The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: kasalii on December 03, 2013, 08:16:12 AM
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Hopefully no one says I'm crazy. I know this isn't the perfect situation. My husband is full-time military. His paycheck pays mortgage and all the bills, and he still has extra money left over. I work full-time retail, but 50% of my paycheck and 11 hours of my day go towards this job. I would rather spend my time doing yard/house work, exercising, and working on my polymer clay business. I believe my clay business is successful for the small amount of time I can put into it now, at the moment I make 10% of my retail job. I understand that it would not be a steady income, but it is my passion and I don't need to pay bills with it. My question is what should I expect when I quit or find a part time job closer to home? What happens to my 401k? My clay business is registered with the state, are taxes going to go crazy? Thank you!
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Would the clay business generate more earnings if you put additional time and effort into it? Would the additional earnings be enough to justify your effort? Is your husband on board with all of this?
Youtr 401k can either be left with the existing plan, or you can roll it over to an IRA (I would suggest the IRA rollover at Schwab, Fidelity or Vanguard).
The way a small business like yours would be taxed is that you take your revenue, subtract all the allowed expenses (and there could be lots depending on the nature of the business) and if anything is left over you will have to pay self-employment tax of 15.3% on that amount. After that, you are liable for income taxes on the money depending on what bracket you are in with both your and your DH's income. To avoid paying taxes on my wife's business income we have put the income into a solo 401k. If you are a sole proprietor making up to $23k a year, you can put 100% of the earnings into a solo 401k and only have to pay the self employment tax.
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My husband is actually the one that keeps suggesting this to me. He says I have this rare opportunity to pursue my clay and I should take it. I believe I would make more since I have already had to turn down wholesale and teaching opportunities because of my full time job. I know I probably won't ever make as much as a normal job, but the benefits of health and less stress are more important to me.
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Makes sense to me, in that case. Worse comes to worst, you can always go back out and get another day job.
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Bear in mind that the house and yardwork will also save you guys money (I'm guessing some of that will be cooking which can really reward the time you put into it).
Why not do it on a trial basis for a year and see whether it works out for the both of you?
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I agree. Thanks for the input! I enjoy what I do now at work, but it's nothing that would be difficult to apply for again if necessary. Pretty much entry level.
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Replace "clay" with "cupcakes" and you could be my wife. She is working full time retail as a manager and it is not enjoyable for her or me. She is staying part time only until her bonus comes in (in April) and then going part time to give other things a try like trying the cupcakes and maybe yoga instructor. Our projected savings rate is 67% after tax with her only part time so I feel it is totally worth it for her to have a more enjoyable life (and I have a happier wife at home when I am there).