Welcome to this month’s side hustle report! If you’ve been following along, each month, I document what I made using various sharing economy and gig economy apps. It’s pretty great to have a little bit of extra income coming in each month for things that I’m basically already doing…
I sometimes get into conversations with friends of mine who wonder why I’m trying to save so much money. When I tell them that I’m doing it because I’d love to be able to retire early, I’m often met with the same response: “I couldn’t imagine myself not working. I’d get too bored.”
I’m sure those of you on the path to financial independence have heard that same remark as well. It’s all well and good, mind you. There’s nothing wrong with working. If you like your job, by all means, you should keep doing it. Honestly, if I ever do reach financial independence, I’ll probably keep working too. Perhaps not in a traditional 9-5 job, but I’d probably do something that I find fun.
My problem isn’t with people who say they enjoy working. That’s totally fine. It’s that I find that people who tell me they like working often use that, not as a plan, but rather, as an excuse for why they’re not saving very much. Or they use it as a reason to criticize my own drive to save money.
Most people don’t believe it, but even in today’s market, you can still earn 5% interest on money sitting in an FDIC insured savings account. It does require a little bit of legwork to set up, but once you’ve done it, the entire account is completely automated.
For most people, a 5% interest savings account is a perfect place to store your emergency fund. It’s where I store my emergency fund. And depending on how much you like to keep in your emergency fund, you could potentially have your entire emergency fund earning 5% interest per year.
I can’t really believe it, but this past weekend, I turned 30 years old. It’s sad to say, but my 20s are now officially over. I think I have to become a responsible adult now or something.
I’ve been casually tracking my net worth over the past couple of months, and back in October, I published my first quarterly net worth report. You can take a look at that post here. My plan is to continue these reports so that folks can see where I’ve been and where I’m going. It’s also not bad for me to have these numbers documented for my own records so that I can get a picture of where I’m going.
Here’s the current picture of my net worth:
I think that wealth, much like temperature, is relative too. One person might feel wealthy making a certain amount of money while another person, making the same amount of money, might feel like they’ve only got pennies to their name. Some of us might scoff when a doctor or lawyer says they don’t make enough money and are living paycheck to paycheck. When this happens, we wonder how someone making six figures can spend so much money.
We don’t often think about 529 plans as a way to reduce our immediate tax liability. But I was recently talking to a friend of mine who pointed out an interesting strategy that might help him reduce the amount of state income taxes he would owe this year.
Traditionally, 529 plans act sort of like a Roth IRA for college. You put money into the 529 for your child’s future college expenses, allow that money to grow over time, and then withdraw that money tax-free so long as you use it for college expenses. If you start right when your children are born, you can basically get yourself 18-22 years of tax-free growth. Considering the fact that the S&P 500 has never lost money over a 20 year period, you’ve got pretty good odds you’ll come out with some tax-free money for your kids by the time they enter college.
The above scenario is the traditional way to use a 529 plan. But a 529 plan can be opened up in anyone’s name, including your own. This opens up a number of interesting possibilities that most people don’t think about…