: $55.83 (this is 4% which my employer matches 100%)Good!
Taxes:Federal looks high by ~$25/paycheck. You might want to verify this, and if so, submit a new W-4 so you can put the money toward the high interest loans now rather than giving the IRS an interest-free loan until you get your refund.
FIT: $142.41
NC SIT: $62.00
Balance of $2650 @ 8.18% with an APR of 10.98%These are the ones I'd pay off ASAP if not sooner.
PLUS Loan: $1808.65 @ 8.5% ($105.53/month)
Subsidized Stafford Loan: $3462.35 @ 6.8% ($50/month)
Monthly Expenses:Just checking: the federal tax calculations referenced above assumed you file single - is that correct?
Grocery: $480 (for 4 people x 3 weeks)
Insurances:
Life: $21.15
Roth IRA: $100Laudable, but putting this toward the high interest loans would likely be even better.
Taxable Invest Acct: $30
No interest CC: $25
401k: $55.83 (this is 4% which my employer matches 100%)Good!QuoteTaxes:Federal looks high by ~$25/paycheck. You might want to verify this, and if so, submit a new W-4 so you can put the money toward the high interest loans now rather than giving the IRS an interest-free loan until you get your refund.
FIT: $142.41
NC SIT: $62.00QuoteBalance of $2650 @ 8.18% with an APR of 10.98%These are the ones I'd pay off ASAP if not sooner.
PLUS Loan: $1808.65 @ 8.5% ($105.53/month)
Subsidized Stafford Loan: $3462.35 @ 6.8% ($50/month)QuoteMonthly Expenses:Just checking: the federal tax calculations referenced above assumed you file single - is that correct?
Grocery: $480 (for 4 people x 3 weeks)
Insurances:
Life: $21.15QuoteRoth IRA: $100Laudable, but putting this toward the high interest loans would likely be even better.
Taxable Invest Acct: $30
No interest CC: $25
I have taxes withheld as single with no dependents but I file as HoH with one dependent. I claim my brother and get the EITC as well as the exemption. I know I should probably adjust my withholding. Before I didn't quite trust myself not to blow that extra money, plus I was afraid of not having enough taken out. But I might adjust it for 2016.That makes a huge difference! Why wait to adjust the W-4? If the case study spreadsheet calculations are correct (you should verify), your total federal income tax for 2015 will be ~$330. Get your money now and use it to pay off those high interest debts.
I'd really like to keep my IRA at 100/month. I'm 26 so I have lots of compound interest time to take advantage of. Same thing for the taxable investment account.See guidelines below. Current 10 year Treasury rate is ~2.3%, so a literal interpretation would indeed put the IRA ahead of the extra debt payment on the 6.8% loans. Not the 8.5%. I'd pay the debt, but admit it's a close call. The taxable investment, however, should not be considered until the debts are gone.
I do have $890 in a savings account. Do you think I should take any out of it to put towards my debt or leave it be? That's my emergency fund.See point #0 above - I'd leave this alone.
Maybe I'll talk to my boss tomorrow about adjusting my withholding for the rest of this year. Only three more paychecks left (God is it really November already?) but you're right, who should I wait?
Ok, so this gets even more interesting when taking a closer look at the saver's credit, EITC, and HoH filing status.
If you contribute enough to your 401k (~$6,200 for the year) to get your AGI below $27,375, you get to use the full $1,000 saver's credit, taking your total federal tax owed to ~$0 - and you still get ~$1900 in EITC credit so the IRS will pay you the $1900.
That could be even better than paying off 8.5% debts....
Ok. It looks like you have a bit over $560 surplus every month.
That is a great start.
There are a few places to cut expenses. Start with that $30 taxable savings.
I'll take a look at how to hit those 13 debts later.
I don't have spread-sheet access right now.
When the Cc interest is due, what do you think the % will be?
...I’ve got around 63k in student loans...
...Gross pay: $1395.83 twice monthly...
Hi Amanda, I have a bit of a different take on your situation. I'm sure the math folks on here will disagree, but I think the number of different debts you have makes you perfect for the Dave Ramsey (snowball) method. Instead of looking at your interest rate, tackle the smallest debt first, and then work toward the larger ones.
The reason I think that would work better for you is that you seem overwhelmed with the shear number of student loans. You will be successful knocking out some debt faster if you close out the smallest ones first. This is going to give you the emotional strength to keep it up. Once a few are paid off, you'll have a bigger chunk of money to throw at the larger debts. Yes, this is a plan based more on "emotion", but we are emotional people! The way you prefer to take care of your family tells me that this is where you are led anyway.
So yes, the math might say to tackle the higher interest first (I really do love MDM's plan), but I think you will feel more at peace with some of this debt GONE.
Hey Amanda,
I've already given my two cents on your debt on your previous post, but I wanted to check-in about what MDM said with regards to the ROTH. You do have plenty of time, and, overall, that money will beat most of your loans in terms payments vs. returns. However, you also say that the loan burden and financials are stressing you out. That, for me, is the most important thing to attack.
I'd suggest that you take your ROTH contributions to 0 and start using that money to payoff any loan over 5%. That extra $100 per month can go a long way in snowballing a few loans. Once those balances start to zero out, I guarantee you that you will feel better (and more in control). Once the high interest loans are knocked out, restart your Roth contributions. With an ROTH started and a 401k in the works, you already have a start. Now, it is time to attack a few loans directly, knock them out, and show your debt who's boss!
The errands I run on the weekends are to the grocery store and to pay bills. I also let my parents use my car in the evenings to pick up my mom from night school (its only a few miles twice a week), take her to and from church (again, a few miles twice a week), and when I go out and get gas in the evenings after dinner twice a week. I know I could probably get my gas on the way home from work but I am starving by the time I get off and if I went to the gas station then I know I would do something stupid and stop at some fast food place. Can't carpool to work unfortunately. Everyone else at my office (there's five of us including me) lives within 10-20 minutes of it. And no, moving is not an option. I do not want to live by myself. I enjoy living with my family and its cheaper for me really.I would still focus on getting gas on the way home. I have an hour commute home with picking up 2 kids in 2 different locations. And then I have to cook dinner, so it's realistically 1.5 to 2 hours before I can eat.
The errands I run on the weekends are to the grocery store and to pay bills.
Ok, so this gets even more interesting when taking a closer look at the saver's credit, EITC, and HoH filing status.
If you contribute enough to your 401k (~$6,200 for the year) to get your AGI below $27,375, you get to use the full $1,000 saver's credit, taking your total federal tax owed to ~$0 - and you still get ~$1900 in EITC credit so the IRS will pay you the $1900.
That could be even better than paying off 8.5% debts....
Holy Crap! I might have to wait to talk to my boss so I can run the calculations myself. I'm a pretty cautious person by nature. And maybe I can sit down with him and get his advice. We're a CPA firm and its that time of year where we're bringing in clients for tax planning. Maybe he'll help me with some tax planning of my own.
For the love of [deity of your choice], combine trips! And get a free checking account with unlimited checks instead of driving to get a money order.
Sounds like another reason to drop this life insurance that you don't need. At the very least, switch to a normal company that operates in the 21st century and then also drop it to a smaller amount as nobody needs to pay your student loans if you die because they should forgiven. As others have already mentioned, a big part of getting started with paying off huge loans and turning your life around is to start optimizing where you can. This is an easy place to optimize!
So I worked on the debt calculator spread sheet.
http://www.vertex42.com/Calculators/debt-reduction-calculator.html
I kept your minimum payments & assumed you had an extra $500 per month to put towards the debt. I think you can probably find another 100 to 200 with some of the suggested budget changes but $500 was my starting point.
The Great news is that you can have the PLUS, lending club and CC all paid off by April 2016.
This was assuming a $2000 tax refund that I put on the second page of the spread sheet in April 2016.
(Without that refund they are all still paid off by July)
Focus on those because of the high interest and low value.
You can run a few scenarios.
Snowball (lowest balance first) Total interest $18,949.28 last debt paid 8 years 1 month
Avalanche (lowest interest first) Total interest $15,645 last debt paid in 7 years 8 months
Custom (a mix of lowest value and interest) Total interest $15,746 last debt paid in 7 years 8 months
You can also run a horrific scenario with no extra payments and it will take over 22 years to climb out of debt.
Here is how I entered the custom data.
Lending Club 2,650.00 10.98% 83.27 2
PLUS 1,808.65 8.50% 105.53 1
Perkins 10,557.95 5.00% 120.00 8
AES Safford 3,462.35 6.80% 50.00 4
CC no interest 827.14 0.00% 25.00 3
A 4,546.57 6.00% - 6
B+D+F 4499.81 30,018.83 6.80% - 5
C 5,553.12 5.60% - 7
E 5,542.68 4.50% - 9
G 4,000.00 3.40% - 10
The last column shows the custom pay off order. I had to group all your 6.8% loans together
I am not savvy with the tax implications of paying one before the other so you can change the "custom" order to be more tax advantaged.
I hope that helps. I will try to send the spread sheet in a PM.
You've gotten lots of good advice (even if it wasn't all identical) but I have one suggestion that I'm not sure has been touched on. On your 0% cc set payments so the entire balance is paid off the month before the 0% period is up. No need to pay it off earlier, but you don't want to end up paying several months interest at 14%. Also keep an eye out for other 0% cc offers. Just be sure to not transfer more than you can pay off in the teaser period.
Bachelor's in AccountingExcellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.
Bachelor's in AccountingExcellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.
Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.
Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.
On form W-4 is this language:
"I claim exemption from withholding for 2015, and I certify that I meet both of the following conditions for exemption.
• Last year I had a right to a refund of all federal income tax withheld because I had no tax liability, and
• This year I expect a refund of all federal income tax withheld because I expect to have no tax liability.
If you meet both conditions, write “Exempt” here"
If that fits your situation, you might as well do so immediately and start getting an extra $142.41 in every pay.
If you are having $142.41*24 = $3,418 withheld and expect $4,000 back from the IRS then it fits for 2015. Might be worth checking on state taxes also.
Liberty Stache I know its a lot of debt relative to my income. I work for a very small firm so I'm surprised I actually make this much. I could double my income if I could get on at a large firm but I like where I work for now. As to side hustles, I'm not sure. I don't feel like I have enough experience yet to do anything with accounting. As to tutoring that I used to do, I don't know. I don't really have time through the week. Maybe on the weekends, but I'll admit I'm a very shy person so it would be hard for me to put myself out there.
Hopefully. I work for a VERY small firm so I'm not too confident that my salary will ramp up, so to speak. I also signed a non-compete agreement good for three years after I leave. My friend says it means I can't work in accounting at all for that time period but I don't think that would actually be enforceable.
Non-competes are for contracting situations. That is, you're working for a contracting company, and you can't leave them to go FTE for the client.Bachelor's in AccountingExcellent. So, the good news is there's no reason your salary shouldn't ramp up pretty quickly. Take heart.
Hopefully. I work for a VERY small firm so I'm not too confident that my salary will ramp up, so to speak. I also signed a non-compete agreement good for three years after I leave. My friend says it means I can't work in accounting at all for that time period but I don't think that would actually be enforceable.
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation. That is, the average paying client won't be eligible for the retirement savings credit or eitc. It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit. If you have been out of school for more than a year, I'm baffled by your salary. $17 sounds like what I'd expect a college intern to make, or a college grad untested employee. If they've put a year of training into you, they should value you enough to pay better.
My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year. Isnt student loan interest also above the line, up to 2500? Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing. Crunch some numbers to see if the hsa makes more sense.
Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000. I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?
I don't know how much experience you have, but my public accounting firm has a branch in Triad and starting salaries for new grads are at least mid-40Ks. I'm willing to bet your non-compete is unenforceable, and doesn't it usually refer to your firm's clients?
Increasing you income is the fastest way to greater financial freedom.
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation. That is, the average paying client won't be eligible for the retirement savings credit or eitc. It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit. If you have been out of school for more than a year, I'm baffled by your salary. $17 sounds like what I'd expect a college intern to make, or a college grad untested employee. If they've put a year of training into you, they should value you enough to pay better.
My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year. Isnt student loan interest also above the line, up to 2500? Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing. Crunch some numbers to see if the hsa makes more sense.
Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000. I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?
I graduated in May 2012 but couldn't find an accounting firm willing to hire me until this past May. So I've only been at this job for 6 months. I tried and tried after I graduated to find an accounting firm willing to hire me, but always got beat out by someone with experience or the positions all required at least one year or more. I got hired on at Lowe's as a cashier in September '13 and still kept hunting for an accounting job. I finally found the firm I'm at now and got hired this past May. The $17/hr I'm getting isn't a lot for an accountant but its better than the $10 I was getting at Lowe's.
I'm not eligible for an HSA unfortunately. I have around $335 of student loan interest though. Might be around $400 by the end of the year.
My income last year was just $15960. This year's looks to be close to $29,100. Can't quite remember off the top of my head and my calculation sheet's at home.
1. Know the difference between income (gross) and adjusted gross, which is reduced by 401k and student interest. That 27k line for the savers credit is black and white, so make sure you've accounted for how the year end paychecks will come in. Your boss should be able to help with this. Also if you've only done $1200 between 401k and IRA due to the mid year job, definitely bump to $2000.
2. I'm not use what ineligible for hsa means. Does it mean you're on a high deductible plan, or that your firm doesn't subsidize you for an HSA? You can contribute even if your employer won't withhold it pretax or offer a match.
3. You have $63k in loans above 5%, that sounds like more than $443 a year to me.
4. Run your taxes and adjust withholding to get back whatever you've overpaid already. Possibly at a zero tax liability. You can increase your withholding in February. At the very least, be prepared to get your refund as soon as the W2 shows up in January.
I think your loan payoff and monthly fees have been well covered, and now your pay should be addressed with your boss. You currently make $17/hour. Do you know how much the firm charges for your time? Knowing this will show you how much they value you. Obviously they have overhead costs, but if they are charging $60-$80 per hour for your time, you should be getting more than $17. Women tend to undervalue themselves, and assume that if we deserve more money, it will be offered. It will not. Ever. You can request a salary review at 6 months or a year, but it has to be you requesting it. If you are a workhorse, doing a good job and getting the jobs done in an accurate and timely manner, they should have no reason to deny your value.
If not, get your year of experience, look back at the companies that you had issues with when you didn't have the experience, verify the non-compete does not apply, and get the heck out of there.
I'm a bit surprised that you've had such a hard time finding a job in accounting. I'm in accounting and I live in the Denver metro area and accounting is booming, even entry level. I talked to one of my friends that is a hiring manager the other day, she is with a small firm, and they're paying entry level people $52,000. PWC is starting grads off at $55,000. I started at $38,000 out of school in 2006 (holy cow I'm approaching 10 years). I think you're grossly underpaid. Hopefully you're getting good experience? What kind of work have you been doing? Did you get decent grades? I would keep looking for better paying jobs.
Also, are you planning on taking the CPA exam? If you can pass the exam that will drastically increase your earning potential and open doors for you.
Holy shit.... I have $63k in Student Loan debt as well between myself and my wife, but we bring home 3 TIMES your income. I feel like its hard to breathe, you must feel like you are DROWNING.
I would start snowballing debt (smallest loan to pay off) and living to the absolute bare bones. When you feel small victories, you will feel better about yourself.
Also, fine ways to earn more money or raise your income. From what I remember, Accountants should make at least $40-$50k a year. Sounds like you are making slightly less?
Good luck, I feel your pain.
You might consider asking your firm to pay for you to take the CPA exam and pay for Becker review courses. Make sure you study adequately before taking the exams so that you pass. It takes so much time and dedication but I promise you that it's worth it.
I think your loan payoff and monthly fees have been well covered, and now your pay should be addressed with your boss. You currently make $17/hour. Do you know how much the firm charges for your time? Knowing this will show you how much they value you. Obviously they have overhead costs, but if they are charging $60-$80 per hour for your time, you should be getting more than $17. Women tend to undervalue themselves, and assume that if we deserve more money, it will be offered. It will not. Ever. You can request a salary review at 6 months or a year, but it has to be you requesting it. If you are a workhorse, doing a good job and getting the jobs done in an accurate and timely manner, they should have no reason to deny your value.
If not, get your year of experience, look back at the companies that you had issues with when you didn't have the experience, verify the non-compete does not apply, and get the heck out of there.
We're not an hourly rate firm. We charge our clients a monthly fee that covers our services such as bookkeeping and payroll. In May is when I have my yearly review so I am hoping for a raise then if things go well. If not, then I might start looking around. My Dad doesn't believe I should expect a raise after just a year. But then again, he's only ever worked in factories, not in a professional setting.
Thank you COlady. I do want to be paid what I'm worth. But I'm so afraid that I might get let go if I ask for more. My boss has two sons finishing up accounting degrees. My Dad is afraid he might let me go and hire them instead. So I am afraid to kind of shake up the status quo. Maybe in another year or so once I get some actual tax prep experience I can start looking.
Thank you COlady. I do want to be paid what I'm worth. But I'm so afraid that I might get let go if I ask for more.
My boss has two sons finishing up accounting degrees. My Dad is afraid he might let me go and hire them instead. So I am afraid to kind of shake up the status quo.
For the love of [deity of your choice], combine trips! And get a free checking account with unlimited checks instead of driving to get a money order.
I do have a free checking account and I walk to get the money order. I might order some checks though.Sounds like another reason to drop this life insurance that you don't need. At the very least, switch to a normal company that operates in the 21st century and then also drop it to a smaller amount as nobody needs to pay your student loans if you die because they should forgiven. As others have already mentioned, a big part of getting started with paying off huge loans and turning your life around is to start optimizing where you can. This is an easy place to optimize!
I do have the day off on the 25th. I might just see about switching life insurance companies and dropping the insured amount by half.So I worked on the debt calculator spread sheet.
http://www.vertex42.com/Calculators/debt-reduction-calculator.html
I kept your minimum payments & assumed you had an extra $500 per month to put towards the debt. I think you can probably find another 100 to 200 with some of the suggested budget changes but $500 was my starting point.
The Great news is that you can have the PLUS, lending club and CC all paid off by April 2016.
This was assuming a $2000 tax refund that I put on the second page of the spread sheet in April 2016.
(Without that refund they are all still paid off by July)
Focus on those because of the high interest and low value.
You can run a few scenarios.
Snowball (lowest balance first) Total interest $18,949.28 last debt paid 8 years 1 month
Avalanche (lowest interest first) Total interest $15,645 last debt paid in 7 years 8 months
Custom (a mix of lowest value and interest) Total interest $15,746 last debt paid in 7 years 8 months
You can also run a horrific scenario with no extra payments and it will take over 22 years to climb out of debt.
Here is how I entered the custom data.
Lending Club 2,650.00 10.98% 83.27 2
PLUS 1,808.65 8.50% 105.53 1
Perkins 10,557.95 5.00% 120.00 8
AES Safford 3,462.35 6.80% 50.00 4
CC no interest 827.14 0.00% 25.00 3
A 4,546.57 6.00% - 6
B+D+F 4499.81 30,018.83 6.80% - 5
C 5,553.12 5.60% - 7
E 5,542.68 4.50% - 9
G 4,000.00 3.40% - 10
The last column shows the custom pay off order. I had to group all your 6.8% loans together
I am not savvy with the tax implications of paying one before the other so you can change the "custom" order to be more tax advantaged.
I hope that helps. I will try to send the spread sheet in a PM.
Thank you for running that for me. Actually I've run some numbers and gotten an estimated tax refund amount of 4000. So hopefully that's the amount I get. I can really pay some stuff off then.You've gotten lots of good advice (even if it wasn't all identical) but I have one suggestion that I'm not sure has been touched on. On your 0% cc set payments so the entire balance is paid off the month before the 0% period is up. No need to pay it off earlier, but you don't want to end up paying several months interest at 14%. Also keep an eye out for other 0% cc offers. Just be sure to not transfer more than you can pay off in the teaser period.
I've got enough in my savings account that I can pay it off if I need to. I check it at least once a week (to make sure no one's stolen my info and charged anything on it). I also have the date marked for 1 week before it goes up to 14%.
Thank you for all your suggestions everyone. You've definitely given me some things to think about. I do believe I will shop around for some better life insurance.
Not trying to burst your bubble but few professionals know the ins and outs of your tax situation. That is, the average paying client won't be eligible for the retirement savings credit or eitc. It's also, you know, better to read up on it yourself. I'm not sure when you finished school but if you were full-time for the spring (5 months) you can't take the savers credit. If you have been out of school for more than a year, I'm baffled by your salary. $17 sounds like what I'd expect a college intern to make, or a college grad untested employee. If they've put a year of training into you, they should value you enough to pay better.
My initial thoughts: changing Roth to traditional will lower your agi, as will hsa contribution, which can be done pretty late in the year. Isnt student loan interest also above the line, up to 2500? Since you're already doing $2700, you only need another $1000 to get under $27k. The savings is not exactly $1000, because you will get $200 at a higher agi, or $400 at an in between, but $600 match on $1000 is worth grabbing. Crunch some numbers to see if the hsa makes more sense.
Eta: if you can do a pretax hsa and then use it for premiums, that makes more sense to me than the IRA or extra 401k over $2000. I would focus on the loans first and max out 401k later. I'm guessing you filed taxes last year, how much has actually changed?
I graduated in May 2012 but couldn't find an accounting firm willing to hire me until this past May. So I've only been at this job for 6 months. I tried and tried after I graduated to find an accounting firm willing to hire me, but always got beat out by someone with experience or the positions all required at least one year or more. I got hired on at Lowe's as a cashier in September '13 and still kept hunting for an accounting job. I finally found the firm I'm at now and got hired this past May. The $17/hr I'm getting isn't a lot for an accountant but its better than the $10 I was getting at Lowe's.
I'm not eligible for an HSA unfortunately. I have around $335 of student loan interest though. Might be around $400 by the end of the year.
My income last year was just $15960. This year's looks to be close to $29,100. Can't quite remember off the top of my head and my calculation sheet's at home.
This comes back to sales & negotiation skills. I have been hired twice since college - on the spot both times, never had to show a resume. That wasn't luck or an accident. I wasn't born this way. I learned the skills through reading books, listening to CD's, practicing, selling door to door (which sucked), getting rejected thousands of times in my younger years before figuring out how to appeal to people. I did all of this due to a burning desire not to be poor. I started out like you. Age 23 w/ $45k in loans and a $32k salary. And now I'm 30, the investments just surpassed 250k & the momentum is on my side. DW is quite shy. She has stepped way out of her comfort zone to learn and implement these skills & she is now pulling down close to $100k at 28 yrs old. She works in the pricing department of a smallish company - not a job you'd think pays very well. She probably earns double the salary of some of her co-workers who do the same thing because she has figured out how to navigate through the management politics, demonstrate her value, play the right card at the right time & get big raises. It is so doable, and even more so in a smaller company where the salary policy isn't so rigid. You just need the confidence & skills. And that's on you to develop and learn.
When a person is destitute, it's easy to get trapped in the mindset that there is a huge scarcity of money in the world. Nothing could be further from the truth. Bank accounts in the US alone hold $3 trillion & that money changes hands 6 times per year. So roughly $18 trillion dollars will slosh around in the US this year. And the next, and the next. Going from $30k salary to $60k or $600k is nothing in relation to the amount of money up for grabs. You just have to figure out how to use your brain to capture a teeny tiny fraction of that money. The stakes are high, and it's on you to figure it out. Just know that it IS possible.
My Dad doesn't believe I should expect a raise after just a year.
...
My Dad is afraid he might let me go and hire them instead.
Networking events? I think the AICPA has those Young CPA events from time to time. I might look into those. Problem is I couldn't do any through the week since I have to get up early.
How do you eat an elephant? ;)
Thank you for clearing that up for me Trifele. Honestly, that was weighing on my mind a bit. Now if I get a better offer I won't have to worry about getting sued.
Can you give me the link to where you found this info?
I just want to throw my two cents in on how to start earning more money. I am a lawyer and I see many similarities between the two professions. At the end of the day, to earn money and be in control in your profession you will have to have your own clients. If you are working on someone else's clients they will always pay you a low amount. Think about it, you are easily replaceable (it took you how long to find a job?) and if you are paid too much then the partner doesn't make any money. Why would they deal with the hassle of an employee if they are not going to make money? Answer: They wouldn't. You should start paying attention to the economics of the situation. I work on "X" cases that bill "Y" in total fees. I am paid "Z%" of the total fees I generate. Is this fair? As a general rule in my business, an employee needs to generate 3X their salary to be worth the time.
Now, being in a small firm is actually a good thing. Usually that means there is less bureaucracy for decision making. To ramp up your income I would try to make a deal with your owners. If you bring in a client you want a percentage of the money. You will continue to do all their work on the agreed terms but also search out additional business. Any new business you bring in for them is "gravy" as you will be doing the client development and work. It is a "win-win" for the firm they get paid for business that doesn't currently exist and they don't have to do anything to get it. Just watch out for getting business from the places they get business. When I was working in a smaller law firm, I got 75% of the fee for clients I brought in. That was a pretty good deal.
Getting clients is the part that will increase your pay and give you control of your earnings. It really is not that hard. You just start going to community activities and telling people what you do. I'm on multiple board of directors, I started a scholarship and a free legal clinic. It can really be anything. If you go to community events over an extended period of time you actually just become friends with everyone and it doesn't feel like forced "networking." Once you become part of this community the referrals start flowing and your income will shoot through the roof. This is probably what the owners of your firm are doing.
In my community there are lots of places where they have entrepreneurship clinics. Most small business owners don't have a clue when they start out. If you go to those types of places and offer basic, easy advice (Register an LLC, Elect S-Corp, pay distribution to avoid 15.3% FICA tax or "now that you own a business don't forget to save for taxes there is no "boss" taking them out of your paycheck) you will start meeting clients. Offer the advice for free and, if they want you to do the paperwork then charge them a modest fee. Get them on the hook and when their business takes off, your business will take off. You service has lots of value and, when you show them how much you can save them in taxes, it will be a no-brainer to hire you. I always say the check I write to my CPA at the end of the year is my favorite because it earned me 10X in saved taxes.
Lastly, you don't have to have all the answers when you start. If you start talking with clients then they will start asking questions. If you don't know, you say, "That is a good question, what is your contact information. I am going to do some research and get back to you." Don't charge anything and get back with the answer. If they don't hire you, it doesn't matter. You will get asked that question a million times over your career and you just got the opportunity to have the answer ready next time. Your clients will teach you about the service they need if you just listen.
So I'm meeting with my boss tomorrow to see if he can help me with some tax planning. I'm hoping to do a mock tax return for 2015 tonight and see if he can check my figures tomorrow. Especially with this ACA advance tax credit stuff. I'm really hoping that if I do have to pay something back that it's not a lot.It will be interesting to see how that goes.
| Category | Monthly | Comments | Annual |
| Salary/Wages for earner #1 | $2,792 | $33,500 | |
| 401(k) / 403(b) / TSP / etc. | $112 | Room to increase? | $1,340 |
| Employer Match | $112 | $1,340 | |
| Income subject to IRS tax | $2,680 | $32,160 | |
| Federal Total Income | $2,680 | $32,160 | |
| Federal tax | $17 | 2015 rates, HOH,stand. ded., 2 exempt. | $200 |
| State/City tax | $67 | Guess, using 5.75% * Fed. Taxable | $807 |
| Soc. Sec. | $173 | Assumes 1 earner paying | $2,077 |
| Medicare | $40 | $486 | |
| Total income taxes | $298 | $3,570 | |
| Income before other expenses | $2,382 | $28,590 |
| Filing Status | 3 | 1=S, 2=MFJ, 3=HOH | |
| # Exempt. | 2 | ||
| # Children for EIC | 1 | ||
| Earner #1 | Earner #2 | ||
| Ages | 26 | 0 | |
| # of earners | 1 | ||
| Total Income | $32,160 | ||
| Std. Deduct. | $9,250 | ||
| Act. Deduct. | $9,250 | ||
| Exemption | $8,000 | ||
| SL int. (approx.) | $871 | ||
| AGI | $31,289 | ||
| MAGI | $32,160 | ||
| Taxable | $14,039 | ||
| 1040 Tax | $1,448 | ||
| Saver's credit | $134 | ||
| Tax after n-r credit | $1,314 | ||
| Child Tax Cred. | $0 | ||
| EIC | $1,114 | ||
| Net Tax | $200 | ||
| Monthly | $17 | ||
| State tax | $807 | 5.75% | |
| Version | V7.02 |
| Loans: | Orig. Prin. | Orig. Length | Curr. Prin. | Yrs left | Rate |
| Student Loan | $1,809 | 1.528 | $1,809 | 2 | 8.500% |
| Student Loan | $10,558 | 9.4126 | $10,558 | 9.4126 | 5.000% |
| Student Loan | $3,462 | 7.35 | $3,462 | 7.35 | 6.800% |
| Category | Monthly | Comments | Annual |
| Salary/Wages for earner #1 | $2,792 | $33,500 | |
| 401(k) / 403(b) / TSP / etc. | $438 | Room to increase? | $5,256 |
| Employer Match | $112 | $1,340 | |
| Income subject to IRS tax | $2,354 | $28,244 | |
| Federal Total Income | $2,354 | $28,244 | |
| Federal tax | -$144 | 2015 rates, HOH,stand. ded., 2 exempt. | -$1,728 |
| State/City tax | $49 | Guess, using 5.75% * Fed. Taxable | $582 |
| Soc. Sec. | $173 | Assumes 1 earner paying | $2,077 |
| Medicare | $40 | $486 | |
| Total income taxes | $118 | $1,417 | |
| Income before other expenses | $2,236 | $26,827 |
| Filing Status | 3 | 1=S, 2=MFJ, 3=HOH | |
| # Exempt. | 2 | ||
| # Children for EIC | 1 | ||
| Earner #1 | Earner #2 | ||
| Ages | 26 | 0 | |
| # of earners | 1 | ||
| Total Income | $28,244 | ||
| Std. Deduct. | $9,250 | ||
| Act. Deduct. | $9,250 | ||
| Exemption | $8,000 | ||
| SL int. (approx.) | $871 | ||
| AGI | $27,373 | ||
| MAGI | $28,244 | ||
| Taxable | $10,123 | ||
| 1040 Tax | $1,012 | ||
| Saver's credit | $1,000 | ||
| Tax after n-r credit | $12 | ||
| Child Tax Cred. | $0 | ||
| EIC | $1,740 | ||
| Net Tax | -$1,728 | ||
| Monthly | -$144 | ||
| State tax | $582 | 5.75% |
So I'm meeting with my boss tomorrow to see if he can help me with some tax planning. I'm hoping to do a mock tax return for 2015 tonight and see if he can check my figures tomorrow. Especially with this ACA advance tax credit stuff. I'm really hoping that if I do have to pay something back that it's not a lot.It will be interesting to see how that goes.
The usual rules of thumb would have you in Roth accounts, not traditional. In your specific situation, however, it appears the opposite is true.
So what you're saying is a Traditional IRA might make more sense instead of a Roth IRA. I'm going to see what my take-home pay would be if I were to change my 401k contribution to 6%. I am kind of afraid to change my withholding because if my brother gets a job during 2016 I'd have to change my withholding status back to single to have enough tax withheld right? I really don't wanna owe the IRS any money when I do my 2016 return.
I also asked what my take-home pay would be if I upped my 401k contribution to 6% instead of 4 and he will get back to me with that number later today.
As for my withholding amounts and status I think I will leave it where it is for now. I'd rather be safe than sorry. But if I want to change it anytime next year he says he can do that for me no problem. The mock tax return also stated I'd get around $3000 back for 2015 so I'm pretty happy about that.
The only difference I can see between a 401k and an IRA is that you can sock away $18k instead of $5.5k.There is also a difference in how these affect the EIC. The 401k amount is contributed by your company and never appears as part of any entry on Form 1040, so it is not included in your income for EIC purposes. Doing your own tax return by hand (or at least with the help of a spreadsheet you do yourself) for a few years should be very worthwhile for you, both personally and professionally.
I know if I increase my 401k to 6% then that will be $83.75 deducted pre-tax.Correct.
I did a calculation with an online calculator for what my take-home pay might be but I think it's wrong as the FIT goes up. That can't be right.You are right, that is wrong. Find a different online calculator. Which did you use?
Here's my results from the calculator:Federal Withholding of $175.78/paycheck is way too much for you.
I think your loan payoff and monthly fees have been well covered, and now your pay should be addressed with your boss. You currently make $17/hour. Do you know how much the firm charges for your time? Knowing this will show you how much they value you. Women tend to undervalue themselves, and assume that if we deserve more money, it will be offered. It will not. Ever. You can request a salary review at 6 months or a year, but it has to be you requesting it. If you are a workhorse, doing a good job and getting the jobs done in an accurate and timely manner, they should have no reason to deny your value.
Wow that Pub 505 has a LOT of good info in it. I'll probably have to go over it multiple times to absorb all of it. As to calculating my paycheck with a 6% contribution to my 401k I will probably still ask my boss to estimate what my take-home pay will be because no matter what I calculate myself the software he uses could give a different result.Yes, sometimes there would be as much as a nickel's difference between what our calculations and what the company would withhold. Really annoying. ;)
I've also been looking at the funds I've invested in for my 401k and I am not very happy with the choices I made. Man some of these fees are high! ... These fees are ridiculous. I wish my boss would go with Vanguard.See https://www.bogleheads.org/wiki/How_to_campaign_for_a_better_401%28k%29_plan.
The differences were more than a nickel. They were like $15 or $20! I did get a calculation of around $121 for Fed though. Do you know any good calculators that can also do state and FICA taxes as well?A $20 per paycheck (aka $480/yr) difference is more than just round-off error. There is either a mistake in someone's calculation, or different inputs or assumptions are being used.
So I figured that out but the state is off. The spreadsheet calculates around $75.50 for each check for state. When I multiply .0575 by the 2680 you got for taxable income I don't get the 67 you got I get 77. I'm not that bad at math am I?Your math is ok. The difference is in the assumptions used.
...a $500 SL interest deduction (I know it'll probably be more than that for 2016 but I like to guess more conservatively with these things)Conservative is better than overly optimistic, but not as good as reasonably accurate. You may not know now how aggressively you will pay the SLs in 2016, but by at least ~June 2016 you probably will. It's generally a good idea to shoot for accuracy when you are investigating possibilities - but see below about appropriate conservatism.
so I get an AGI of $30982 and a taxable income of $24682.You are assuming filing with single (not HoH) status, correct? If so, there is another $4000 (actually $4050 in 2016) that you will subtract to get taxable income - see the case study spreadsheet (CSS) calculations for details.
So state tax on a yearly basis comes out to $1419Note that the actual NC state tax calculation may differ from the assumptions used in the CSS - you should check that.
so I get a monthly amount of $82 for state.Not sure how $1419/yr becomes $82/mo.
And if I am figuring this correctly then my take-home pay would be $2624 pay after 401k deduction - $565 total taxes = $2059 / 2 = %1029.50. So my take home pay would go up by a whopping .68 :)I get $1048.63 but that's with $871 SL interest so close enough.
However if I increased my contribution to 7% then my take home pay would go down to 1018. So I don't want to go any higher on the contributions unless I get a raise.Actually (using the $871 SL interest assumption), increasing the 401k contribution to $177/mo (or 6.34%) would increase your take home pay to $1053.18 due to a $200 saver's credit (again, assuming your W-4 is adjusted accordingly). Here is where you would want to be somewhat conservative: the $200 saver's credit applies if your AGI is $30,500 or below. If it is $30,501 the saver's credit is $0.
Although since the funds in the 401k suck I probably won't go higher than 6%.See http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/
I wonder though, if he doesn't want to switch to a different 401k provider, then maybe I could set up a 401k with Vanguard and he can send my contribution and his matching part to it. Is that legal?Doubtful. Pretty sure a 401k is described by a legal document and applies company-wide.
I might have to have a talk with him about the 401k. I don't think he'll want to change though. There's just five of us counting him and the others are perfectly fine with the way the plan is. But maybe when he gets back on the 23rd I can sound him out. Or better yet, talk to the payroll lady. She's worked with him for 8 years, she should be able to give me an idea on how he'd react about this.
Attached is a version of the CSS with specific calculations for NC state income tax in cell G30. That might be of specific interest to you and any other North Carolinians.
What may be of more general interest is the chart overlaying cell J73 and thereabouts. It is a way to analyze "what if?" options that (to me at least) fits the "picture is worth 1000 words" equation. To make good use of it may require some familiarity with Excel data tables, but at least for this case study you may be able simply to look at it. The main thing it shows are the locations of "step changes" in the tax code. For your single filing status that occurs with the saver's credit. For the HoH filing status there is the saver's credit and the EIC.
I've been assuming the entries below describe your single and HoH situations:
Cell Single HoH
G2 1 3
G3 1 2
G4 0 0
G5 0 1
Use it if useful, ignore it if not. The graph is the embodiment of a vague idea I've had for a while and this case study catalyzed that work - so thanks! The generic version has been uploaded to the Google Drive location mentioned in http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/ and http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.
...You would be in a far better position having those $60k in loans plus $60k in cash versus $0 in loans and $0 in cash.In some cases (e.g., dire emergency) yes - due to having the cash on hand. In other cases (e.g., life goes on normally) no - due to the cost of the very high interest rates on those loans.
TL; DR: OP enjoy life, go on PAYE/REPAYE, don't make all these charts and crap and tracking about this stuffThat is one perspective. Nice thing about the MMM forum is the variation in perspectives. We can also give OP kudos for getting a better understanding of her situation and having the responsibility to repay the loans she took to get her accounting degree.
It's always good to get multiple perspectives on a situation. I would like to pay the loans back as I did borrow that money in good faith. I will try to relax though in regards to the Nelnet loans. I almost felt like they were breathing down my neck and I absolutely had to get them refinanced by May or something. I think I'll give myself a little breathing room instead of inducing a heart attack. I still want to get them refinanced, but the world won't end if I don't do it in May. Really I have until July or so before I need to re-apply for the IBR. So that'll give me a few extra months to pay down the other high-interest loans.
Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.
Don't fall for the "good faith" argument.
From wikipedia:Also, taking the argument further, your professors did not act in "good faith" as they (like most business professors) probably led their students to believe they'd be making $50k-$100k plus.
If OP feels that paying back her loans is what she needs to do to maintain her integrity, well, I don't see her giving up that mindset based on something you think her professors may have said.
That being said, finding all possible means of reducing payments will not compromise one's integrity, as long as those means follow the rules, such as IBR or REPAYE. That's what we all do with taxes, right? We look to legally minimize our tax burden.Don't fall for the "good faith" argument.
Would you mind laying this out for me? I'm not sure I understand what the good faith argument is, but I'd like to.