I believe that financial empowerment is a key part of caring for ourselves and our families, as we serve our patients and communities.
There are countless personal finance blogs out there, and many which are written specifically by and for physicians. We have some unique challenges and opportunities, after all.
In this spirit, I’m sharing my financial goals for the remainder of the year. Having written goals is important for accountability, and the 2019 deadline is helpful for tax purposes. I want to maximize my tax-advantaged accounts while I have the chance!
Since I have a professional S-corporation, I can administer my own solo-401k. I opened this retirement account for free with E*trade. As an individual employing myself, I can contribute as both an employee and as an employer.
Contributing pre-tax dollars lowers our tax liability for both federal and state taxes. This is key in California, a state with a high state income tax.
Since I’ve contributed $22k so far, I need another $34k added by the end of the year, or about $5700 per month. It’s a stretch, but it has to be done.
As of this past week, we own a duplex in our neighborhood. I’m excited to be able to offer our tenants a safe, beautiful place to live, in an amazing location, close to downtown Palm Springs. I plan to hold the property long term, and pay the mortgage down, ahead of the 30 year amortization schedule.
To help with the down-payment on the rental property, I borrowed $40k from an investment account. I plan to replace that money as soon as possible, so that we can continue to benefit from the magic of compounding.
I’m aiming for $15-20k. The cash will serve as a cushion as rent comes in, and expenses come out. Liquid cash will be needed for bills, maintenance, and in preparation for future capital expenses.
With a new mortgage on the rental house, I do not plan to borrow any more money for the foreseeable future. However, a HELOC is a tool used by some as a backup emergency fund of sorts. This line of credit is available to those who have significant equity in a home or secondary property, usually at very low interest rates. Many real estate investors use this as a tool to access cheap money when they need it, whether to buy their next property, make improvements on an existing property, or cover unforeseen expenses.
Wes earned $400 last year as a website model. At this low level of income, no 1099 is required, and no self-employment tax must be paid. Paying him a wage becomes a deductible business expense, while providing him tax-free money in retirement. The greatest benefit of a Roth, especially for someone one and a half years old, is that the growth is not taxed. If that money quadruples or quintuples by the time he retires, he still gets the proceeds tax free. If treated correctly, this money will never be taxed, and that’s an amazing thing.
In future posts, I’ll share more of our financial journey, as we learn to optimize this part of our life.
If talking about money, earning too little (or too much) money, or asking for more money makes you uncomfortable, listen to this episode from podcaster and life coach Brooke Castillo. She is ultra-successful in her business, and her unabashed ownership of that success inspires me. In this episode, she speaks to my heart about why we as women need to share, and care about what we earn.
What are some financial goals you’re working toward?
Write them down, or share them here.
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