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With a New Job Come New Goals

March 6th, 2011 at 10:33 am

I've already started analyzing how I'm going to handle the money I earn from the new job I start tomorrow. Many things will be different since it's a contract job with no taxes deducted.

I remember earning about this much at a job in 2005, though that job had benefits. I was contributing 15%, or about $300 to $350 each 2-week pay period to my 401(k). AND I was prepaying the mortgage, sometimes $100 a month, sometimes as much as $400 a month.

Since this job doesn't have a retirement plan, I decided I'll divvy up the money I'd otherwise invest in a 401(k) (and toward the mortgage) in the following way each month:

$350 will go to replenish an emergency fund; this is important, since I'll need that money to live on if for some reason i become unemployed again.

$300 will go to mortgage prepayments...I'm really obsessed with paying off the darn thing.

$350 will go to my SEP IRA. I created that account 2 years ago but it only has about $500 in it now because my freelance copywriting has only amounted to a few thousand each year. However, my full-time job will now all be "freelance," and i recall i can contribute as much as 20% of income (around $10,000).

So if you consider mortgage prepayments as "savings," my new savings rate will be $1,000 a month. Not bad, considering my modest income.

I also plan to create some spreadsheets to help me track my expenses since they will all now be tax-deductible. The ones I will track include:

* My $443/month COBRA premiums; by year's end they will have exceeded the minimum 7.5% of total income needed to claim this deduction.

* Mileage driving to the city, since my primary work location 4 days a week will be home, and after the initial week or two, I'll just be driving in 1 day a week for meetings.

* Phone calls to the office

* Office supplies such as copy paper and ink cartridges

I don't anticipate claiming deductions for my computer or office since I won't be using them exclusively for work.

I also need to mark my calendar with due dates for IRA quarterly tax payments.

I reviewed the agreement he wants me to sign. It's mostly non-disclosure stuff, but it looks like he only wants to pay me once a month, which seems to me a long time to wait to get paid when this will be my only source of income. I will have to talk to him about that tomorrow. Really not crazy about that at all.

I'm going to revise my goals that appear here on my blog, too.

3 Responses to “With a New Job Come New Goals”

  1. MonkeyMama Says:

    Actually, if you are self-employed (filing Schedule C and not covered under an employer health plan), you can deduct 100% of your health insurance. Just google "self-employed health insurance" for more details. It is an adjustment on the front of the 1040 Form.

    The exception would be if you did not have enough business income to offset the expense. In that case, itemizing the expense (portion more than 7.5% of income) makes more sense.

    Just FYI - seems to me you can fully deduct your health insurance in 2011.

  2. patientsaver Says:

    That's fantastic! I always learn something new from you, MM!

  3. CB in the City Says:

    I would definitely count mortgage pre-payment as savings.

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