29 Y.O. with a $60,000 bonus

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Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

29 Y.O. with a $60,000 bonus

Post by Username1 » Sat Jan 12, 2019 3:27 pm

Hey, I have a $60,000 bonus for my department's outstanding performance last year.

Here's my financial situation:
* I rent a $900/m apartment in the downtown area
* I have $20,000 in an emergency fund in Ally Bank
* I have $22,000 in my checking account
* I have $10,000 in a Roth IRA (I started this in 2017)
* I own a Prius that's paid off.
[edit]* I have no debt

I'm mixed on what I should do with my bonus. I can:
1.) Use it to buy a rental property. This will lower my rent to $0 or a negative number (if I make a profit from the tenants).
2.) Put it in an ETF and set it aside. I plan on having $300,000 in an ETF by 2022. This fund will be set aside until my retirement (so, instead of contributing every year to retirement, I'll contribute a lot up front and then just enjoy the peace of mind :-) )

For #1, you should know that I'm single and I'm planning to move out of the area in 5.5 years. If I do get a rental property, I'll then have a property management company manage it.

You should also know that I would like to start my MBA class in 2020. I estimate that this should cost at least $60,000.

What should I do? I've been thinking about this for months now and the day is arriving soon. I haven't been able to talk about it since I don't want my employees to ask me for raises out of the blue -_- nor did I want to change the relationships in my social life.

Please help :)

desafinado
Posts: 156
Joined: Wed Dec 28, 2016 3:14 am

Re: 29 Y.O. with a $60,000 bonus

Post by desafinado » Sat Jan 12, 2019 3:34 pm

Username1 wrote:
Sat Jan 12, 2019 3:27 pm
2.) Put it in an ETF and set it aside. I plan on having $300,000 in an ETF by 2022. This fund will be set aside until my retirement (so, instead of contributing every year to retirement, I'll contribute a lot up front and then just enjoy the peace of mind :-) )
do you have access to a 401k at your job? and how large is the bonus relative to your salary?

nguy44
Posts: 165
Joined: Sun Jul 09, 2017 1:52 pm

Re: 29 Y.O. with a $60,000 bonus

Post by nguy44 » Sat Jan 12, 2019 3:44 pm

When I was working, my rule for bonuses was to have fun with up to 10% of it and save/invest the rest. What to invest it in is a factor based on your time horizon. If you do plan to go for your MBA, this would fund most of it so I would stick it in a savings/MM fund yielding above 2%. Personally I would not consider rental property, but that is because I do not have a landlords tolerance and patience. :happy

tmcc
Posts: 311
Joined: Tue Feb 06, 2018 6:38 pm

Re: 29 Y.O. with a $60,000 bonus

Post by tmcc » Sat Jan 12, 2019 3:47 pm

Not sure if you have an opportunity that supports it but I always wanted to do the owner/occupant duplex setup... but it never ended up working out for me. Its an easy way to build equity, offset costs and continue an elevated savings rate.

justsomeguy2018
Posts: 289
Joined: Wed Oct 03, 2018 8:11 pm

Re: 29 Y.O. with a $60,000 bonus

Post by justsomeguy2018 » Sat Jan 12, 2019 3:51 pm

Username1 wrote:
Sat Jan 12, 2019 3:27 pm
Hey, I have a $60,000 bonus for my department's outstanding performance last year.

Here's my financial situation:
* I rent a $900/m apartment in the downtown area
* I have $20,000 in an emergency fund in Ally Bank
* I have $22,000 in my checking account
* I have $10,000 in a Roth IRA (I started this in 2017)
* I own a Prius that's paid off.
[edit]* I have no debt

I'm mixed on what I should do with my bonus. I can:
1.) Use it to buy a rental property. This will lower my rent to $0 or a negative number (if I make a profit from the tenants).
2.) Put it in an ETF and set it aside. I plan on having $300,000 in an ETF by 2022. This fund will be set aside until my retirement (so, instead of contributing every year to retirement, I'll contribute a lot up front and then just enjoy the peace of mind :-) )

For #1, you should know that I'm single and I'm planning to move out of the area in 5.5 years. If I do get a rental property, I'll then have a property management company manage it.

You should also know that I would like to start my MBA class in 2020. I estimate that this should cost at least $60,000.

What should I do? I've been thinking about this for months now and the day is arriving soon. I haven't been able to talk about it since I don't want my employees to ask me for raises out of the blue -_- nor did I want to change the relationships in my social life.

Please help :)
At a minimum I would probably put $6,000 in the Roth if you haven't already contributed to that this year. If you have already done that this year I would set aside $6,000 to contribute for next year.

I personally wouldn't put all of the rest of it in the market/ETF. Who knows what the next 4 years will bring. So I would probably sit aside at least $10,000 of it to pad my emergency fund (something yielding at least 2% interest).

What you do with the remaining amount depends on your time horizon/risk tolerance I think. I think using it to help with MBA expenses would probably be your best use of it.

veggivet
Posts: 421
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Location: New England

Re: 29 Y.O. with a $60,000 bonus

Post by veggivet » Sat Jan 12, 2019 3:53 pm

Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
If you watch your pennies, your dollars will take care of themselves.

jason1
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Joined: Fri Sep 21, 2018 2:51 pm

Re: 29 Y.O. with a $60,000 bonus

Post by jason1 » Sat Jan 12, 2019 3:55 pm

From experience, don't get a rental that you will be moving away from. Managing property from a distance is extra risky unless you have a TRUSTED manager. Fully fund the 2018 and 2019 Roth if you have not done so yet. If your employer offers a decent 401 k you should join and max that this year.

Personally with the remainder I would take a portion and add to cash/ef savings to ensure you can cash flow your MBA. The remainder in vtsax.

tim1999
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Re: 29 Y.O. with a $60,000 bonus

Post by tim1999 » Sat Jan 12, 2019 5:09 pm

Spend $2,000 on experiences you enjoy, or take a trip to somewhere you've wanted to go.

bgf
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Re: 29 Y.O. with a $60,000 bonus

Post by bgf » Sat Jan 12, 2019 6:05 pm

your student loan rates will be high so id save it in a safe investment, high interest savings or CD, and use for tuition.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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whodidntante
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Re: 29 Y.O. with a $60,000 bonus

Post by whodidntante » Sat Jan 12, 2019 6:07 pm

Max all tax advantaged accounts.

Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

Re: 29 Y.O. with a $60,000 bonus

Post by Username1 » Sat Jan 12, 2019 6:36 pm

bgf wrote:
Sat Jan 12, 2019 6:05 pm
your student loan rates will be high so id save it in a safe investment, high interest savings or CD, and use for tuition.
Savings it is!
tim1999 wrote:
Sat Jan 12, 2019 5:09 pm
Spend $2,000 on experiences you enjoy, or take a trip to somewhere you've wanted to go.
Haha. I'm well traveled and used to live overseas :) I think I'm gonna spend this year doing local trips and staying home with my cat. There's something nice about being in a familiar land :)
jason1 wrote:
Sat Jan 12, 2019 3:55 pm
From experience, don't get a rental that you will be moving away from. Managing property from a distance is extra risky unless you have a TRUSTED manager. Fully fund the 2018 and 2019 Roth if you have not done so yet. If your employer offers a decent 401 k you should join and max that this year.

Personally with the remainder I would take a portion and add to cash/ef savings to ensure you can cash flow your MBA. The remainder in vtsax.
Yeah, I'm gonna put it in a savings account for the rental or MBA school.
veggivet wrote:
Sat Jan 12, 2019 3:53 pm
Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
tmcc wrote:
Sat Jan 12, 2019 3:47 pm
Not sure if you have an opportunity that supports it but I always wanted to do the owner/occupant duplex setup... but it never ended up working out for me. Its an easy way to build equity, offset costs and continue an elevated savings rate.
I've been looking into a multi-family home! I qualify for a 0% down VA loan and it's an attractive option for me! I think putting a lot of the bonus into a 2% savings account (emergency fund) would be a good course of action since, if there's something wrong with the house, I have the cash to fix it! Plus, I can withdrawal money from the EF in a few years for the MBA too.
desafinado wrote:
Sat Jan 12, 2019 3:34 pm
Username1 wrote:
Sat Jan 12, 2019 3:27 pm
2.) Put it in an ETF and set it aside. I plan on having $300,000 in an ETF by 2022. This fund will be set aside until my retirement (so, instead of contributing every year to retirement, I'll contribute a lot up front and then just enjoy the peace of mind :-) )
do you have access to a 401k at your job? and how large is the bonus relative to your salary?
There's no 401k. The total bonus is $100,000. I already took $40,000 early to pay off the Prius. My salary is $90,000. I have $60,000 due to me.

======================

So, yeah, here's my Course of Action I have in my head:
1.) put $6,000 into 2019's Roth IRA
2.) File my taxes in Feb and pay my 2018 taxes. I think I owe $40,000 (I was paid a total of $130,000 in the 2018 calendar year).
3.) For the remaining $12,000, I'll put it in the emergency fund.

The thing is, I realized that, if I do pay $40,000 in taxes, I'll have to pay $10,000 every quarter in Estimated Taxes for 2019's tax year... which means that I actually don't have any money -_-

So, yeah, I'll max out the IRA ($6,000), pay my taxes, and put the remainder in a savings account, which will be used to pay 2019's Estimated Taxes -_-

Wow. This started out very sexy and fun and ended up being super boring and mundane.

[edit]
I just sat down and made a XLSX to project my 2018's taxes. I probably made $150,000 last year. That means I owe $54,681 in local, state, and federal taxes -_-.

So.... yeah. I'll max out my Roth IRA and then hand the rest of my bonus to the IRS.

[edit2] I just realized that this also means I'll own ~$13,000/quarter in Estimated Taxes in 2019. [(removed) --admin LadyGeek] I have no idea how I'll meet those Estimated Taxes Payments. :oops: I only make $7,500/m and my bonuses are yearly. WTH should I do?
[edit3]] I'm gonna talk to my CPA to see if I can pay my Estimated Taxes unevenly throughout the year; since my income is uneven. Then, I'll use my Emergency Fund ($20,000) plus the remainder of my bonus to pay my 2019 Estimated Taxes, until I get 2019's bonus in January 2020.

THEN! In January 2020, I'll have money to invest or put in a savings account or SOMETHING! :annoyed
Last edited by Username1 on Sat Jan 12, 2019 6:56 pm, edited 1 time in total.

MrBobcat
Posts: 179
Joined: Fri Jan 11, 2019 5:19 pm

Re: 29 Y.O. with a $60,000 bonus

Post by MrBobcat » Sat Jan 12, 2019 6:55 pm

Username1 wrote:
Sat Jan 12, 2019 6:36 pm

veggivet wrote:
Sat Jan 12, 2019 3:53 pm
Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
Well if you go over income limitations for a Roth with the $60k bonus and made a Roth contribution, then it's a PITA.

Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

Re: 29 Y.O. with a $60,000 bonus

Post by Username1 » Sat Jan 12, 2019 6:59 pm

MSUBobcat wrote:
Sat Jan 12, 2019 6:55 pm
Username1 wrote:
Sat Jan 12, 2019 6:36 pm

veggivet wrote:
Sat Jan 12, 2019 3:53 pm
Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
Well if you go over income limitations for a Roth with the $60k bonus and made a Roth contribution, then it's a PITA.
What's a PITA?

MrBobcat
Posts: 179
Joined: Fri Jan 11, 2019 5:19 pm

Re: 29 Y.O. with a $60,000 bonus

Post by MrBobcat » Sat Jan 12, 2019 7:00 pm

Username1 wrote:
Sat Jan 12, 2019 6:59 pm
MSUBobcat wrote:
Sat Jan 12, 2019 6:55 pm
Username1 wrote:
Sat Jan 12, 2019 6:36 pm

veggivet wrote:
Sat Jan 12, 2019 3:53 pm
Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
Well if you go over income limitations for a Roth with the $60k bonus and made a Roth contribution, then it's a PITA.
What's a PITA?
Pain in the ass. :P

krafty81
Posts: 209
Joined: Thu Jul 05, 2018 2:01 pm
Location: San Diego, CA

Re: 29 Y.O. with a $60,000 bonus

Post by krafty81 » Sat Jan 12, 2019 7:02 pm

Great advice here. Couple notes

- 22,000 dollars in a checking account is not doing you much good - carry about 10K and invest the rest of put it into something that gets interest.

- You are young, so money you invest now has the advantage of time and compounding. I would save, and shelter from taxes, all I could. If your business does not have a 401k, they should. Do they have a deferred comp program?

Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

Re: 29 Y.O. with a $60,000 bonus

Post by Username1 » Sat Jan 12, 2019 7:03 pm

MSUBobcat wrote:
Sat Jan 12, 2019 7:00 pm
Username1 wrote:
Sat Jan 12, 2019 6:59 pm
MSUBobcat wrote:
Sat Jan 12, 2019 6:55 pm
Username1 wrote:
Sat Jan 12, 2019 6:36 pm

veggivet wrote:
Sat Jan 12, 2019 3:53 pm
Congrats on the bonus! First thing I would do is take 10% of it and stash it in your Roth IRA for 2018...
YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
Well if you go over income limitations for a Roth with the $60k bonus and made a Roth contribution, then it's a PITA.
What's a PITA?
Pain in the ass. :P
-_-

Ok. Well, I looked at the income limitations for a Roth IRA and I did go over it. WTH do I do now? I already contributed $5,500 for 2018's tax year yet I made $150,000.

Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

Re: 29 Y.O. with a $60,000 bonus

Post by Username1 » Sat Jan 12, 2019 7:05 pm

krafty81 wrote:
Sat Jan 12, 2019 7:02 pm
Great advice here. Couple notes

- 22,000 dollars in a checking account is not doing you much good - carry about 10K and invest the rest of put it into something that gets interest.

- You are young, so money you invest now has the advantage of time and compounding. I would save, and shelter from taxes, all I could. If your business does not have a 401k, they should. Do they have a deferred comp program?
Yeah, I've been meaning to take money out of the checking account and put it in a savings account.

Yeah, that's one of the reasons I want to invest. No, there's no 401k since I'm technically the business owner.

Looks like the bonus is gonna be spent on 2018's taxes and 2019's Estimated Taxes. Then, I'll be in a good spot for 2019's tax year.

UpperNwGuy
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Joined: Sun Oct 08, 2017 7:16 pm

Re: 29 Y.O. with a $60,000 bonus

Post by UpperNwGuy » Sat Jan 12, 2019 7:06 pm

I would open a taxable investment account and invest most of it in Total Stock and Total Bond.

MrBobcat
Posts: 179
Joined: Fri Jan 11, 2019 5:19 pm

Re: 29 Y.O. with a $60,000 bonus

Post by MrBobcat » Sat Jan 12, 2019 7:07 pm

Username1 wrote:
Sat Jan 12, 2019 7:03 pm
MSUBobcat wrote:
Sat Jan 12, 2019 7:00 pm
Username1 wrote:
Sat Jan 12, 2019 6:59 pm
MSUBobcat wrote:
Sat Jan 12, 2019 6:55 pm
Username1 wrote:
Sat Jan 12, 2019 6:36 pm




YUP! That's on the to-do list now too. I usually contribute it at the end of the year but, hey, what's wrong with being pro-active?
Well if you go over income limitations for a Roth with the $60k bonus and made a Roth contribution, then it's a PITA.
What's a PITA?
Pain in the ass. :P
-_-

Ok. Well, I looked at the income limitations for a Roth IRA and I did go over it. WTH do I do now? I already contributed $5,500 for 2018's tax year yet I made $150,000.
Get a hold of your IRA custodian. Here's Vanguards procedure.

https://investor.vanguard.com/ira/excess-contribution

mortfree
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Re: 29 Y.O. with a $60,000 bonus

Post by mortfree » Sat Jan 12, 2019 9:04 pm

The bonus is for your departments performance.

But you are a business owner.

What income belongs to you and what income belongs to the business?

Maybe I’m just not following along since you went from 60k in your pocket to owing taxes, accidentally contributing to a Roth , etc.

I also like the part where you don’t want your employees (?) to know about this extra money

Annabel Lee
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Joined: Sat Nov 24, 2018 9:18 pm

Re: 29 Y.O. with a $60,000 bonus

Post by Annabel Lee » Sat Jan 12, 2019 10:37 pm

No 401k, technically the "business owner", able to withdraw some bonus money early - gotta be a card counting blackjack team in Vegas!

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whodidntante
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Re: 29 Y.O. with a $60,000 bonus

Post by whodidntante » Sat Jan 12, 2019 10:58 pm

Username1 wrote:
Sat Jan 12, 2019 6:36 pm

There's no 401k. The total bonus is $100,000. I already took $40,000 early to pay off the Prius. My salary is $90,000. I have $60,000 due to me.
That's quite a plot twist. I mean, you paid 40 grand for a Prius? :twisted:

stimulacra
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Re: 29 Y.O. with a $60,000 bonus

Post by stimulacra » Sat Jan 12, 2019 11:05 pm

whodidntante wrote:
Sat Jan 12, 2019 10:58 pm
Username1 wrote:
Sat Jan 12, 2019 6:36 pm

There's no 401k. The total bonus is $100,000. I already took $40,000 early to pay off the Prius. My salary is $90,000. I have $60,000 due to me.
That's quite a plot twist. I mean, you paid 40 grand for a Prius? :twisted:
I assumed he took 40k off the table to pay off the Prius and take care of taxes.

Topic Author
Username1
Posts: 30
Joined: Sat Oct 11, 2014 10:11 am

Re: 29 Y.O. with a $60,000 bonus

Post by Username1 » Sun Jan 13, 2019 7:49 am

The Prius was $16,000. It was a 2013 with 25,000 miles :)

As for my "business", I am compensated from the parent company through an LLC. The LLC has employees and incurs business expenses through its normal operations. The payroll and expenses are then passed on to the parent company.

So, I do not have a 401k since I'm the manager of the LLC. I do get a bonus from the parent company because I negotiated profit sharing with the parent company. When the department gets a sale, I get 10% of it, pre-taxes or expenses :-). The profit sharing check comes in once a year, hence why I refer to it as a "bonus." This year, I asked for $40,000 sooner since I wanted to inflate my 2018's tax return, to prepare my Debt to Income ratio in 2019 or 2020, so that I can buy a house, if I want to. (Also, I get a $7,500 payment every month to the LLC, which I refer to as "salary.")

Also, to explain how I got such a good contract, it's because the department's monthly revenue was $3,000/m when I came in, in the summer of 2016. It's now over $200,000/m right now :)

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