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Apache is functioning normally

June 4, 2023 by Brett Tams

By Jason Topp 8 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited November 5, 2018.

There’s been a lot of talk about Roth IRAs this year.

Some folks still aren’t sold on them – and of course no one particular investment vehicle is right for everyone.

But, for the right person, the Roth IRA is a great way to save some additional cash for retirement!

Here’s three important things to remember about investing into Roth IRAs.

You Can Access Your Principal At Any Time

This is a huge advantage! Your contributions are available to you at any point in time regardless of age and regardless of how long the money has been in the account.

Don’t confuse this with earnings. Only your principal is available, not any of your earnings.

Your earnings must stay in there until age 59 1/2 to avoid the 10% premature distribution penalty.

The great thing about this is that it makes the Roth a viable long-term investment vehicle, but also gives some flexibility in terms of needing to access the money for an emergency.

Of course, don’t start the Roth with this idea in mind – in other words, emergencies should be handled from your emergency fund, not from your Roth! But, it is nice to have this in your back pocket if you really were in a desperate situation.

There Are Income Limits

Yes, unfortunately there are income limits to these things. Of course, Uncle Sam doesn’t want any one and every one having the ability to max fund these things so they set limitations.

Generally, the IRS will phase you out of your contribution or reduce the amount you can put in if you make between two set amounts and then they will deny you a contribution altogether if you make too much.

In 2019, your Roth IRA contribution limit is reduced – or phased out in the following situations.

Your filing status is married filing jointly or qualifying widow(er) and your modified adusted gross income (AGI) is at least $193,000. You are phased out completely if your modified AGI is $203,000 or more.
Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.
If you’re a single filer and your modified AGI is at least $122,000, you’ll be phased out up to $137,000. You cannot make a Roth IRA contribution if your modified AGI is $137,000 or more.

You Do Not Get A Tax Benefit Up Front

This one is pretty basic, but it bears repeating. It seems like a lot of people ask about how the Roth IRA works. The thing to remember is that your contributions are NOT tax-deductible. You do not realize any tax benefit up front.

So someone who contributes to a traditional IRA instead of a Roth IRA (provided they meet certain qualifications) gets an immediate tax savings equal to the amount of the contribution, multiplied by their marginal tax rate. Someone who contributes to a Roth IRA, however, does not get this immediate tax reduction.

Contributions to a Roth IRA do not reduce a taxpayer’s adjusted gross income (AGI). Compare that to a Traditional IRA where contributions reduce a taxpayer’s AGI.

Because you are using after-tax dollars for contributions, if you fund a Roth while in a moderate or high tax bracket, you will likely pay more income taxes on the earnings used to make the Roth IRA contribution than a Traditional IRA contribution.

This is simply because, as stated, contributions to traditional IRAs or employer sponsored tax deductible retirement plans result in an immediate tax savings equal to the taxpayer’s current marginal tax bracket multiplied by the amount of the contribution.

If you think your income in retirement will be lower, or that you will be in a lower tax bracket than what you are in right now, then that means you may be paying more tax on that money now than you would in the future. The higher your marginal tax rate, the greater the disadvantage.

Don’t forget though, that if you don’t diversify yourself from a tax standpoint you could be creating a huge retirement time-bomb for yourself!

What are your thoughts – Do the advantages of the Roth outweigh the disadvantages? Tell us your thoughts in the comments!

Source: biblemoneymatters.com

Apache is functioning normally

June 4, 2023 by Brett Tams

Image of a relaxing lake -- perfect for an early retirement

For as long as I can remember, I have known that I wasn’t fit for the corporate world.

Like J.D. Roth, the founder of Get Rich Slowly, I am an introvert, not a fan of authority and even less of structure. So even before I graduated college, I had my mind on one big goal: leave the corporate world as soon as possible. I was working for a big IT multinational in business school; those were not the happiest times, but that job allowed me to graduate debt free, with a small nest egg that I immediately invested to buy my first rental property in cash.

I believe real estate is one of the best way to build wealth and make money, since you generate an almost passive income, but it was far from enough to cover my basic living expenses. I started playing with those online savings calculators to see where my savings would take me in 5, 10 or 20 years. It was a revelation.

Do you know that if you make $2,000 and invest 10 percent of your salary at 6 percent for the next 40 years, you will have $400,289 for only $96,000 invested? At a 4 percent withdrawal rate, your nest egg will produce a monthly income of $1,334. Less than the $2,000 you are making today, or the $1,800 you are living on since you are investing 10 percent of your salary, but no small change.

The thing is, I didn’t want to wait for 40 years. Playing with the calculator some more, I found out that if you can live on 25 percent of your salary, to cover your expenses in retirement, you only need to save for 7 years! Living on 25 percent of my salary was a bit of a stretch, so I looked for ways to make more money. I bought a three-bedroom apartment and took in two roommates. I took odd jobs on top of my day job; I was making money tutoring at night and writing for several travel websites on the weekends, catering at weddings and freelancing as a translator. The plan was to retire around age 40, but I was so determined to quit my last job that I considered an alternative: how about leaving the U.K., where I worked, and relocating abroad?

At the time, I was 29 and owned two rentals in France and the U.K. that would cover my expenses in a cheaper country. I had a few investments that could cover the mortgage on the second rental (the first one was paid for) in case of a vacancy. And my freelance income was more than what I made at my day job. It came from half a dozen sources, and the probability of them all drying up at once was slim. I quit my job and took a one way flight to Morocco.

I lived in Casablanca for a year, and started a life of semi-retirement. I would cycle along the oceanfront, study Arabic, spend hours shopping for fresh produce or eating grilled camel at the market, and travel for weeks at a time to get pictures and posts for my travel writing gigs. I loved my time in Morocco but kept thinking about a country I loved even more, Guatemala. I had lived there for three years after business school, and after traveling to 80 countries, it was still one of my favorite. After a short trip there, I knew it would be my next destination. I found a piece of land by a beautiful lake in the northern area of the country, complete with a lovely little house that could become a guest house someday (one of my dreams). I bought it with cash along with with a 90-acre piece of land that I am turning into a residential development.

I have been living there with my boyfriend for almost a year, and after putting quite a bit of cash into house renovations and building a detached room and panoramic terrace, we are living happily on less than $1,000 a month, or $500 each.

Related Content: How to live on less

Here is our budget:

Housing: $0 We bought our property with cash. You can rent a lovely furnished one- or two-bedroom house in Antigua Guatemala or Lake Atitlán, the two favorite retirement spots in the country, for $500 to $700 a month, generally including utilities. For a bigger colonial home, you will have to spend $1,000 to $1,500 per month.

Food: $200 This is pretty high, almost the minimum wage in Guatemala but we like to eat and that includes some imported products we enjoy (like cheese!) and some alcohol. We seldom go out.

Car: $100 We have two old cars that we bought with cash and put about $100 per month in gas.

Electricity: $80 With the house renovations there were drills and tools plugged all day, we occasionally use air conditioning, and pump our water from the lake to cook and shower with an electric pump.

Natural gas: $12 for a 25 lb. container that lasts about a month.

Staff: $300 We have a full time handyman/gardener around the house, who alternates with his girlfriend who comes to clean the house. This is a great perk to living in Guatemala.

Animals: $20 We have a rooster and 10 hens, some turkeys, ducks and roosters. They eat a $20 bag of feed per month, we eat $40 worth of delicious free-range eggs each month. Win-win!

Internet: $80 We spend $40 each. He pays for a data plan on his iPhone, and I pay for a wireless USB modem. It’s expensive, but we are in the middle of nowhere!

Property taxes: $30

Accountant: $20 We own the house and land as an LLC so we need an accountant.

Random: $150 Once in a while we go out, buy something for the house or go over the grocery budget, but that never comes to $150 though, but if something breaks it could. It is quite complicated to get car parts or any parts around here.

That’s a total of $992 or $496 per person.

On top of that, I spend about $3,000 per year or $250 per month on travel. I fly back to France for a month but stay with my family so apart from a $1,000 ticket I don’t spend a lot, my last trip cost about $2,000 so I still have $1,000 to travel somewhere else, maybe the U.S., by the end of the year.

You may have noticed that I don’t mention healthcare. When I go back to France I get my physical from my doctor, and I do not have health insurance here, just a travel insurance included in my credit card that will repatriate me if something serious happened. This year, I only got a root canal in Guatemala that cost $200.

With the cost of a rental, healthcare and travel back to the U.S. once or twice a year, you could live well here on less than $1,000 per person. Go the extreme early retirement route, and you can live on rice and beans for less than $300, housing included.

But is retiring abroad worth it? I wrote a post recently to compare the costs of early and normal retirement in the U.S. versus abroad, where I concluded that you could either live better than you do for the same price, have a bigger home, some staff, a lovely piece of land with a view for the price of a 500-square-foot condo, or be able to retire years earlier by moving to a cheaper country and living by local standards.

For me, Guatemala meets all my requirement. The weather is mild all year long (they call it the land of eternal spring), people are nice and relaxed, the cost of living is very low and you can find most things you may want or need, from imported tech gadgets to U.S. trained doctors, albeit at a cost. I enjoy my month-long European holiday to visit my family and friends. Since I have been living abroad for the past 10 years anyway, I am used to emailing and Skyping the rest of the year. They visit me occasionally, as well. I could live in France on a similar or slightly higher budget but would not get the same quality of life.

Related Content: Retirement strategies

Where you will spend your retirement is a very personal choice, and for many, being near your family will be on the top of your list. Although if your kids are on the West coast and you are on the East coast, you are just as far away as if you had retired under the Guatemalan sun.

Source: getrichslowly.org

Apache is functioning normally

June 3, 2023 by Brett Tams

Here on Making Sense of Cents, I talk a lot about different ways to make money on the side and the many great side hustle ideas. I do this because I truly believe that making money on the side can change a person’s life.

After all, learning about different ways to make money on the side changed my life.

My main side hustle a few years ago mainly consisted of me blogging here on Making Sense of Cents. Then, it quickly grew, my income matched and then exceeded my day job income, and I actually made the decision to leave my day job in order to pursue my side hustle full-time.

As you can probably tell, starting a side hustle significantly improved my life and it’s something I will ALWAYS be extremely happy about. My side hustle income allowed me to pay off my debt quickly, leave the job I disliked, start working towards my passion, and travel extensively.

Taking part in the many different ways to make money on the side can allow you to:

Pay off your debt;
Save for things such as a vacation;
Stop living paycheck to paycheck;
Reach retirement sooner;
Not feel as stuck at your job;
Become more diversified.

Many others believe in the amazing power of side hustle income as well. I recently interviewed many side hustlers, freelancers, business owners, and more about the different ways they’ve made money on the side and compiled them into one extremely informative blog post to help all of you. Plus, they share their tips on how to manage side jobs better so that you can make money on the side while not going crazy.

Below are over 40 different side hustle ideas and tips from the experts. There are many different ways to make money on the side and I’m sure you’ll find one below.

Related articles on side hustle ideas:

Here are over 40 ways to make money on the side:

Start a blog.

Blogging is how I make a living and just a few years ago I never thought it would be possible. I now make a great living online, I travel full-time, and I enjoy the work I do.

I made over $300,000 last year by blogging and will make more than that in 2016 (I’m hoping to double my income this year).

There are many ways to make money on the side and one of the top ways I recommend is to start a blog. You can create your own blog here with my easy-to-use tutorial. You can start your blog for as low as $3.49 per month plus you get a free domain if you sign-up through my tutorial.

Become a Brand Ambassador.

“A side hustle that I absolutely love is being a Brand Ambassador. A Brand Ambassador quite simply shares talking points and usually free swag with the public in order to build brand awareness. Brand Ambassadors typically work on the weekends at different events so the trick is to manage family time if you have a family. For more information on how to become a brand ambassador check out the following post: How To Become a Brand Ambassador.” – Michelle Jackson

“Love meeting new people? Many cities have active brand ambassador Facebook groups that are constantly looking for product demonstrators, trade show spokespeople, tour managers, and more! And brand ambassadors can expect to earn $15-20 per hour.” – Kate Dore

Related: Become A Brand Ambassador And Make Extra Money

Write a book.

“Self-publish a book on Amazon that focuses on a topic at the intersection of 3 things: 1. your passion; 2. your expertise; 3. a need in the marketplace How much a person could make would be based on how much they want to charge for the book, but I would say you could make anywhere from $50 – $300 / month, depending on your book content / audience.” – John Lee Dumas

“Anyone can be a self-published author now and it is one of my favorite side hustles. Whether you want to share tips on how to do something or want to write a fictional story, any topic can be published. How much you make depends a lot on how much competition there is for the same type of book. I make between $300 and $500 a month for a crowdfunding book I wrote last year while my investing books make between $100 and $250 a month. The best thing is that, once published, they will keep making money year after year.” – Joseph Hogue

“Publish a book. It is easier than it used to be. You can self publish or if you have a platform such as a blog with associated social media you can pitch to publishers and generate interest there. Publishing a book increases credibility and leads to other opportunities such as speaking, course, freelance writing, judging, presenting awards, launching events and a lot of media exposure. Depending on how you do, what niche it is, how well you market it you can make anywhere from nothing right through to millions. Personally, getting asked to publish a book back in 2010 changed everything and was a pivotal turning point for me. Quite a few friends of mine earn a few hundred thousand a year from their books and associated content, others a couple of million. Most authors only make a few thousand if they are lucky though. It is all in how you market and how much of a following/community or tribe you have.” – Kylie Travers

Become a virtual assistant.

There are many ways to make money on the side online, and one of them is by becoming a virtual assistant.

“My favorite way for someone to make extra money from home (and what I would personally do if I needed extra money FAST is to be a virtual assistant. Specifically, I would be a VA to bloggers. There are so many ways to do this, including assistant with social media, creating images, writing content, etc. There are lots of Facebook groups set up specifically for people to sell content to bloggers. Really your income is only limited to the time you want to invest in it. Some VAs charge per hour and some charge per project/post. With a few hours per day, I’d say you could easily make $50-$100 extra per day.” – Lena Gott

“I’ve made most of my money by working as a VA and blog manager for busy blog owners. I fit my side hustle in alongside my full-time job by reminding myself that I was making a temporary sacrifice of sleep and free time in order to build my business to the point I could quit my job. I now make over $5,000/month online with my business.” – Kayla Sloan

A virtual assistant helps a business run more smoothly. You can be contracted for one project (such as collecting data for research) or it can be a continuing job such as replying to e-mails and comments. Virtual assistant work can range widely. There are many, many tasks that people hire virtual assistants for.

Related: How To Become a Virtual Assistant and What Does a Virtual Assistant Do?

Become a coach.

“Coaching is a great way to make side income. It needs practically no monetary investment… just time. Just be mindful of what you charge per hour, as almost everyone starts way smaller than they really should. When pricing your coaching services, if in doubt, double it!” – Chris Ducker – ChrisDucker.com

“One on One coaching is a really simple and fast way to start earning income fast for yourself. While people who’ve been doing this for a while will typically earn around $300, $500 an hour, someone just getting started could expect to earn $50 a $100 an hour. The benefit with this side business is that you can earn more per hour starting out which means you won’t have to work as much to earn as much. Also, consider offering package deals, this will allow you to sell at a higher price point and this gives a definite start and end date to things.” – Chris Holdheide

Sell on eBay or Craigslist.

“I go through twice each year and pick up items I’m not using to sell on craigslist or ebay. I make about $3-400 each time I do it. That’s an extra $800 for something cool!” – Lauren Bowling

“One of my favorite ways to make extra money is to go around my house and find one thing to sell on Craigslist every week (particularly on Fridays right before the weekend when everyone loves to get rid of their money ;)). It not only helps you de-clutter and get rid of stuff that’s no longer important to you, but also make some good side money that you can then bank towards something you do care about! I made over $1,200 doing this last year and it helped fund a Roth IRA. Give it a shot!” – J. Money, BudgetsAreSexy.com / RockstarFinance.com

“One way that a person can make side income is by selling items on eBay. The amount of money varies. It depends on how many items you are selling and also the type of items. I’ve had months where I’ve made $300 (part-time), but I’ve also had months where I’ve only made $50.” – Jason Butler

Whether you have old clothes you want to sell, a car, electronics, or something else, eBay or Craigslist can be a great way to sell many different types of items.

Related: How To Sell On Ebay

Edit for others.

“One way a person can make a side income is to provide edits to authors. The amount they can make depends on the type of edits they provide and the number of projects they take on. I primarily take on larger projects that involve either developmental edits or line edits (or both!) but short story projects can also be a good way to work on brief projects while making a side hustle and break up the monotony of projects that are the same length. How much a person can make can also vary based on how they charge; for example, I charge per word in order to provide a better estimate, but some people charge per page. ” – Megan Harris

Get paid to search online.

Did you know that you can take paid online surveys to make extra money?

Swagbucks is just like using Google to do your online searches, except you get rewarded points called SB for the things you do through their website. You can also earn points by taking surveys, watching videos, and shopping. Then, when you have enough points called SB, you can redeem them for cash, gift cards, and more. You’ll receive a free $5 bonus just for signing up through my link!

InboxDollars is another online rewards website I recommend. You can earn cash by taking surveys, playing games, shopping online, searching the web, redeeming grocery coupons, and more. Also, by signing up through my link, you will receive $5 for free just for signing up!

Another one you may be interested in related to this one is Nielsen Digital Voice. Digital Voice is a part of Nielsen, which I’m sure you’ve heard of. All you have to do is surf the web and you may be able to start earning money.

Become a proofreader for court reporters.

In 2014, Caitlin made slightly over $43,000 by being a freelance proofreader, while also going on several fun vacations. If you are looking for a way to make money on the side, this may be something you want to look into.

“Court reporters use digital stenography machines in combination with computer-aided transcription software to write verbatim records of various legal proceedings. They report depositions, trials, hearings, arbitrations, case management conferences, compulsory medical examinations, examinations under oath, and pretty much any other type of legal proceeding. Because of the sensitive nature of legal proceedings, it’s imperative that as many errors as possible be eliminated from transcripts — an especially major error could ruin an entire trial! A fresh set of eyes will 99% of the time catch more errors than the same eyes who saw the text from start to finish, too. An excellent proofreader is a huge asset to a court reporter — especially a court reporter who wants to make more money.” – Caitlin Pyle – Make Money Proofreading By Becoming A Freelance Proofreader

Answer surveys.

You can get paid to answer surveys and to test products all from the comfort of your home. Due to this, I think it’s one of the easy ways to make money on the side as you don’t need any experience, skill, inventory, or anything like that.

Survey companies I recommend include VIP Voice, American Consumer Opinion, Survey Junkie, Clear Voice Surveys, Pinecone Research, Opinion Outpost, Survey Spot, Prize Rebel, and Harris Poll Online. They’re free to join and free to use! It’s best to sign up for as many as you can as that way you can receive the most surveys and make the most money.

Clean homes.

“One great way for a person to start making some side hustle income is to clean houses. It’s a chore that’s always in demand (I personally hate having to clean), and it’s pretty easy to get into. You can make anywhere from $100 a job and up, all depending on the time and level of cleaning you do.” – Glen Craig

Find a part-time job.

There are many, many part-time jobs out there that may be able to work along with your schedule at your full-time job. You can find a job on sites such as Snagajob, Craigslist (yes, I’ve found a legitimate job through there before), Monster, and so on.

Start an e-commerce store.

“A great way to make a side income is with an e-commerce store. Unlike a blog or an info site which does not actually sell anything, an online store allows you to quickly scale and generate revenue immediately after launch. My wife and I made over 100K in profit in our first year with our shop.” – Steve Chou

Drive a taxi or become an Uber driver.

“Drive a taxi at night. I’m reliably told that on Friday and Saturday a taxi driver who owns his/her car can make up to $300 per night. Nothing to be sniffed at! But what you decide to do as ‘side hustle’ depends on what you like to do and what you are really good at. If you like dogs, start a dog walking/sitting hustle.” – Maria Nedeva

“I’m always looking for new ways to make a few bucks so that I can then share the results with my readers. I wanted to test out Uber so that I could see if it was worth it. I drove part-time (weekends and evenings). The first week of driving generated me $651.60. Since the article went live, many of my readers have started driving on the side. You won’t get rich, but the extra money adds up. The other positive is that you save money by not going out. This side hustle will help you pay off debt and save up for your major goals. Good luck on the road and cheers to your new friendships that you’re going to create.” – Martin Dasko

Related: How To Become An Uber Driver

Write online.

“Freelance writing is an excellent side hustle because you can commit your time “per article,” and work at any time of the day or night. Most people can expect to make $50 per article and up. However, a lot of people – including myself – make considerably more as a professional freelancer.” – Holly Johnson

Test websites.

“One cool way to earn money on the side is by testing websites. There are a number of sites out there, but UserTesting.com is the best. You get paid $10 for testing websites and apps and following their instructions. It’s simple, easy, and you can earn about $30/hour with this. The work is not guaranteed, but it’s a great way to maximize any of your downtime with earning extra cash.” – Grayson Bell

Prepare taxes.

“One great side hustle most people can easily learn is preparing taxes. If you start your own tax preparation firm, your potential is unlimited. However, if you’re just learning, try getting a part time job at a place like Liberty Tax or H&R Block or a local CPA firm. At the big brands, like Liberty Tax or H&R block, you can probably expect to make between $10 to $15 per hour depending on your location and experience. This job is generally only seasonal, so it allows you to have summers and the holidays off from your side hustle.” – Lance Cothern

Become a photographer.

“Photography! Most people only think to hire a photographer for big events like weddings and baby announcements because photographers are expensive. Charge $100-$200 for an hour package at a local park, and in one weekend by booking your friends and family, you can easily make $2k with just family portraits. With the popularity of photo cards from sites like Shutterfly, you can be a saving grace for families on a budget and you’d be surprised at how many folks you know who would hire a photographer in budget!” – Shannyn Allan

Create a website.

“I’ve created several simple websites about apps and websites that I like and use. I write about how the apps work, pros/cons, other similar apps, etc. Some of the apps or websites give me credits or money when I get new users to sign up or use their service. I’ve made about $4,500 over the last three years, and I haven’t spent more than a few hours working on the sites during the last two years. I’d say overall I only put in 20-30 hours.” – Louis DeNicola at Saveful.com

Become an online tutor.

Online tutoring has become an open market place for the gig economy. This is a great option to make money on the side, or even convert it to full-time. Studypool provides a great platform for tutors to simply answer student’s question and get paid (no video chat required). You can earn up to $500/week tutoring part time or potentially up to $60,000 a year tutoring.

Take part in research studies.

“If you live in a city, or near a university or teaching hospital, you can make money participating in research studies that need human subjects. Just go to craigslist, click on “volunteers”, and type in “research”. There are a wide variety of studies out there: some are medical (if you’re generally healthy, you can often be a control subject), and some are more about psychology or other related disciplines. You can make anywhere from $10-$20 for a short, one-time study to hundreds or even thousands of dollars for longer, more involved studies. Another benefit is that you get to learn about the research that’s being done, which is often fascinating.” – Sarah from The Yachtless

Make money online.

“The best way that I know how to make side income is online. Specifically, by freelance writing and blogging. The amount of make you can make online is unlimited. If you’re just starting, maybe you’ll make $500/month. But over time, you can increase your earnings to $5,000/month and before long even more than that. I don’t know another side gig where the income growth potential is so high.” – Natalie Bacon

Film weddings.

“One way that my wife and I made $5,000 in the past year on side income has been filming weddings. A year and a half ago we had no video experience. Once we bought a camera and posting videos, we’ve had friends and friends of friends start asking us to film their weddings. Most everything we learned about video came from asking other film peeps to show us the ropes or looking up “how-to” videos on Youtube. Since weddings are typically on the weekends, they really are an ideal side hustle. They don’t get in the way of our typical work week at all and they pay high margin. Once you have some film experience under your belt, you can charge $3-5k per wedding film, easily. If you’re interested in getting started filming weddings, I would recommend tagging along with an experienced shooter. From my experience, they are always looking for good help if you’ve got an eye for good shots and can work well under a little stress (there will be brides after all). This past fall we apprenticed and was well worth the long weekend shoots. We learned so much about shooting good wedding film and made a good amount of money in the process.” – Heath Padgett

Create a product to sell.

“I’m biased, but I think creating an online product and selling it is one of the best side hustles a person can do. But people shouldn’t be scared for the term “product”. A product can be anything – an idea or content, a course, a widget, a downloadable printout, anything! And there are so many different avenues to sell today: create a blog, start an Etsy shop, sell on eBay or Amazon. The great thing about the Internet is that there is somebody out there that is looking for something and everything. If you’re a teacher, sell your classroom notes. If you’re an engineer, share your though processes. Anything can be turned into content, and anything can be packaged and sold.” – Robert Farrington

“The ways to make a side income are really endless. I’ve encountered so many ways entrepreneurs are able to make a side income. Although blogging has been the most lucrative way for me to make a side income, my favorite way is creating courses. Creating a piece of content showcasing your expertise in a specific are and people paying you for it is a great and rewarding feeling.” – Jeff Rose

Manage databases, apps, and more.

“Managing, designing or configuring cloud-based apps- ranging from social media and content management systems (like WordPress) to databases. I learned to administer salesforce.com databases for nonprofits and last year made $6,000-$15,000/month pretty consistently working from home. (The going rate for these services is $50-$200/hour) What helped me was going through a self-study course on the platform, getting a couple of certifications, doing some spec work, then going out and asking clients if they needed my services. I call it “Learn, Slay It, Sell It.” Find out about growing trends, get up to speed then see if people will pay you to do it. If you become enough of an expert at it, they will! The nice thing is that it doesn’t have to be anything you studied in school, just something you studied on your own and mastered enough to be marketable.” – Aja McClanahan

Build websites.

“One way to make side income is to build websites for people and for businesses. The first website I ever built I charged $1200. Even if you dont know programming, it is easy to learn by watching free tutorials on Youtube. I think it would be very realistic to make $2,000 – $3,000 on the side building websites.” – Deacon Hayes

Become an alcohol demonstrator.

“Back in college, I made extra money on side side pouring alcohol samples for people in grocery stores. It was easy and paid well, considering how I don’t even know how to open a wine bottle (If I wasn’t using a product in a bottle that had a twist top, I asked someone else to help open it). The job paid $20 to $25 per hour and I could choose when I’d like to work and what job opportunities I’d like to accept. If you like to talk to people and prefer a laid back and good paying side job, being an alcohol demonstrator is definitely worth looking into.” – Chonce at My Debt Epiphany

Become a consultant.

“Become a consultant in your spare time doing some of the same work you might do in your full time gig. This works best with white collar office type roles where you can do your work at home at your computer. Just make sure you don’t compete with your current employer.” – Jim Wang

Tips from the experts on ways to make money on the side.

Along with the many different ways to make money on the side above, I also asked experts for their top tips when it comes to managing a side hustle.

“One of the best ways to think about how to make extra money is to identify what people are already paying for. I, for example, recently hired someone to manage my Pinterest account. That’s a great hustle you can master through a course or ebook, then execute from anywhere on your own time. Make someone else’s overwhelm your opportunity.” – Stefanie O’Connell

“Set boundaries. If you don’t you will get pulled in every direction and your health, personal life, finances, everything will suffer. Set boundaries for times you will work on your side hustle, what you are willing to do and stick to it. Don’t let checking social media creep into time you are watching your kids play sport or time you were going to work out. No money makes up for lost relationships or lost health. ” – Kylie Travers

“To accommodate a side hustle that makes a serious second income one ought to re-organise their life. I’d say that keeping a time/task diary helps. For a week write down all you do and how long you do it for. Analyse it and decide to stop doing anything that is: a) not productive; and/or b) doesn’t give you a lot of pleasure. You’d carve up a lot of time. You can also start looking for activities that you can combine to save time; e.g. running and commuting to work.”- Maria Nedeva

“My favorite (and least-favorite at the same time) way to manage everything (four kids & four blogs) is to work when our kids go to sleep. I will do some things during the day, but nothing that will require my attention for more than just a few minutes. My husband and I work from home, on our blogs, so we spend around 4 or more hours every night working side by side on them. We also try to squeeze in two hours during the preschool hours. This allows us to spend our time with our kids during the day and work together at night. While we might be a little more tired than usual right now (haha!) we figure that we can make up this time when our kids are older and in school. 😉 It is all about balance and finding time when we can. We can’t give 100% of ourselves to everything at the exact same time, so setting aside time for family and time for working is what works best for us – so we can give 100% to our family during the day and then 100% to our blogs in the evenings.” – Becky Mansfield

“My best tip for finding time to make extra money on the side is to give up watching tv. I used to watch one or two shows each evening, and now I spend that time working on my blog. I also stay up a little later than usual some evenings to get work done so I can spend my days with my kids. I’ve found that if you make it a priority, you will find time.” – Lena Gott

“You can make extra income in many ways – the only real limit is the limit you put on yourself. If you’re technically inclined, you can monetize that in your “off” hours. If you’re knowledgable about a certain topic you can freelance write in that area. Even if you have no skills, which I don’t believe, you can do something as simple as work around your neighborhood to walking/sitting for dogs while people are away from home. The opportunities really are endless to make extra income, you just need to want it and think outside the box.” – John Schmoll

“As someone who works full time and runs a blog on the side, I am a master at time management and planning. The best advice I have to managing both a job and a side hustle is to prioritize. If your job is number one and your side hustle is number two, then you may have to say no to anything that interferes with these two priorities (e.g. events with friends or family). Personally, prioritizing my goals and creating a plan to achieve them, have been the two most important factors to succeeding with a job and a side hustle.” – Natalie Bacon

“Organization of your time. I work a 9-5 job, I come home and walk my dog, then cook dinner. As you can imagine that doesn’t leave a ton of time for your side hustle. It means organizing your time for your side hustle. After I finish eating dinner, I budget an hour to my side hustle. Now that doesn’t seem like a lot, but if you do it every weekday that adds up to 5 hours you spent on your side hustle. You might have missed “Making a Murderer” but you added $100 to your pocket.” – Even Steven Money

“Because I was writing for my full-time job and also freelance writing/blogging as a side hustle, the last thing I wanted to do after an 8-hour day was come home and grind out more copy. Because of this, I leaned heavily on my weekends and my evenings became sacred. Every Sunday evening from 4-8 I’d work on my blog or any projects I had in the pipeline. Writing on Sunday evenings became so routine I find myself doing it now even though I work for myself full time and can write whenever I want! So that’s my advice: pick out a chunk of time that’s just for you and keep the date with yourself religiously. No one ever likes to hear it, but the truth of the matter is that it takes sacrificing in other areas of your life to truly side hustle and make it worth your time.” – Lauren Bowling

“Top tip: manage your time smarter. Managing your time has everything to do with FOCUS. Tasks will expand to the time you allot them, so schedule the things that are important to you, and stick to that schedule. It’s not about finding more time, it’s about leveraging the same 24 hours we all have in a day, and focusing on ONE goal at a time for your side income will help you accomplish that goal. Better yet, The Freedom Journal will guide you through setting and accomplishing your #1 goal in 100 days, so my top tip would be to grab The Freedom Journal and start taking action! :)” – John Lee Dumas

“The best way to find more time for side hustles is to eliminate things you thoughtlessly do that add no value. Consider how often you look at the same news feed updates on Facebook over and over again. If you just check Facebook once per day, you’ll get the same info and save a bunch of time.” – Lance Cothern

“My top tip for managing a side hustle is to be very organized. Every week, I have a “planning night” where I put actionable items on my calendar and then I follow through with them. I also use Trello to manage projects and outline what “steps” they are in and keep checklists in Trello so I make sure I don’t miss anything. A person can find more time for side income pretty easily – devote half an hour over lunch, or take time away from your favorite TV show to look for ideas, and then do them!” – Megan Harris

“The number one thing you can do to manage your life and your side hustle is to simply schedule time for it and have your family hold you accountable to it. You can make time for anything you set your mind to. You somehow manage to watch your favorite show each week, make dinner as a family, etc. Well, if making extra money is important, you’ll find the time. Maybe it’s before work or after the kids are asleep? There’s always time. The trick is, set a designated time, ask your spouse and tell your kids that this is what the time is for, and then use that time to make things happen!” – Robert Farrington

“Managing a side hustle is like any other aspect of your life. If you want to succeed at it, you need to prioritize it. So, allot the time, work through the time, make your side income and then get back to the other aspects of your life.” – Chris Ducker – ChrisDucker.com

“I’d suggest starting small with just a few hours a week. It’s easy to look at your free time outside of your job and think you can easily add 20+ hours of work per week. This can easily lead to burnout, and which might kill any motivation you had for side gigs.” – Jeffrey Trull

“One of the best things you can do for your goals is to wake up an hour early and *only* spend time working on what’s truly important to you. Sure you can watch less TV at night or hustle on your lunch breaks, but I find a single hour in the morning when everyone else is sleeping to be much more productive. And then you’ve started the day off with a major accomplishment no matter what else happens the rest of the day! It’s a beautiful thing!” – J. Money, BudgetsAreSexy.com / RockstarFinance.com

“Find something you enjoy doing that you don’t normally get to do otherwise. Turning it into a side hustle will offer incentive to make time for it. For instance, if you love pets and aren’t currently a pet owner, you can sign up with Rover and dogsit, or maybe work as a dog walker. That way you’re killing two birds with one stone.” – Jackie Lam

“The best way to make time for a side hustle is to learn to manage your time better. If you’re watching three hours of television each night, for example, you may need to give that up to work on your side hustle instead. If you’re still too busy, consider getting up at 5:00 or 6:00 a.m. I did that for over a year before I was able to quit my 9-5 job to pursue my side hustle full-time.” – Holly Johnson

“You need to make time for your side hustle. I would work on it during lunch, at morning before I went to work. Sometimes I would do it when on nights and weekends. I think most people could find 1 – 3 hours per day to work on a side gig.” – Deacon Hayes

“First, make a weekly calendar of all the events in your life. On that same calendar, enter in the blocks of time you plan on working on your side hustle. Treat those times like anything else that is important on your calendar. If you schedule time from 8-9pm on Wednesday and you forgot your favorite show is on, no excuses! Commit to these times and don’t let anything interfere that isn’t a family emergency.” – Jeff Rose

“My top tip for managing a side hustle is work at a scheduled pace. Set aside a certain number of hours every week and make sure that you make consistent progress. To find more time, I’ve replaced television and YouTube surfing for more productive activities.” – Steve Chou

“I used to struggle with finding extra time outside of my work and family life. The one tip I recommend is use your down-time more effectively. Instead of watching an hour of TV, take that hour and work on a side hustle. If you’re a night owl, use that when everyone else is asleep to create a business or develop a product. We don’t use all time effectively, but just taking chunks here and there and building a side hustle can change your life.” – Grayson Bell

“Choose your side hustle wisely. Choose to market your skills and talents instead of just looking at it from a financial standpoint. Earning a lot of extra money sounds nice, but if you don’t enjoy what you are doing, you will start to dread it quickly and it will take up more of your time. I’m able to work quickly and efficiently on side projects I enjoy so I can make the most of my time. I also try to cut out mindless tasks that take up time like binge watching television or browsing aimlessly through social media.” – Chonce

“The opportunities to earn extra money are endless. But your time and energy are finite. Prioritize a health diet, exercise, socializing, and relaxation. You will be rewarded with extra energy for a side hustle on top of your day job.” – Kate Dore

“You don’t have to make it a part-time job. Make it a hobby first and don’t stress out about getting it done immediately. Find five hours a week to work on the book. Spend a couple of months learning everything you can about the subject or developing the characters/idea. Books can be as short as 40 or 50 pages or as long as you want to write them.” – Joseph Hogue

“If you really see a future in what you are doing, invest in your “side-hustle” by creating systems and ways to duplicate yourself i.e. subcontracting work when possible. Since we are a debt free family, our “personal burn rate” was low enough where I didn’t have to pocket all the business revenue. I eventually began to subcontract workers to fulfill client requests. It was a huge time saver for me and kept it a part-time gig for me that was relatively stress-free.” – Aja McClanahan

“Choose a side hustle that you also get some sort of personal benefit out of, in addition to the extra cash. For example, you might choose a side hustle that helps you get more exercise, or that gives you the chance to earn a new skill, or that allows you to meet new people, or just something you find really interesting. You’ll be more likely to stick with it if there are multiple benefits.” – Sarah Noelle

“You need to make it a priority. The best way to make it a priority is to understand why you need this extra income – pay off debt? Save more for retirement? That goal will drive you. Then make sure you list all the non-essential tasks you do and rank them, your side hustle will be above some tasks… make sure you hustle before you do those tasks.” – Jim Wang

Hope you enjoyed this expert roundup on different ways to make money on the side. Do you want to make side hustle income? Why or why not?

Apache is functioning normally

June 2, 2023 by Brett Tams

By Peter Anderson 11 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited January 25, 2010.

Over the past week we’ve been writing quite a bit about retirement accounts, which ones are better for different situations, and talking about what the Roth IRA contribution limits are. Now I want to talk about another hot topic in retirement accounts, the 2010 Roth IRA conversion.

In case you haven’t heard all the buzz, this year marks a one time Roth IRA conversion event in which people can convert their traditional IRA’s, SEP IRA’s, Simple IRA’s, old 401k’s, old 403b’s into a tax free Roth IRA account. Because of the conversion event, waves of people are expected to take advantage this year and convert their traditional taxable investment accounts into tax free Roth IRA accounts.

Is It A Good Idea To Convert My Traditional IRA To A Roth IRA?

Before you even go down the road of converting your traditional taxable accounts, you’ll need to think about whether or not converting them is a good idea for your situation. There has been a lot of talk about it throughout the blogosphere, with some saying it’s a great idea for most to have their money grow tax free, while others aren’t as enthused because it seems like a way for the government to collect tomorrow’s tax income today, at a higher rate. As always consulting a financial professional before you make any moves is a good idea.

Among the things you need to consider:

Do I want to pay tax now or later? Depending on what your tax rate is currently vs. when you retire, your amount of tax can vary quite a bit. The problem is, it can be hard to guess what tax bracket you’ll fall into in the future, much less predict if tax rates will go up in the future.
Is my income too high to contribute or convert to a Roth IRA in the future? If you want to do a bit of tax diversification and your income is currently too high to contribute to a Roth IRA, this year may be one of your few chances to convert your traditional taxable account to a Roth.
Do I want to spread out my tax liability from converting? As part of the conversion event people who convert will be able to spread out their tax liability over 2011 and 2012.

Benefits Of The 2010 Roth IRA Converson

There are quite a few benefits of converting to a Roth IRA this year

$100,000 AGI rule removed: 2010 is big for so many because the $100,000 MAGI rule is lifted, making a conversion possible for even higher earning singles and couples. Previously only singles and married couples making less than $100,000 were able to convert.
Tax doesn’t have to be paid 2010: 2010 is the year that you’ll actually convert to the Roth IRA, but the income to be claimed on your taxes is able to be deferred until 2011 and 2012. You can claim 50% of the conversion amount as income in 2011 and the other 50% in 2012. Remember, this stipulation is only good for the 2010 tax year, and then goes away.
You can convert a 401k directly to a Roth IRA: If you have a 401k from an old employer, or another old retirement account, you can convert those this year as well.
Tax free growth of assets, and tax free withdrawals: Converting means the money will grow tax free, and won’t have minimum distribution requirements once you turn 70 1/2.

Contribution Income Limitations Still Exist For New Roth IRA Contributions

Even though high income earners can convert their existing retirement accounts in 2010, that doesn’t mean that new contributions to their converted Roth IRA are allowed. If you’re over the IRA contribution phase out limits, you won’t be able to make new contributions to your Roth IRA.

How To Convert To A Roth IRA

Converting your IRA to a Roth IRA is going to be very similar to rolling over an account from an old 401k to a rollover IRA. If you’re not changing brokers or investment houses it may be as simple as filling out a form. The key is to contact a financial professional who can give you advice for your specific situation.

Are you going to be rolling over a Traditional IRA into a Roth IRA this year? If so, do you plan on deferring the taxable income into 2011 and 2012? If not, why are you decided not to convert? Tell us your story in the comments.

Source: biblemoneymatters.com

Apache is functioning normally

June 2, 2023 by Brett Tams

Last week, I wrote about a conversation with my investment adviser. In the article, I mentioned that my current income roughly covers my current spending except that I’ve been spending an average of $2,000 per month on travel. Because of that spending deficit, I’ve been drawing down my medium-term savings, which should last me until the end of 2014. Meanwhile, I’m exploring a variety of options to bring the income and spending into equilibrium.

Some GRS readers were taken aback by this.

“Maybe the name of this blog should be changed to Get Poor Quickly,” Marsha wrote. Brian from Debt Discipline expressed the common concern that withdrawing from my investments seems like a step in the wrong direction. And Greg wrote that this blog must be losing its way if I’m writing about “stealing from the future to maintain a current lifestyle of travel.”

Other readers, however, took a different view.

Frugal Scholar noted that there’s nothing wrong with taking withdrawals if my total savings can support them. The always-perceptive Sam wrote, “If J.D. is living a life of semi-retirement, which it seems to me he is, then it would make sense to pull money from investments as that is what one does in retirement.” And EMH was even more direct: “Why have all those investments and not use them?”

I spent a lot of time replying to comments on last week’s article. In doing so, I noticed that I’d done a poor job of sharing all the facts about my situation. I’ve been timid about total transparency, which means readers don’t have all the info they need to make a judgment. Today, I want to change that.

It also occurred to me that there are differing opinions about what savings are for. On some levels, those differing opinions are a result of each of us having different plans and priorities. But I think something that gets missed is that money is used differently at different stages of life.

The Stages of Personal Finance

In February 2009, I wrote a meditative article about the stages of personal finance. This then led to a series of articles on the subject. Here’s how I defined them:

In the zeroeth stage of personal finance, we’re fumbling in the dark. We have no financial skills and has no idea how to best use our money. We live impulsively, reacting to life around us.
In the first stage of financial development, there’s a candle in the darkness, and we’re drawn toward the light. We become aware that certain actions produce better financial results. We learn basic skills like frugality and saving and debt reduction. We still make many mistakes, but we now have some idea of where we ought to be headed.
During the second stage of personal finance, we can see the light at the end of the tunnel. We’ve moved beyond the basics to create a solid foundation for future growth. We’ve eliminated debt, built up our savings accounts, established emergency savings, and begun to set aside money for retirement. We learn that we are in control of our financial future and not at the mercy of some vast, uncaring universe.
In the third stage of financial aptitude, you light the way for others. (Boy, my metaphors were strained!) Our foundation is solid, and we now spend years (or decades) constructing a financial edifice that will support us for the rest of our lives. That generally means paying off the mortgage, supercharging our income (and thus, our saving rate), and preparing for the ultimate goal…
The final stage of money management is financial independence. At this stage, we no longer need to worry about money. We have enough saved to do whatever we please. Because we each have different goals, strengths, and weaknesses, financial independence means different things to different people. Financial independence is really just another way to say “retirement.”

When I started this blog, I had just progressed from the zeroeth stage of personal finance to the first. Over the next few years, I documented my progress as I achieved greater knowledge and control of my money. Today, I am fortunate to be in that final stage of personal finance. I am financially independent.

What do I mean by financially independent?

Some people believe you’ve achieved financial independence only when you can live off the dividends or interest your savings produce. Others — including me — take the stance that you’re financially independent if, given reasonable assumptions (4 percent inflation, 6.5 percent long-term real return on stocks, 4 percent withdrawal rate, etc.) you’ll also draw down your principal.

As I shared in the comments last week, I could stop working today and live off my savings for the rest of my life. In essence, I could choose to retire early — if I wanted. But I don’t want to, and for several reasons:

By continuing to work, I earn more money, which does two things. When my income exceeds my expenses, I add to my stockpile. When my expenses exceed my income — as they do now — income mitigates how much I need to draw down my savings.
Work gives me meaning. I enjoy writing about personal and financial freedom. It’s fun. Plus, the emails I get indicate I’m able to help other people pursue their dreams as well. So long as work gives me purpose, I’ll continue to work.
For me, work creates social connections. I get to meet readers and colleagues and financial professionals, which helps me expand my knowledge and learn about lots of other things.
And so on.

When people choose to continue working even though they could call it quits, they’re said to be semi-retired. I think that’s an apt term, and that’s how I classify my current state. I am semi-retired.

What Are Savings For?

Saving is a key part of personal finance. In fact, I’ve come to believe it’s the key part of personal finance. When we save money, we build smart habits today while protecting and providing for our future.

That said, saving plays different roles in different stages of personal finance.

For instance, when you’re accumulating or repaying debt, saving ought not be a high priority. Aside from a minimal emergency fund (of $500 or $1,000), your money is better directed elsewhere. That’s why in my beloved Balanced Money Formula — which urges folks to spend less than 50 percent of after-tax income on Needs, more than 20 percent on Saving, and the rest on Wants — debt repayment is actually classified as saving. There are few uses for money that provide a better return than paying down credit cards and other high-interest loans.

Once debt is eliminated, however, saving becomes a high priority. During the second and third stages of personal finance, we work to build three types of saving:

Short-term saving, such as in an emergency fund. Most experts urge people to save between three and twelve months of their current spending so that they’re prepared if something unexpected happens, such as a job loss or catastrophic illness.
Long-term saving for retirement. This is why we save in a 401(k), Roth IRA, and other retirement accounts. We’re saving for the far future when we’ll be unable to produce income at the level we can today.
Medium-term saving is what I commonly call targeted saving. For most folks, this takes the form of saving for a car or a house or a vacation or for college education. But other people use medium-term saving as a way to fund sabbaticals and mini-retirements. Others use this money to quit their job and take a chance on a new business or a new career.

We save money for two purposes: To protect against an uncertain future and to help us fulfill our dreams.

Short-term savings and long-term savings are generally defensive. They’re a form of self-insurance to shield us from the slings and arrows of outrageous fortune. Medium-term savings is used more for offense; it’s to pursue the things that provide us pleasure and purpose.

There seems to be a subset of people, however, for whom it’s never acceptable to spend savings. We’re all familiar with folks who spend too much and never save, but there are also people who save too much and never spend. They’re mocked in books like A Christmas Carol and Silas Marner. They’re demonized in movies like It’s a Wonderful Life. But for some reason, in real life, these types are often considered heroes. This puzzles me.

I see nothing heroic about dying with a fortune. I see nothing noble about saving and saving and never spending. Money is a tool. Its purpose is to provide comfort and pleasure for ourselves and for others. Saving isn’t an end in and of itself. We accumulate savings so we can do the things we want to do.

My Own Situation

In the past, I’ve been close to the vest regarding my financial situation. My attorney, my accountant, and my ex-wife all wanted me to keep things quiet. However, after some recent conversations — including one with Pat Flynn — I’ve decided to be more transparent. I can’t (and won’t) reveal everything, but I’ll share some broad info.

I’ve already shared that I’m currently outspending my income by about $2,000 per month because of travel. That’s what got some people riled up last week. I’ve also shared that I have enough medium-term savings to maintain this deficit until the end of 2014 (meaning I have about $25,000 saved for this purpose). I also have about $5,000 in emergency savings. Plus, I’m fortunate to have over a million dollars in long-term retirement savings.

Note: Yes, it’s true: While writing a blog about how to get rich slowly, I got rich quickly. This irony is not lost on me. One commenter last week suggested that this could cause problems since I didn’t have time to build the necessary mindset to manage the money. This is a valid concern, and one reason I’m trying to be cautious and make only “small moves.” I’ve read plenty of horror stories about people who squander sudden wealth.

In an ideal world, I’d be earning an income that meets my expenses. And, in fact, that was the whole point of last week’s article; I’m looking for ways to bring earning and spending into alignment. At the same time, I feel no shame about outspending my current earnings by $2,000 per month. Why not? Because that’s what my money is there for.

If I were still in debt, this $2,000 monthly deficit would be a concern. If I had only minimal savings, it would still be a problem. But I’d argue that even for somebody in the third stage of personal finance, deficit spending for a short time is perfectly acceptable. And if you’re in the final stage of personal finance? Well, then that’s actually how you’re expected to be living. When you’re retired, you’re drawing down your capital.

Note: Last week I wrote that Mr. Money Mustache would probably advise me to be more frugal. I was wrong. After reading the article, MMM e-mailed me to say: “Just enjoyed your latest post on GRS. I think you might be underestimating your passive income from savings…Since this is more than your spending by a wide margin, I would feel very confident that all your work income is 100% optional. Of course, you should still do enjoyable work because it makes you happy just as it makes me happy. But the paycheck is really just some icing on the cake.”

In fact, the fundamental problem of personal finance is figuring out how much to save so that you can live off your investments in retirement and die with a zero balance. (Or, if it’s your intention, to leave money to others.) A quick calculation (using conservative assumptions) shows that I could choose never to work again and even if I lived until 80, my assets would allow me to live on about $4,000 per month for the rest of my life. If I sold my condo, that number would climb to $5,000 per month.

And if I chose to spend $2,000 per month, which was the idea that created such a fuss last week? According to FIRECalc, my money will probably never run out! And, in fact, because of the extraordinary power of compounding, my savings will continue to grow forever.

The Bottom Line

Last week’s discussion was fascinating. If I were to draw down my savings in one fell swoop in order to buy a car or to purchase a house, I doubt anyone would object to my actions. After all, that’s how we think savings should be spent. But because I’m choosing instead to use my savings to fund travel and to buy time while I look for additional ways to make income, some people think I’m being foolish.

I suspect that even after this long discussion of saving and retirement, there will still be folks who believe it’s irresponsible for me (or anyone else, for that matter) to draw down savings for this sort of thing. If that’s you, tell us what you find objectionable. Under what conditions do you believe it’s okay to draw down savings? Does it matter which phase of personal finance you’ve reached? How do you decide when it’s okay to use the money you’ve saved to do the things you want to do?

Source: getrichslowly.org

Apache is functioning normally

June 1, 2023 by Brett Tams

By Peter Anderson 3 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited February 11, 2017.

At the end of October the IRS released their 2011 IRA contribution limits. If you have a Roth IRA (and you should), you’ll want to keep a close eye on the amount you’re allowed to contribute each year, because from time to time the amount does go up. When it does, you want to make sure to take advantage.

As we thought, the allowed contribution amounts have not changed this year, although the income phaseout limits have seen some small changes.

Contribution Limits For 2011 For Roth And Traditional IRAs

The contribution limit for the 2011 tax year is $5,000 for both Roth and Traditional IRAs, for people under the age of 50. If you’re older than 50 you can make a catch up contribution to your account of $1000, which brings your limit to $6,000.

You can contribute to a Roth IRA and a Traditional IRA in the same year, however, you need to remember that the $5000 limit is a combined total for both account types. You can’t contribute $5000 to each type, just a total of $5000 (or $6000 if you’re over 50.)

So if you contribute $3000 to your Roth IRA, you can only contribute $2000 to your Traditional IRA

Here’s a table showing the 2011 Traditional and Roth IRA contribution limits, along with the limits in years past.

Year	Age 49 and Below	Age 50 and Above
2002-2004	$3,000	$3,500
2005	$4,000	$4,500
2006-2007	$4,000	$5,000
2008-2012	$5,000	$6,000
2013-2018	$5,500	$6,500
2019-2022	$6,000	$7,000
2023	$6,500	$7,500

AGI Based Income Phaseouts For Traditional And Roth IRAs For 2011

Once you reach a certain income level, the amount you can contribute to a Roth IRA or Traditional IRA starts getting phased out, and at a certain point your ability to contribute is taken away altogether.

For Roth IRAs single taxpayers with an annual Modified Adjusted Gross Income (MAGI) over $107,000 begin to see their contribution limit drop until at $122,000 it goes away completely. The limits for Married Filing Jointly investors are $169,000-$179,000.

For Traditional IRAs single taxpayers with an annual Modified Adjusted Gross Income (MAGI) over $56,000 begin to see their contribution limit drop until at $66,000 it goes away completely. The limits for Married Filing Jointly investors are $90,000-$110,000.

IRA Type	Single	Married Filing Jointly
Roth IRA	$125,000 – $140,000	$198,000 – $208,000
Traditional IRA	$66,000 – $76,000	$104,000 – $124,000

Contributions To Your IRA Can Happen Until April 15th The Following Year

One important thing to keep in mind with IRAs is that if you haven’t already contributed the full amount to your Traditional IRA or Roth IRA for the 2010 tax year, you can still open a Roth IRA and contribute to the accounts up until tax day, April 15th, 2011.

If you do make a contribution in 2011 before tax day, make sure you specify which tax year the contribution is being made for.

Roth IRA And Traditional IRA: How Are They Different

The main difference between Traditional IRA and Roth IRA accounts is when you’ll pay taxes on the money. Traditional IRA accounts have money that is put in pre-tax. Because no taxes have been taken out yet, your distributions will be taxed in retirement.

Roth IRA contributions are made with dollars that have already been taxed. Because the money has already been taxed, it will grow tax free and not be taxed at withdrawal. I like that.

For a complete look at where to open a Roth IRA before the year is out, check out this article: Where Is The Best Place To Open A Roth IRA?

Do you currently have a Traditional IRA or Roth IRA? Are you contributing to the limit? Which account type do you prefer? Tell us your thoughts in the comments.

Source: biblemoneymatters.com

Apache is functioning normally

June 1, 2023 by Brett Tams

Our rights as women have come a long way since we earned the power to vote on August 26, 1920.

But the financial playing field between men and women still isn’t level. Not even close.

To help you make waves in your own financial life, I interviewed several Millennial and Gen Z women to find out what financial advice they’d give to other women today

Here’s what they had to say.

What’s Ahead:

1. “Don’t be afraid to negotiate your salary.”
2. “Take advantage of any employer match ASAP.”
3. “Avoid high-interest debt.”
4. “It is SO cliché, so hear me out… please start saving early for retirement!”
5. “Start using a spending plan or budget. Zero it out each month, and save the rest.”
6. “As a Millennial myself, the best money advice I would give women in their 20s and 30s is to diversify how you save and spend money.”
7. “Protect yourself and your people financially.”
8. “Educate yourself so you understand how money, interest, and debt works.”
9. “Sign up for Experian Boost. It’s free and will report monthly bills that generally don’t boost your credit like a phone bill, gas, and power!”
10. “When you buy your first home, pay biweekly (most working people get paid on these terms anyway). You’ll make one extra payment a year, shaving off seven years of your loan life on a 30-year mortgage!”
11. “When it comes to money, you can have your cake and eat it too.”
12. “Do not share bank accounts with anyone you’re dating but not married to, even if you live together.”
13. “Do not lease your car. Take out a loan instead.”
14. “Be a minimalist, especially if you rent.”
15. “The greatest gift you can give yourself is to save and invest early.”
16. “Becoming a financially grown-up woman means unlearning a lot of money lessons society taught us as girls: that men are better at money and math (they’re not), that investing is scary (it’s not), and that the best route to financial stability is to marry a high earner (absolutely not!).”
17. “Surround yourself with people with similar money values.”
18. “Make saving a habit as soon as you start making income.”
19. “Budget, but give yourself room to indulge.”
20. “Cash back offers are everywhere, from brands like Rakuten, to credit card perks, to apps like Coupons.com. Use them!”
21. “Learn to use credit cards wisely.”
22. “Get a side gig by turning a passion into a money-making opportunity.”
23. “Know your worth and advocate for yourself when negotiating.”
24. “Set goals and actively work toward them.”
25. “Forget FOMO. Don’t be afraid to say no.”
Summary

1. “Don’t be afraid to negotiate your salary.”

Anna Barker, Founder of LogicalDollar, offered me this advice.

There’s no question that it can be scary to ask for more money. Especially as women, we often internalize the feeling that we’re going to be seen as pushy or demanding if we ask for a raise.

However, various studies show this is actually one of the reasons women end up earning less over their lifetimes than men, who tend to be more likely to ask for more money.

2. “Take advantage of any employer match ASAP.”

Barker also talked with me about retirement. One of the best things that you can do for your future financial security is to start investing as early as possible.

If your employer offers any matching of your 401(k) contributions, this is basically free money and you should do everything you can to invest up to the limit of the match.

3. “Avoid high-interest debt.”

According to Barker, a big money mistake that a lot of women in their 20s and 30s make is signing up for high-interest credit cards. To be clear, credit cards can actually be a great tool if used correctly — which primarily involves paying the balance off in full by the end of each billing cycle.

The problems start to arise once those interest-free periods run out and you realize you’re not able to immediately pay off the debt you’ve accrued.

4. “It is SO cliché, so hear me out… please start saving early for retirement!”

Heather Albrecht, Financial Coach and Founder of Balance Financial Coaching, discussed this with me.

It’s hard because when you’re young, you seem to have SUCH a long time until that money is needed. But the math doesn’t lie.

Starting young makes it easier because you can save less. Gosh, I wish I had made the space in our spending plan to save earlier even though it seemed impossible. The $25 here or there would have been huge by now.

5. “Start using a spending plan or budget. Zero it out each month, and save the rest.”

Albrecht also spoke with me here. And I have to say if I had been able to get myself into the mindset of “saving money is spending money on my future freedom” at a younger age, there would have been a lot less stress at times.

Budgeting doesn’t have to be difficult, either. Just pick the right method and it’ll become just another habit.

6. “As a Millennial myself, the best money advice I would give women in their 20s and 30s is to diversify how you save and spend money.”

Siobhan Alvarez, Founder of Budget Baby Budget, shared this wisdom with me.

I am a big believer in not being dependent on one checking and savings account! I have a long-term high-yield savings account for an emergency fund, a savings account at my local bank for big purchases, a checking account for everyday expenses; and a checking account for fun purchases throughout the month.

This has helped me not only pay off a huge amount of debt over the past few years but do it in a way so I didn’t feel like I was missing out on life and fun!

7. “Protect yourself and your people financially.”

Brittney Burgett, Head of Communications at Bestow, gave this little nugget of advice. Emergency savings, disability insurance, and life insurance matter, especially if you have financial dependents.

Insurance, in particular, is more affordable to buy the younger and healthier you are. I, for example, have life insurance because I own a home.

My mom is my beneficiary, so if anything were to happen to me, the payout from a policy would enable her to continue the mortgage payments and decide later on what to do with my house — keep it, rent it or sell it. Life insurance would give her flexibility when it’s needed most.

8. “Educate yourself so you understand how money, interest, and debt works.”

Lindsay Feldman, Publicist and Founder of BrandBomb Marketing, broke down this for me.

It wasn’t until I really started reading financial books and listening to podcasts that I really began to take control over my financial situation. Understanding how money, interest, and debt works are key to being able to make your money work for you. I look at everything differently now which has empowered me to make smarter decisions.

9. “Sign up for Experian Boost. It’s free and will report monthly bills that generally don’t boost your credit like a phone bill, gas, and power!”

Feldman offered up a way for folks to finally help their credit the easy way. Experian Boost™ is free and it takes just a few minutes to sign-up.

Always be on the lookout for ways to improve your credit – it’ll only help you in the long run.

Feldman shares a great tip that can help homeowners own their home sooner (and pay wayyy less in interest). If it’s possible, work those extra payments into your budget.

11. “When it comes to money, you can have your cake and eat it too.”

Youmna Rab, Founder of Brilliantly Budgeting offered me this quote.

You don’t need to save every penny you earn and give up your favorite indulgences like spa days or dinners out.

If you make a plan for your money, you can enjoy what you like while also saving money for the future.

12. “Do not share bank accounts with anyone you’re dating but not married to, even if you live together.”

Shannon Vissers, the Financial and Retail Analyst of Merchant Maverick, shared some tough love here.

If you break up or your partner spends on things you don’t agree with, you’ll have no legal recourse to get your money back apart from suing them in small claims or court (which is expensive and stressful and may not go in your favor).

13. “Do not lease your car. Take out a loan instead.”

Vissers makes a good point here as well. A lease is essentially a very expensive car rental, and it’s a bad choice unless you’re wealthy enough to comfortably afford this luxury.

This doesn’t mean you can’t get a new car when you’re young. Rather than leasing a car out of your price range, opt to finance a cute, reliable car that you’ll own in three or five years (ideally three). You’ll build credit history this way and, in a few years, you won’t even have a monthly car payment.

14. “Be a minimalist, especially if you rent.”

While this tip may not be for everyone, there’s a good reason Visser’s offers this pearl of wisdom as well.

A good case can be made for spending on experiences when you’re young – trips, concerts, etc. — but overspending on retail goods is another story. Ever heard of the saying, what you own, owns you?

It’s true.

Remember, you’ll have to deal with all your clothes, shoes, furniture, kitchen items, knick-knacks, etc. the next time you move — and your headaches will be compounded if you have to move to a smaller place.

15. “The greatest gift you can give yourself is to save and invest early.”

Sarah Jane Paulson, CFP® at Valkyrie Financial, gave me this bit of guidance.

The classic pay yourself first mentality is the easiest way to a financially strong future. Build that emergency fund (or F*** You fund, if you prefer) of three to six months worth of expenses in a separate account other than your everyday checking.

Then go out and open an IRA or Roth for yourself. Put your money into cheap, diverse index funds and keep adding to it. The greatest money strength you have on your side is that you have years for the market to create an avalanche out of the first few snowflakes of money you invest.

16. “Becoming a financially grown-up woman means unlearning a lot of money lessons society taught us as girls: that men are better at money and math (they’re not), that investing is scary (it’s not), and that the best route to financial stability is to marry a high earner (absolutely not!).”

Sara Rathner, credit cards expert at NerdWallet, wanted to share this with other women.

So throw all those old lessons in the garbage, because that’s where it belongs. Now, today, learn everything you can about managing your finances on your own.

There is nothing more empowering than being the boss of your own life, and of being an equal partner in your relationships. No one will ever care as much about your money as you will.

17. “Surround yourself with people with similar money values.”

Sue Hirst, Co-Founder and CFO of CFO On-Call shared her experience when we talked.

When I was in my 20s, I used to hang out with many people who didn’t share my money values. As a result, almost every time I went out with my friends, I splurged money recklessly due to peer pressure.

This was one of the top reasons I was unable to save as much money as I would have liked each month. Looking back, I wish I had either told my friends directly that I wasn’t comfortable spending huge amounts of money routinely, or made new friends whose financial values aligned with my own.

18. “Make saving a habit as soon as you start making income.”

Imani Francies, Finance Expert at US Insurance Agents, shared this little mind shift.

Saving becomes easier when you look at yourself with the same significance that you look at your power bill or any other bill. No matter what, you are going to do your best to pay your power bill. You should feel the same way about putting money into your savings.

Paying yourself first every month is investing in your future. Even if you can only put $5 into a savings account once a month, start early.

19. “Budget, but give yourself room to indulge.”

Lisa Thompson, Savings Expert at Coupons.com, offered up ALLLL the good tips when I spoke with her.

What’s your weakness: designer handbags, weekend getaways, fine dining with a great bottle of champagne? Make room for things you love by controlling what you spend in other areas.

20. “Cash back offers are everywhere, from brands like Rakuten, to credit card perks, to apps like Coupons.com. Use them!”

Thompson also offers this bit of advice. Refuse to pay full price for anything until you’ve looked for an offer. If you can pair a coupon or cash back offer with a store discount or sale, bam! That’s a savvy way to shop.

21. “Learn to use credit cards wisely.”

To tack on, Thompson also had this to say.

She makes a good point, too. Today, there are so many options for credit cards that offer perks from cash back to miles to points, as well as incentives, like a free Dash Pass for DoorDash or money toward a Peloton membership. The key, of course, is to not carry a balance and pay so much interest that it cancels out the perks. But if you can learn to use credit cards wisely by paying them off each month, the perks and incentives can help make everything from dining out to travel more affordable.

22. “Get a side gig by turning a passion into a money-making opportunity.”

Finally, Thompson ended our conversation with the quote above.

Do you love essential oils? Make balms, rollerballs, and pillow sprays, and sell them on Etsy or at pop-up shops.

Do you love thrifting, going to estate sales, and visiting antique shops? Find items worth more than what you’re paying and resell them! Facebook Marketplace is the perfect spot for that, and it’s free.

If you can turn a hobby into a source of income, that’s extra money for you to invest, save, or use as your slush/entertainment fund.

23. “Know your worth and advocate for yourself when negotiating.”

Amy Maliga, Personal Finance Consultant at Take Charge America, tells it like it is with her wise advice above.

Since the gender pay gap is still a real thing (ugh), it’s important to do your research on salaries for your position and advocate for yourself when negotiating a new job or discussing your annual performance review.

24. “Set goals and actively work toward them.”

Maliga offered me a simple but strong piece of advice above.

Whether it’s buying a home, starting a business, or embarking on world travel, setting financial goals gives a structure and framework to how you plan your finances.

25. “Forget FOMO. Don’t be afraid to say no.”

Maliga also makes a good point here.

TikTok made me buy it – or did it?

It’s way too easy to shop these days, and social media knows exactly what it takes to get you to press “add to cart.” When you’re tempted to buy something you hadn’t planned on, or friends are trying to talk you into activities you can’t afford, keep those long-term financial goals in mind, and don’t be afraid to say no.

Summary

We celebrate Women’s Equality Day every August 26th to commemorate the day the 19th Amendment finally recognized that women have the right to vote. But that same equality hasn’t trickled to the financial space yet, where the gender pay gap, wealth gap, and investing gap still exist today.

We’ve made a lot of progress over the decades, but a lot still needs to happen at the company, state, and national levels to achieve equal pay and equal opportunities for equal work. Until then, I hope these financial tips from awesome Millennial and Gen Z women serve as inspiration for how you can up the ante in your own financial life.

Are there any tips you’d add to the list? Let me know in the comments below!

Apache is functioning normally

June 1, 2023 by Brett Tams

By Jason Topp 4 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited June 27, 2010.

Everyone should be saving into a Roth IRA for retirement!

Have you heard those words before?

I’ve seen them strewn about the web here ‘n there on various blogs or in comments on other personal finance sites.

Is that true? – Should everyone be saving into a Roth IRA?

Not exactly.

Although Roth IRA’s have become a very popular retirement account over the last 10 years, and have contributed greatly to the whole “Tax Diversification” conversation, there are still some scenarios where they don’t make sense.

Let’s take a look at three reasons why you should NOT use a Roth IRA for retirement savings.

You Make Too Much Money

We all wish we had this problem right? Uncle Sam doesn’t want you to put money away that will be completely tax free if you are a high-income earner. They will actually phase you out of your contributions beginning at a certain income.

What exactly is a high-income earner?

Well, here is the breakdown for Roth retirement savings:

If you are a single filer and you earn between $105,000 and $120,000 you start getting phased out. Anything above $120,000 you cannot contribute to a Roth IRA.

If you are married filing jointly and make between $167,000 and $177,000 you get phased out. Anything above $177,000 you cannot contribute to a Roth!

So, here’s how this would apply – let’s say you are married and you’re knocking down$165,000 and you think your income is going up – do you really want to open a Roth IRA for possibly one year and then get phased out? Probably not, but at the very least you want to double check your figures and do what’s best for you.

So, if you make too much money – a Roth IRA may not make sense for you – or may not even be allowed.

Your Tax Bracket Will Be Lower in Retirement

Tax rates are at an all time low! What are the odds they’ll be going up soon? I’d say good to very good!

That being said, we generally don’t know for sure what tax rates will be when we retire.

Most folks do assume their brackets will be lower – and for good reason. If you’re making decent money through your peak earning years and expect your income to decrease drastically in retirement then there is a good chance you’ll have a lower bracket.

The reason you may not want to contribute to a Roth IRA in this case is because Roth IRAs use after-tax money for contributions. That means you’ve already paid the tax on it (in a higher bracket mind you) and will be pulling it out in a lower tax bracket.

The tax savings would not be legitimized if you are in a higher bracket now and a lower one later.

The difficult part is that we don’t know for sure what our brackets will be and also most folks want to maintain standard of living and might need the same amount of income in retirement, which means you need to carefully consider some numbers and figure out what the best route would be for you.

You Are Already Maxing Out a Traditional IRA for Retirement Savings

Let’s say that for whatever reason (you don’t have a 401k through work or you are using a Non-deductible IRA and then converting to a Roth) you are contributing to a Traditional IRA and are thinking about starting a Roth IRA – you need to be aware of the IRA contributions limits.

In other words, Uncle Sam only allows you to contribute a certain amount to all IRA’s no matter what kind.

So, if you are under 50 years of age, you can contribute up to $5,000 per year into an IRA. If you are over 50 – you can contribute up to $6,000.

If you are contributing the full $5,000 to a Traditional IRA, you cannot contribute another $5,000 to a Roth. It’s only $5,000 total!

So, where a Roth IRA would not make sense is if you really need the Traditional IRA to help lower your taxable income now rather than caring so much about tax-free down the road.

In that case you may want to max fund your Traditional IRA to reap tax benefits now.

If you are not max funding your Traditional IRA, you could split the difference (i.e. $2,500 to a Traditional and $2,500 to a Roth), but only if it makes sense for you from a tax standpoint after running some numbers.

What Are Your Thoughts?

Source: biblemoneymatters.com

Apache is functioning normally

June 1, 2023 by Brett Tams

At what age did you start thinking about investing? Is it when you started college? Maybe its after you started your career. What about high school? Maybe, but not likely, if not, you should, learn how to make money with 100 dollars, and be glad you did! Last year I was asked to be a guest speaker of a class of high school students at Carbondale Community High School. Before I came, I had the teacher take a poll of the students on the top five reasons why they think they should invest. The overachievers that they were, they gave me their top six reasons. Here are their top six reasons, and their reasoning behind them. I think you’ll crack a smile on a few.

1. Turn a Profit, or in Their Words, “Make Some Money.

Can’t argue with that, can you? Sure, having an income to sustain you through retirement is the driving force to why most people invest, but the only way to achieve that is making money, right? The students were just a little more direct with their logic. I can always appreciate that.

2. Retirement.

I asked the kids how they thought they were going to have an income when retirement came. One student responded that she expected to get money from her job or her employer when she retired. That led into discussion in talking about pensions, and how pensions have greatly reduced over the years. We then talked about 401k’s and how they have evolved. I made it clear that it was on them to choose their own investments and take charge of their financial destiny.

I then was able to bring a copy of my most recent Social Security statement, and showed them how much I would expect to receive if I retired at the age of 62, 67, and 70. I think it was a real eye opener for many, seeing how little that I would expect to receive by waiting 32 plus years, to start drawing my first Social Security check. One students comment of, “That’s it!” was priceless.

3. Bragging Rights.

This was by far my most favorite of their reasons. The logic behind the bragging rights was that the students felt that if they had investments that they could be able to boast to their family or friends about certain investments that they owned. While I never encourage this as a reason to invest, I get some humor out of this.

4. Tax Breaks.

All the students were in agreement that they don’t want to pay more tax that they have to. They all felt that investing would somehow decrease the tax they had to pay. We talked a bit about investing into dividend paying investments and also the rules on the Roth IRA. Not a better tax break than the tax free growth of the Roth.

5. Cash Flow/Real Estate.

One discussion that we had with the students was that I told them that investing does not always mean investing into the stock market. There are other ways to invest. You can invest into a business idea, you can invest into themselves, and they can also invest into real estate. I actually have many clients and acquaintances that have been very successful with real estate and have made, have been very successful without actually ever investing in the stock market.

6. For Children’s College.

Many of the students knew that college was around the corner and that was obviously on their minds. Knowing that student loans were in the foreseeable future they hoped that their kids would have just as good if not better opportunity that they will.

All in all, I think the students had some good reasoning on the why you should invest. They all admitted that they still have a lot to learn. If you have a child that is high school to junior high age, ask them why they think they should invest. I’d be curious to hear some more reasons and the support behind it.

Thanks to Mrs. Wilson’s class for participating! You all were great.

Source: goodfinancialcents.com

Apache is functioning normally

June 1, 2023 by Brett Tams

You might be asking yourself what the Jackson Five has to do with the Roth IRA five year rule for qualified withdrawals? I’m sad to say, “Absolutely nothing”. Other than then number “five”, of course. I just thought it was fitting with all the recent tributes to the King of Pop to have my own. Now that I have your attention…..

The basics of the Roth IRA include the phrase “Tax Free Money”. That phrase makes the Roth IRA the most attractive retirement planning tool of our time. When it comes to the intricacies of the Roth IRA, in regards to how it works, some confusion can set in. One provision of the Roth IRA that can leave many scratching their heads is the Roth IRA Distributions Rules For Withdrawals: 5 year rule.

The Five Year Rule pertains to when you can take qualified distributions from your Roth IRA tax and penalty free. Nobody wants to pay tax and penalties, right? That’s why it’s important to know how the Roth IRA withdraw rule works. Just to add more fun to the mix, you need to first know that there are two sets of Five Year rules. One pertains to Roth IRA contributions and the other pertains to Roth IRA conversions. We’ll begin with Roth IRA contributions.

Withdrawal Rules on Roth IRA Contributions

In order for you to take money from the Roth IRA tax and penalty free, it has to be considered a “qualified distribution”. We’ll get to what the rules on qualified distribution are in one moment. First thing I need to remind you is that all contributions can be taken at any time, tax and penalty free. That means what you put into the Roth IRA (contribution) can be taken out the following day without consequence (not factoring sales charges and market risk).Let me illustrate:

Example 1

You open a Roth IRA at your bank and decide to put $5000 into a money market account inside the Roth. A month goes by and something happens where you need to withdraw your money. You can withdraw the original $5000 tax and penalty free. What has to stay is the earnings or, in this case, the interest that you made off the $5000 (which should be minimal considering you didn’t have it that long). Now keep in mind, the bank may charge you some cancellation fee of some kind, so read the fine print. But as far as the IRS is concerned, you are in the clear.

Example 2

Just to illustrate another side of the first example, let’s say this time you decide to invest at a brokerage firm and choose an investment more tied to the stock market. After a month goes by, your original $5000 investment now plummets to $3000. (I think a lot of people can relate to that). All you are allowed to withdraw is the $3000. That’s it! Sometimes that gets overlooked. Also, if you paid a sales charge or commission on that investment, that’s not being refunded to you either.

What is the Rule For Qualified Distributions on a Roth IRA?

What’s so important about a qualified distribution? If it’s deemed qualified, you then avoid taxes and the 10% early withdraw penalty. Taken directly from IRS pub 590 this defines what qualified distribution is:

A qualified distribution is any payment or distribution from your Roth IRA that meets the following rules. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and the payment or distribution is:

Made on or after the date you reach age 59½
Made because you are disabled
Made to a beneficiary or to your estate after your death, or
One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).

Remember that you have until April 15 of the following calendar year to make a Roth IRA contribution for any tax year. But the five year window begins January 1st of the actual tax year. Also, the five year window is based on when you made your first deposit. Meaning that a new five year window does not begin with each additional deposit. Is your head spinning? Let’s look at another example:

Example 3

You open a Roth IRA but don’t actually make your first contribution until April 10th, 2006. Your five year window would then begin on January 1st, 2005. If you didn’t make another deposit until 2008, your five year window is still based on the January 1st, 2005 date. Don’t forget that it’s Five Year rule plus one of the other factors (most likely 59 1/2) to get the money tax and penalty free.

Roth IRA Conversions

The Five Year Rule works a bit differently when it pertains to Roth IRA Conversions. The major difference is starting of a new five year window with each new conversion. Once you reach the age of 59 1/2 this isn’t much of an issue, but you still need to aware of this. Especially, if you haven’t had a Roth IRA open for at least five years. If so, the conversion amount will come out tax free, but the earnings are still subject to a five year holding period. Let’s look at another example:

Example 4

If you started a Roth IRA at age 50 with a contribution and then decide to convert at ages of 58, 59, and 60 respectively, you are immediately eligible to take all funds out tax and penalty free (even earnings) since you satisfied age and “any or “a” five year holding period in a Roth.

The above example is one what I wrestled with trying to find the answer and as it stands right now, that is the best interpretation of the rule that I’ve found.

Similar to Roth IRA contributions, the five year clock begins on January 1st of the year that you convert. The key difference is that the you must convert in the calendar year and not the tax year: before December 31st.

Converting has been difficult to qualify for a conversion since your adjusted gross income has to be less than $100,000. But as I’ve written about on more than one occasion, Roth conversion rules change slightly and the income limit is removed in 2010. Expect many to take advantage of this next year.

Keep it in Order: Rules For Taking out of Roth IRA

You have made it thus far- congratulations! We’re almost there. The last step that we have to address is the ordering rules for taking out withdrawals from your Roth IRA. This is important because of, once again, the taxes and penalties that might occur. According to the IRS, the order of a distribution from a Roth IRA is:

Regular Contributions – by considering the first money withdrawn from the account “regular contributions,” and not earnings, the IRS allows account holders to remove a portion of their accounts before the five-year rule applies.
Conversions – this is on a first-in, first-out basis. So the money placed into an account because of a conversion that occurred in 2008 would be removed before a conversion that occurred in 2009.
1. Taxable – the taxable portion of the conversion is removed first. This is the amount claimed as income because of the conversion.
2. Non-Taxable – this is the portion of the conversion not included in gross income.
Earnings – finally, the last money to be removed from an account are the earnings on the assets placed in the account.

Logically, it makes sense. The monies that you have paid taxes on will come out first tax and penalty free. After the contributions are taken out, just work down the list to see what you can or cannot take. Still confused? This is where a CPA or a Certified Financial Planner can assist you computing the numbers for you.

Required Minimum Distributions and Roth IRA

One last note when doing conversions and you are over the age of 70 1/2. Since you are the IRS magic age to begin required minimum distributions, those distributions can’t be converted to a Roth IRA. In the year you wish to convert, you must first withdraw your required distribution, and then you can convert any or all remaining funds to a Roth. This is only if you do a full conversion. If you are looking to do a Roth IRA conversion at the beginning of the year, but postpone your RMD; then you’ll want to do a partial conversion and leave at least the amount of the RMD in the IRA. Be sure to double check with your IRA custodian to see what their policy is on the matter of RMD’s and converting. Keep in mind that in 2009 RMD’s are suspended, so that would not apply. It will continue as scheduled in 2010.

Source: goodfinancialcents.com

You Can Access Your Principal At Any Time

There Are Income Limits

You Do Not Get A Tax Benefit Up Front

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Tips from the experts on ways to make money on the side.

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1. “Don’t be afraid to negotiate your salary.”

2. “Take advantage of any employer match ASAP.”

3. “Avoid high-interest debt.”

4. “It is SO cliché, so hear me out… please start saving early for retirement!”

5. “Start using a spending plan or budget. Zero it out each month, and save the rest.”

6. “As a Millennial myself, the best money advice I would give women in their 20s and 30s is to diversify how you save and spend money.”

7. “Protect yourself and your people financially.”

8. “Educate yourself so you understand how money, interest, and debt works.”

9. “Sign up for Experian Boost. It’s free and will report monthly bills that generally don’t boost your credit like a phone bill, gas, and power!”

11. “When it comes to money, you can have your cake and eat it too.”

12. “Do not share bank accounts with anyone you’re dating but not married to, even if you live together.”

13. “Do not lease your car. Take out a loan instead.”

14. “Be a minimalist, especially if you rent.”

15. “The greatest gift you can give yourself is to save and invest early.”

17. “Surround yourself with people with similar money values.”

18. “Make saving a habit as soon as you start making income.”

19. “Budget, but give yourself room to indulge.”

20. “Cash back offers are everywhere, from brands like Rakuten, to credit card perks, to apps like Coupons.com. Use them!”

21. “Learn to use credit cards wisely.”

22. “Get a side gig by turning a passion into a money-making opportunity.”

23. “Know your worth and advocate for yourself when negotiating.”

24. “Set goals and actively work toward them.”

25. “Forget FOMO. Don’t be afraid to say no.”

Summary

Read more:

You Make Too Much Money

Your Tax Bracket Will Be Lower in Retirement

You Are Already Maxing Out a Traditional IRA for Retirement Savings

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1. Turn a Profit, or in Their Words, “Make Some Money.

2. Retirement.