Author Topic: Reader case study - lots of new income; time to get financial house in order  (Read 6752 times)

wantingwhiskersonmyface

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Answered
« Last Edit: November 08, 2015, 05:42:04 PM by wantingwhiskersonmyface »

mxt0133

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You need to consult a CPA that can help you set up a retirement plan for your non-profits or create a new corporate entity that can allow you contribute up to 53K (or something close to it).  It will be worth the money spend on professional advice on the tax savings alone.

wantingwhiskersonmyface

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Thanks. The new venture is actually its own LLC if that helps.

csprof

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Thanks. The new venture is actually its own LLC if that helps.

You have a few options - a SEP, SIMPLE, or self-employed 401k, for the "I'm basically the only employee" situation.  But you need to either research the heck out of it or talk to a professional to make sure you get the details right.  The SEP limit is max(20% / $55k) for 2015.  It's a great thing for people with weird side income patterns.

marty998

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AGI - $172k

Clergy are supposed to take a vow of poverty right? j/k

Curious to know what this side venture is that pulls in $8k per month for 5 hours work a week. Very well done!

former player

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Wow.  Is this where some of those "it's non-negotiable" 10% tithes go?

firewalker

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@wantingwhiskersonmyface: When you said "minister" and $101K income, I immediately thought that this could get ugly on this forum. Do yourself a favor: Delete your post and change your login name.

ShoulderThingThatGoesUp

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You spend $86,400 a year? In Texas? Exploding volcano of wastefulness!

wantingwhiskersonmyface

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I make 77k a year for my ministry job. I've been in that position for 10 years and oversee a million dollar budget and 20 staff. Is that really terrible?

I am actually intentionally underpaid for the other non profit i started. It grosses 600k/year, and I make $24k from it. That one is not a ministry.
« Last Edit: November 02, 2015, 05:23:24 AM by wantingwhiskersonmyface »

firewalker

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Do you mean minister as in Minister of the Interior or as in serving communion on sunday?

wantingwhiskersonmyface

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It's not a church, a religious non-profit. Tough crowd so far.

ShoulderThingThatGoesUp

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Look, as long as you're not defrauding people, I don't care how you make your money. But spending $7,200 a month is insane. Obviously you should figure out how to optimize your tax-deferred savings, and with the complications you have you might want to sit down with an accountant to do that. But your spending is off the charts and if you are interested in financial freedom, you can achieve it much faster by working on that.

Kroaler

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I think your getting a lot of judgement, based on your profession and income.  Even myself somehow am judging you poorly even though you came here looking for honest advice. I realize I shouldn't be but I am. 

Maybe your running a religious non profit in a directors role, but still get the clergy tax benefits?  Idk what your situation is, but that one definitely sounds better lol.     

wantingwhiskersonmyface

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Yes, that's exactly it.

former player

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Clergy tax benefits?  Those are constitutional?  If so, and given the need for religious non-discrimination, it seems to me that the cult of MMM is beginning to have even more potential benefits than I had realised.

Freedomin5

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I agree, definitely consult with a CPA. Once I maxed out my retirement options, I looked into other retirement savings vehicles, such as investing in property, low cost mutual funds and paying off mortgage. If liquidity is a factor, then maybe CDs or other term deposits?

Also, don't mind the people who are discriminating against you because of your job title. Being a religious leader shouldn't preclude you from being business savvy or financially well-off (I'm thinking of Lydia from Acts). My understanding is that this forum is for people who want to learn to be better managers of their money so that they can achieve specific financial goals. If that describes you, then it shouldn't matter what job you hold. Some people here deserve face punches for wastefulness or poorly managed finances, but I don't think people should be face punched for their religious beliefs, their job title, or their income level.


wantingwhiskersonmyface

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Thanks for your kind words and focused response.

Sounds like I need to find a trustworthy CPA.

Kroaler

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I agree, definitely consult with a CPA. Once I maxed out my retirement options, I looked into other retirement savings vehicles, such as investing in property, low cost mutual funds and paying off mortgage. If liquidity is a factor, then maybe CDs or other term deposits?

Also, don't mind the people who are discriminating against you because of your job title. Being a religious leader shouldn't preclude you from being business savvy or financially well-off (I'm thinking of Lydia from Acts). My understanding is that this forum is for people who want to learn to be better managers of their money so that they can achieve specific financial goals. If that describes you, then it shouldn't matter what job you hold. Some people here deserve face punches for wastefulness or poorly managed finances, but I don't think people should be face punched for their religious beliefs, their job title, or their income level.

I think everyone was picturing this when they saw minister.
http://www.cnn.com/2015/03/13/living/creflo-dollar-jet-feat/

but it appears to not be that so alls good lol.


monstermonster

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Please ignore all the haters. Doing good work doesn't always need to mean a vow of poverty, and it appears you tithe your income as well. Honestly, for an ED-like position for a 1 million non-profit with 10 years experience, 77K is quite a reasonable salary.

Definitely find a trustworthy CPA- I suspect you're going to want a SEP or SIMPLE IRA for your new business, which will allow you to put most of that newly earned cash away without paying taxes on it (for now). Please don't plan on "pulling it out in a few years". Instead, keep your savings elsewhere from your other two salaries.

Expatriate

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I'll put in the standard reply as well: 2.5k on 'misc expenses' certainly warrants more detail!

Axecleaver

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Does your side hustle have paid employees besides you? The complication with a 401k, is that the business has to follow some complex rules to make sure it's not set up as a tax haven for the owner. Many companies choose to set up a safe harbor compliant plan. Take a look at the safe harbor rules, here's a decent link: http://www.benefit-resources.com/blog/bid/152520/Guide-to-Safe-Harbor-401-k-Plans

If you have no employees except you, I'd recommend opening up a solo 401k. This lets you contribute 53k in 2015 (18k is the employee part, 35k is the employer part).

If it gets into the millions, you'll have to invest that in taxable accounts. Hiring an advisor or CPA to talk this through is good advice.

Best advice is to keep your lifestyle the same, understand that things come and go, and try to stack as much of that windfall as you can while it lasts. There are legions of the once-rich who wasted it all on big homes and fancy cars, who wish they'd saved some of what they made to last them.

Would love to hear more about your side hustle. I'm also super jealous of your clergy deductions.

wantingwhiskersonmyface

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What would you like to know about the side business?

Axecleaver

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Can you explain the business model? Avoid specifics if you like, I'm curious about how the business makes its money and how you add value to the process. $2k a week net for 5 hours of time is a pretty good return on your time. Assume you invested some sweat equity earlier in the process to get this off the ground.

Josiecat

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$7,200 a month is A LOT!  Work together as a family and start getting this trimmed down.  Rethink subscriptions, cable, eating out, etc.

wantingwhiskersonmyface

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Can you explain the business model? Avoid specifics if you like, I'm curious about how the business makes its money and how you add value to the process. $2k a week net for 5 hours of time is a pretty good return on your time. Assume you invested some sweat equity earlier in the process to get this off the ground.

Yeah, it's been great for me. Especially when you factor in the ROI. This is basically an internet marketing company. We manage the online presence for small businesses. I have some part time content creators and an account manager. 12-15 businesses revenue around 12k gross per month and my staffing expenses are only about 4k/month.

Imonaboat

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It's the 1% tax rate that got a snide look from me, not your income or job title. I know people struggling to makes ends meat for large families on minimum wage or near it that pay more towards society than that. Have you thought about the morality of using loopholes that you clearly don't need?

wantingwhiskersonmyface

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Man, that's a slippery slope. I guess it would depend on how much you trust the govt with your money vs yourself. We will give more than 20k to charity this year. I wouldn't be able to do that if I was taxed at a higher rate. And where do we draw the line on morality of other "loopholes"? Child tax credit, mortgages, etc.? Seems like a no-win.

Imonaboat

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Definitely a slippery slope, I doubt I would judge it the same way if it was a job that was not funded by the beliefs and generosity of others, as well as significant tax exemptions all around. I guess the value added or lost would depend on which charity, since many of them are worse than the government as far as waste and theft.

wantingwhiskersonmyface

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That's fair. And we do lots of due diligence before giving. But I do appreciate your thought.

Imonaboat

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I wish I could add something more positive, but I'm having difficulty relating unless you want tips on how to decrease your spending!

Jack

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Clergy tax benefits?  Those are constitutional?  If so, and given the need for religious non-discrimination, it seems to me that the cult of MMM is beginning to have even more potential benefits than I had realised.

Hey, that was my idea! (I proposed it a while back in a thread about basically doing financial advising in return for the property tax exemption.)

By the way, I think constitutional scholars come at it from the other direction: it's no so much that tax breaks for religion are constitutional, but that taxing religion is unconstitutional.

Anyway, I admit that I'm a bit jealous of your success, but as long as you're not pulling any Creflo Dollar-type exploitation tactics (like John Oliver did an exposť on a while back) then I can't really fault you for it.
« Last Edit: November 06, 2015, 03:00:31 PM by Jack »