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.
With a New Job Come New Goals
March 6th, 2011 at 06:33 pm
March 6th, 2011 at 07:40 pm 1299440431
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.
March 6th, 2011 at 08:05 pm 1299441920
March 7th, 2011 at 01:59 am 1299463178