What should I do with $40k a month of income?

[webguy]

To give a quick back story, I was making about $70k at my day job as a web developer and started looking into investing in real estate as an asset. While doing research I decided that I really know nothing about real estate and didn't really have the desire to learn and so would be better served building my own assets in a field that I know about. I decided that instead of investing my extra cash into real estate that I'd just spend all my spare time building a software app to generate cash flow instead. Fast forward a year and the app is generating $40k+ per month in profit and I don't know what to do with all the money. I'm not expecting to earn that amount per month for more than a couple of years, but having said I'm working hard to try to increase revenue and try to build it for the long term (I just don't want to get my hopes too high). Expenses for my wife and I are about $3k per month and we're hoping to start a family next year. Our financials are as follows:

$105k cash (expecting a $75k tax bill in Jan + some extra to fund retirement accounts in Jan)
$255k investments (55% US, 35% Intl, 10% REITs - in mix of IRAs, 401k, HSA and taxable accounts)
$100k home equity ($165k mortgage left at 2.6% on a home worth ~$265k)

I only started seriously investing about a year ago and feel uncomfortable dumping $20-30k a month into stocks with the market at it's current valuation, so I'm not sure what to do with the money. The last few months I've just been stockpiling cash ready for my tax bill. I'm not used to having so much extra money (my family wasn't very well-off growing up) and so could use some advice. I have very little spare time now as it takes a lot of time to manage and support the software app/business, and so was looking briefly into turnkey property investing. Would this be a good use of my capital? I understand that index fund investing is a great strategy (and is what I've been doing) but I'm hoping to retire in a few years and it seems risky to be investing so much money into the stock market in such a short period of time (when it's so highly valued) without the benefit of long-term dollar cost averaging on my side. I know the market could keep going up but it would suck if I invested $500k over the next 2 years while it's high and then I stopped investing and it took a nose dive.

If anyone has any advice for me it would be hugely appreciated!

[Undecided]

To give a quick back story, I was making about $70k at my day job as a web developer and started looking into investing in real estate as an asset. While doing research I decided that I really know nothing about real estate and didn't really have the desire to learn and so would be better served building my own assets in a field that I know about. I decided that instead of investing my extra cash into real estate that I'd just spend all my spare time building a software app to generate cash flow instead. Fast forward a year and the app is generating $40k+ per month in profit and I don't know what to do with all the money. I'm not expecting to earn that amount per month for more than a couple of years, but having said I'm working hard to try to increase revenue and try to build it for the long term (I just don't want to get my hopes too high). Expenses for my wife and I are about $3k per month and we're hoping to start a family next year. Our financials are as follows:

$105k cash (expecting a $75k tax bill in Jan + some extra to fund retirement accounts in Jan)
$255k investments (55% US, 35% Intl, 10% REITs - in mix of IRAs, 401k, HSA and taxable accounts)
$100k home equity ($165k mortgage left at 2.6% on a home worth ~$265k)

I only started seriously investing about a year ago and feel uncomfortable dumping $20-30k a month into stocks with the market at it's current valuation, so I'm not sure what to do with the money. The last few months I've just been stockpiling cash ready for my tax bill. I'm not used to having so much extra money (my family wasn't very well-off growing up) and so could use some advice. I have very little spare time now as it takes a lot of time to manage and support the software app/business, and so was looking briefly into turnkey property investing. Would this be a good use of my capital? I understand that index fund investing is a great strategy (and is what I've been doing) but I'm hoping to retire in a few years and it seems risky to be investing so much money into the stock market in such a short period of time (when it's so highly valued) without the benefit of long-term dollar cost averaging on my side. I know the market could keep going up but it would suck if I invested $500k over the next 2 years while it's high and then I stopped investing and it took a nose dive.

If anyone has any advice for me it would be hugely appreciated!

Asset allocation is asset allocation.

[piethief]

I had a situation a couple years ago where the technology company I worked for went public.  I had a good amount of stock for a non-founder and in a two year period, I made more money than I made the previous decade.

Two important points:

1.) The high income didn't last beyond the two years, so you are right to not so much be afraid, but be prepared for that.  Sounds like you are.
2.) It made the tax liabilities extremely difficult to calculate until after taxes were filed for the year.

Here's what I ended up doing:

I held enough of the money in liquid savings until my CPA filed my taxes for the year, then once I covered any tax bills, that money was effectively free and clear to invest and I threw it all in diversified investment accounts.  Ultimately this was a good decision because I had an incredibly huge tax liability for the amount of money I received.  (Shares taxed at a higher value than when I was able to sell them, so my effective rate actually ended up being insanely high like close to 70%.  But on the plus side I have carry forward tax losses that I will be able to deduct until I turn 115 years old. :)

The only other reason I would keep money around is if I were in a high risk start-up company type situation, but it sounds like you probably could just pretend this money never existed, invest it, then be super happy in a couple decades when it's worth millions of dollars.

[surfhb]

Wow! congrats!

You can't think short term while investing.   The point is to look at the end game 50 years from now.   Since you'll probably be using this capital in 50 years, do you think the market will be higher or lower than its currently at right now?    If you say yes then start investing!   

Btw.....I'd pay off all your debt.   A paid off home is nice to have.....even at these those rates.   I firmly believe in securing you nut sooner then later

[2Birds1Stone]

A friend of mine is an econ professor at UC, owns a real estate company, as well as a financial consultant on mergers and acquisitions. His wife owns a chain of dental practices so they are also in that 7 figure income range. He stresses tax deference, I believe being self employed he is able to defer $52k/yr and so is his wife, that should help lower the tax bill as well. I would also look into maxing out HSA/college savings plans, and any other tax deferral options you might have.

I hope this is not out of line asking, what type of App is this? Even if you can't specify the name I am curious. I have a few friends in app development and I hope they are able to gain such traction.

[Ricky]

You'd do the same with $37k in extra money as you would with $1k. Invest it. In what, is up to you, and frankly too broad of a subject to be repeated here. Stocks are obvious. Real estate is obvious. Since you're into app development and seem to know your role in life, look into being a VC and make some speculative plays. I'd allocate roughly 20% into speculative VC (or more) with that type of income.

Dividend growth investing and real estate (preferably vacation rental) will always be my favorite ways to invest.

[FarmerPete]

Invest.  Max out your tax deferred accounts and put the rest in index/mutual funds.  Unless you are planning to access the money soon, don't worry about the ups and downs.  It'll grow over time.  Even if this was summer of 2008 before the collapse, you'd break even in a couple years.  If you think you're going to FIRE in 2-3 years, then you might want to invest in less volatile investments.

[xQuizx]

Congratulations!

I would contact a financial adviser (as well as an accountant) for some help.

Some advice my adviser gave me was you can use your side income to contribute to a SEP IRA.  You can put 25% away for yourself and your wife, which would significantly reduce your taxable income

http://www.irs.gov/Retirement-Plans/Retirement-Plans-FAQs-regarding-SEPs-Contributions.

Cheers!

[merula]

Wow, good for you! If I were in your shoes, I'd pay off any debt (mortgage included, but there are plenty of people on the board who would say to hold onto a 2.6% interest rate mortgage), max out any tax-deferred accounts you have available to you, and then dump everything else in investments. I wouldn't worry about what the market is doing right now. For reference on this point:

http://jlcollinsnh.com/2014/11/12/stocks-part-xxvii-why-i-dont-like-dollar-cost-averaging/

http://awealthofcommonsense.com/worlds-worst-market-timer/ (Not really applicable in terms of savings from earnings, more to make the point that you can still come out ahead even if you buy "high".)

[frompa]

How about tossing a good portion into short term account, to cover your likely tax liability.  And then set up a SEP or other self-employed tax deferral retirement savings option.  Assuming you are a sole practicioner, get yourself an EIN from the IRS and contact Vanguard for help setting it up, then start setting as much cash aside as you can, into your tax deferred retirement accounts.  People differ on the value of paying down a mortgage.  From my point of view, I hated all debt and got rid of my home mortgage ASAP, because even if I could have earned $ on the $ I used to retire the mortgage, I knew that I'd feel much more secure in the long run, being debt free.  That has most certainly panned out for me.

 I'd exercise caution is seeking services from a financial advisor... in my experience of dealing with many people who don't really understand how money works, financial advisors have mostly encouraged their financial ignorance and made lots of money off their ignorance.  None of this is rocket science... take your time figuring out all that you can.  A good CPA will be able to answer and deal with technical questions and help you get set up properly. 

What a nice problem to have;  congratulations on having the self-confidence to move ahead under your own steam. 

[Exflyboy]

Minimise your taxes then if you have a 10 year or more timeframe then stock market ETF's... its the way to go!

Set and forget.. check your balances once a year.. but if they are lower add some more if you can.

Oh yeah and I'd pay off all my debts including the mortgage.. you can argue at 2.6% it doesn't make sense, but in 5 years you lost your job its a wonderful feeling to own that roof over your head... That's what I did anyway.

Frank

[VegasStache]

1. Congrats
2. Save more for taxes until this settles down.  I'd put 40% ($16k/month) in an index fund and earmark this in your head for the tax bill.
3. With the 60% of the income stream per month that's left, allocate some to long term investing, some to paying down your debt, some to revisiting your infrastructure (do you live where you should?) some to charitable giving (I like Kiva & NPR), some to education (yourself and your potential kids'), and of course cover your 'normal' monthly expenses.  Do some goal setting to determine your mix.
4. Insure yourself & your wife.  I know it's not popular around here to get Whole Life Insurance, but I use participating (aka dividend producing) insurance on myself, my wife and my kid.  We're over insured, but built a LOT of cash value while we were raking it in when I was consulting and she was running a lucrative law practice.  This cash value is a great way to be your own banker without having to use traditional banks.  We have a few hundred thousand we can tap for whatever investments we like and it's all tax free in/out (policy loans.)
5. Get an estate plan / trusts set up to hold your assets.   Shop around for an attorney you like and knows their business.  Use your accountant for a recommendation or just ask around.
6. Make sure you have a good team giving you advice.  CPA, attorney, doctor are minimum.

[webguy]

Thanks for the replies everyone, I really appreciate every one of them.

To address some of the points; I've been working with a CPA and small business attorney who are helping me to reduce taxes. I'm currently an LLC and will be filing as an S-corp next year to help reduce self-employment taxes. I've maxed out all retirement account for this year (IRAs, 401k, HSA) and have them all currently invested in stock index funds. I have money saved up for my tax bill in Jan already.

I think I know that the best thing to do is to keep pumping more money into stock market index funds, but when you've never had much money then it's scary to be putting so much in in such a short period of time. I'm not used to having this much income and I feel very lucky to be in this situation, but it also seems to make it more difficult to invest than when I was just continually putting $3-4k a month into investments when I was working my old day job as it felt like much less of a risk back then. I don't have any bonds in my portfolio, perhaps I start buying some of those?

Oh yeah and I'd pay off all my debts including the mortgage.. you can argue at 2.6% it doesn't make sense, but in 5 years you lost your job its a wonderful feeling to own that roof over your head... That's what I did anyway.

I definitely understand that having a paid off house is nice, but I feel like I'd be mad to pay off the 2.6% mortgage! I'm comfortable having that monthly payment and feel confident that even if I lost all of my income we could still make that payment.

I hope this is not out of line asking, what type of App is this? Even if you can't specify the name I am curious. I have a few friends in app development and I hope they are able to gain such traction.

It's a social media application. It's tied to one particular social media platform (which is why I don't anticipate a very long shelf life) but I'm working on similar apps for other platforms too which will hopefully increase the longevity a bit.

Since you're into app development and seem to know your role in life, look into being a VC and make some speculative plays. I'd allocate roughly 20% into speculative VC (or more) with that type of income.

I've never thought about that before. Do you (or anyone else) have experience in this? Watching "Shark Tank" or "Dragon's Den" is the closest I've come to this. It seems like it would take a lot of work to do due diligence on each potential investment and I definitely don't have much time right now unfortunately.

[sobezen]

Wow!  A heartfelt congratulations to you and your family!

With your $40,000 monthly extra cash flow I'd consider the following:
1) estate planning (durable power of attorney, setting up trusts for your assets, review your beneficiary forms, advanced medical directives)
2) insurance (life, umbrella, disability, and long term care.)
3) create an education fund if you plan on having a family.
4) pay down your home.
5) reduce additional debts (credit card, student loans, etc).
6) research the different types of financial advisers available and their certifications. i recommend an hourly fee-based Certified Financial Planner who is a fiduciary. you can research more about advisers on FINRA and yelp site to see if they have any complaints. then when you are comfortable enough go out and interview different advisers and their firms. don't rush to make any decision when you meet any of them. also, make sure you research and directly ask the advisers how are they compensated. in my experience it is good to know upfront if they are getting compensated based on the funds or products they offer. that said what types of products can they offer? can they offer competitors products or only their own? if they can only offer their own, such is the case for most bank based advisers, i'd avoid them b/c they cannot offer you other products/services beyond their company.
7) put aside more for emergencies (if you have six months, consider raising it to a year. i empathize with your concern about not coming from money so saving more and having buffer should help reduce this concern)
8) begin researching more about potential investment properties in your area, so you can begin to gain more experience and confidence in real estate investing. i don't recommend out of state simply because you may not have the time, resources or experience (yet) to evaluate properties, so look locally if you still are interested in diversifying into real estate.
9) put aside more money to expand your business. since you are anticipating the income from the business to gradually decline, then perhaps you can research and create other apps to meet other growing needs/services?

good luck and let us know what you end up doing. :)

[webguy]

What is your wife's situation?  Is she working at a job that has a 401k?  Is she an employee of your business so you can max out her 401k as well?

What did your CPA recommend regarding W2 income vs. shareholder distributions?

My wife is currently finishing up a 9 month unpaid internship as part of her grad school program and will be added as an employee of my business next year in order to max out a 401k for her ($18,000 + 25%). My CPA ran through some scenarios with me and we decided on $134k in W2 salary and the rest as distributions. This seemed to make the most sense in regards to retirement account contributions and payroll taxes.

I love this thread.

Entrepreneurship is awesome. For every person content earning their paltry $150k wage working for MegaCorp, Inc., there are stories like this, confirming that there really is no ceiling -- in the western world, you can earn as much money as you want. Capital requirements are minimal. Regulatory impediments are minimal. If you aren't earning enough money, you have only yourself to blame here in the USA.

I'm glossing over some edge cases, but I love stories like this because they're a reminder of how much of a wussy I am. I'm pretty young, but if I stay the course, I'll be a millionaire by age 30 -- just by working normal jobs. But why stop at that? That's nothing. There's no reason I shouldn't be earning $40k per month too. These threads are a reminder that I've set the bar far too low.

In fact, why stop at $40k? Why not grow the business and get $1 million per month instead?

This doesn't answer the questions in the thread, but yeah, I love entrepreneurship...

Cathy, I couldn't agree more. I'd recommend everyone explore starting a business on the side because there is so much opportunity out there, it's insane.

It's funny that you questioned stopping at $40k because I've had the exact same mentality over the past year. To give you some perspective, before I started the business I listened to a lot of online business podcasts and a couple of episodes stood out to me. One interviewed a guy who made $10k a month selling a product he created. I couldn't believe it! I thought that would be insane to earn $120k per year! I decided to make it a goal of mine. I then heard another podcast where the guy nonchalantly talked about how he made no less than $1000 per day from his online business. I was blown away and thought that I'd never be able to earn that much but it was fun to dream. Shortly after that I decided to start building the app and my goal was that within a year I wanted it to generate enough income each month to cover our mortgage (~$1500/month). The first month it made $2500! The second month ~$4500, the third $6000, and the fourth $10,000. At that point I couldn't believe it and thought I'd just be happy if it stayed at that level. Then after a while I started to think well why can't I double that and make $20,000 a month? 6 months later I hit $22,000. Again I started thinking well why can't I double that?? Here we are 8 months later and I should hit $45,000 this month. There's no way I'll be able to double that though. Right??? Haha, who knows, but your mindset it spot on that you should never limit yourself to what people tell you should earn or what you think you should be earning. I never thought I'd ever earn 6 figures in my life back when I was working my day job. So hopefully this is some kind of inspiration to you and I absolutely think you should follow the entrepreneurial path if you have a desire for it.

[YeahNo]

Come on man, you gotta give us those details of the App so we can all go use it now that we knew a MMM'r created it!

[Villanelle]

Yes, putting it toward a 2.6% mortgage isn't going o maximize return, but if I wasn't willing to put that $20-30k in the stock market (which is what I'd actually do, assuming I felt completely confident I'd saved sufficiently for taxes), that's probably the route I'd take.

Being a VC sounds very cool, but it is extraordinarily unpredictable and it would never make up more than a very, very small % of my asset allocation, unless I was so rich that I literally had money to burn.  That's more gambling than it is investing. 

[HairyUpperLip]

Wow, awesome story. Congrats man. I don't have any real advice, sorry.

[Fuzz]

I am incredibly psyched for you. That's terrific work. $40K/month in side income is HUGE. I think you can't go wrong putting money in an index and fund and making sure you and your wife are squared away with a maxed out SEP IRA.

With that cash flow, you it could make financial sense to hire people to work on your project. If a marketing consultant can help you go from $40K to $80K that would be money well spent. Management, marketing and sales are their own sets of skills, but you seem incredibly competent. I think your tradeoff is invest in yourself vs. invest in the market. You should do both (and diversify your investments in the market). But given your talents/success, I would encourage to think about what kinds of investments in your business are reasonably likely to beat the market.

My own philosophy is to be diversified in my market investments but relatively undiversified in my investment in myself (i.e. I don't have a professional degree and a contractor's license).

[vagon]

I would keep in the forefront of your mind:

• Your target wealth level
• Your business is actually an investment itself
• Your employement is tied to your investment

So that leads to the following questions:
Whats your target level of wealth? this should drive your asset allocation

I am assuming you'll hit the target level of reasonably soon, so it may be a good idea to diversify more and put more weight into conservative assets. At that point in time your focus should be on protecting your wealth.
Currently your stock in your company is extremely high growth, but also very risky. So you have growth essentially covered. You are currently (it seems) diversifying into other growth assets (aka the index funds).
What you seem to be lacking is less volatile asset classes like REITs (or any other solid real estate ventures. Empahsis on solid no spec) and bonds.

Finally you are your own growth investment. If this goes bad, how long will you spend on it before looking for another job? How about your wife? Will you be able to transfer to another job (probably)? Would you want to (probably not)? How does that affect your target wealth level?

[Goldielocks]

One thought, and one thought only came to mind...


Troll.


----LOL

[pbkmaine]

Talk to a tax accountant. If you have the right structure, you might be able to set up a defined benefit plan for yourself. You could sock a lot of money away.

[jawisco]

Talk to a tax accountant. If you have the right structure, you might be able to set up a defined benefit plan for yourself. You could sock a lot of money away.

+1

This is the best way to shelter the most money from taxes and that is always a good idea.

[RichMoose]

I would advise you to be very careful with this windfall. There are a lot of people out there who come into these situations via stock options, inheritances, etc. It doesn't take long before the leaches show up and they often can be dishonest accountants, lawyers, and financial advisors. Make sure you control and understand everything these advisors do!

My advice would be to keep things as simple as possible. While I'm not very familiar with US tax laws regarding corporations, if this was in Canada I would set up 2 companies. A holding corporation and a corporation for the app itself. This way you can play around with earnings a bit and set up a flexible share structure with different classes for you and your wife. If that kind of monthly income keeps growing, it may be worth considering real estate as part of your investments depending on your area. With low current interest rates, you could consider buying an apartment building or commercial office building with your holding corporation. You can also open business investment accounts through low-cost brokers and use those to invest in mutual funds or ETF's. Make sure you max all your personal tax-advantaged accounts and make sure you don't let your tax bill get out of hand.

You have opened a lot of options with this but be careful to keep things simple and very easy for you to understand. Good luck!

[webguy]

Thanks so much everyone for your advice! I'm getting a lot of sound ideas from this thread on how to allocate my cashflow.

9) put aside more money to expand your business. since you are anticipating the income from the business to gradually decline, then perhaps you can research and create other apps to meet other growing needs/services?

With that cash flow, you it could make financial sense to hire people to work on your project. If a marketing consultant can help you go from $40K to $80K that would be money well spent. Management, marketing and sales are their own sets of skills, but you seem incredibly competent. I think your tradeoff is invest in yourself vs. invest in the market. You should do both (and diversify your investments in the market). But given your talents/success, I would encourage to think about what kinds of investments in your business are reasonably likely to beat the market.

I think this is great advice and something I've thought about before but never really figured out a way to do. I know that if I hired people or invested in some people to help me it would fuel growth and allow me to increase the income further, however, I've never managed a business (or people) before and that side of things intimidates me. I'd much rather sit in my home office and work on code updates than have to interview potential hires and figure out ways to delegate tasks and manage other people. I'm going to give this much more serious thought though as right now it's just me doing everything and that definitely limits the potential of the business due to the amount of time in the day and the extent of my expertise in certain areas.

I would keep in the forefront of your mind:

• Your target wealth level
• Your business is actually an investment itself
• Your employement is tied to your investment

So that leads to the following questions:
Whats your target level of wealth? this should drive your asset allocation

I am assuming you'll hit the target level of reasonably soon, so it may be a good idea to diversify more and put more weight into conservative assets. At that point in time your focus should be on protecting your wealth.
Currently your stock in your company is extremely high growth, but also very risky. So you have growth essentially covered. You are currently (it seems) diversifying into other growth assets (aka the index funds).
What you seem to be lacking is less volatile asset classes like REITs (or any other solid real estate ventures. Empahsis on solid no spec) and bonds.

Finally you are your own growth investment. If this goes bad, how long will you spend on it before looking for another job? How about your wife? Will you be able to transfer to another job (probably)? Would you want to (probably not)? How does that affect your target wealth level?

I never really thought of my business as a high growth investment and so this is great advice. As I'm pretty young I figured my investment portfolio would be fine in all stocks, but it would be a good idea to push some of the cash from the business into more conservative investments and focus some on preserving my wealth rather than just trying to grow it. I guess my hesitation in doing this is that bonds are the only conservative investment I'm familiar with and I've read that now is potentially a bad time to invest in that asset class due to low interest rates. Are there other conservative investment types I could look into?

To answer your questions, our target wealth goal is $1M in cash/investments, but if we hit that in the next few years and business is still going well then I'll continue to "milk that cow" and try to earn as much as possible while I can. I've thought about backup plans and have a few. If the business tanked and revenue fell to 25% of it's current level then it would still provide $10k a month. I recently released a second app and that's currently pulling in about $7-8k a month, so it's unlikely that both would get cut off at the same time and it would likely be more like a gradual decline than a sudden drop off. If they did both disappear then I have a freelance business that I put on hold to do these apps which I could rejuvenate. If that didn't work out then I have a pretty strong network through my freelancing which I'm confident I could tap for a job within a few weeks if need be.

I think my plan right now is going to be to continue to invest in index funds, but allocate a larger amount to some more conservative investments, and also start looking to hire some people to help me with a few aspects of the business (marketing and support mainly) to help reduce that burden and free up some time to allow me to focus on further growing the business.

[feelingroovy]

I just wanted to point out a couple discussions from two people in a similar situation--sudden high income that may not last.

http://forum.mrmoneymustache.com/journals/buying-autonomy/
http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-how-do-i-handle-this-roller-coaster-ride-sudden-wealth/

There is some good advice in both threads you may find helpful.

[vagon]

I never really thought of my business as a high growth investment and so this is great advice. As I'm pretty young I figured my investment portfolio would be fine in all stocks, but it would be a good idea to push some of the cash from the business into more conservative investments and focus some on preserving my wealth rather than just trying to grow it.

No problem, just remember a stock is just equity in a business and it just so happens that you have a a lot of equity in your own business. Your investment in all stocks is historically fine, especially given your age - the key here is that your goals are probably different from most people your age who would earn more like 20% of what you do.

I guess my hesitation in doing this is that bonds are the only conservative investment I'm familiar with and I've read that now is potentially a bad time to invest in that asset class due to low interest rates. Are there other conservative investment types I could look into?

The hesitation is natural. Bonds typically lose money given inflation, but they are significantly less volatile which is what conserves your wealth. I would not place too much emphasis on trying to time a market and when to invest in what, a better idea is to stick with an asset allocation.

Other typically more conservative investment types are real estate and precious metals. Note just the process of diversification itself spreads risk so you might look to include international stocks and bonds into the mix. If you are comfortable with investing in stock funds or ETFs, companies like Vanguard will almost always have a generic asset mix that is rated according to its risk profile this might be a good option as it sounds like you are time poor.

To answer your questions, our target wealth goal is $1M in cash/investments, but if we hit that in the next few years and business is still going well then I'll continue to "milk that cow" and try to earn as much as possible while I can. I've thought about backup plans and have a few. If the business tanked and revenue fell to 25% of it's current level then it would still provide $10k a month. I recently released a second app and that's currently pulling in about $7-8k a month, so it's unlikely that both would get cut off at the same time and it would likely be more like a gradual decline than a sudden drop off. If they did both disappear then I have a freelance business that I put on hold to do these apps which I could rejuvenate. If that didn't work out then I have a pretty strong network through my freelancing which I'm confident I could tap for a job within a few weeks if need be.

That target seems to be extremely achievable given your business revenues of $47K a month. Congratulations.
Your back-up plan is solid too, but I would also keep your partner in mind when thinking about job contingencies.

I think my plan right now is going to be to continue to invest in index funds, but allocate a larger amount to some more conservative investments, and also start looking to hire some people to help me with a few aspects of the business (marketing and support mainly) to help reduce that burden and free up some time to allow me to focus on further growing the business.

Good luck with it all, feel free to PM me if you want to bounce any other ideas around.

[kkbmustang]

You might also consider, in addition to all of the standard tax deferral issues, the opportunity for charitable giving. You could use something relatively straight forward like a donor advised fund. Also, google "donating appreciated assets" in that same context. You can avoid paying tax on the locked in appreciation and take a deduction for the FMV on the date you donate it to the donor advised fund. You can make decisions regarding charitable organizations you want to ultimately donate to at a later date (and tax year). Just FYI.