It’s the time of the month when I reveal my spending and investing habits for the past 30 days.
At the start of 2012, I pledged to invest 100 percent of my income into a combination of retirement accounts, real estate ventures and website-building activities. Will and I are living as a one-income household, spending his money and investing mine. Since I’m self-employed, it’s hard to predict exactly how much I’ll earn, but it’s reasonable to estimate that Will and I will bring in roughly the same amount this year, which means we’re investing 50 percent of our joint income.
You can read my January, February and March investing reports here.
So how did I do in April?
#1: I Maxed Out My Roth IRA!
I’m done, finished, finito with my 2012 Roth IRA contributions. Hooray! As you’ll recall, I fell just a few hundred dollars shy of maxing out my Roth by the end of February, and in March my budget got gobbled up by needing to pay for repairs on the 3-bedroom rental house that we bought for $21,000. I’ve been wanting to cross the Roth line-item off the list for more than two months, and I’m jazzed that I’m finally done!
#2: I Paid a Hefty, Hefty Tax Bill
Ah, the joys of self-employment: I get to write the government four checks a year.
My taxes aren’t withheld from my paycheck (because I don’t get a paycheck). Four times a year, I file “estimated quarterly taxes,” which consists of guessing how much I’ll owe and then sending the government a check for one-quarter of that.
After crunching the numbers, I discovered that every ounce of money-making effort I exerted during the month of April goes straight to the government. Gee, I hope they’re investing it soundly. 
Between taxes and capping off my Roth IRA, April’s income is spoken for.
Now Comes the Hard Part
Until now, this investing project has been simple. I make a hefty retirement contribution and continue working in the same manner in which I’ve always worked, without questioning the strategic growth or direction of my business.
This month, the hard part begins. If I’m serious about investing in my fledgling little businesses, then I need to carefully consider HOW my money is going to get spent. Should I concentrate on buying real estate or growing websites? Should I branch into podcasting and videos, or should I start upgrading my rental units? How will I have the time to grow these projects if I’m ALSO trading my time for money as a freelance writer?
I can’t just throw money at a business; I need to manage it carefully, making sure every penny is spent strategically. But that requires answering some tough questions.
This is an issue I didn’t have to deal with for the first four months of the year, when I was simply making retirement contributions and getting our rental house ready for move-in. I’ll face these questions head-on in May.
Perhaps this is an unexpected benefit, a blessing, of investing money in your business: it forces decision-making. It forces growth. It forces strategy.
In a strange way, perhaps investing forces you to hold yourself accountable. If I’m merely contributing my time, I might be tempted to sell myself short. But if I’m spending hard-earned money, I demand better results.
Thanks to Jimmy Benson for today’s photo.
Your last point is something I struggle with as well. With so many places to put my money, I’m having a hard time deciding where it should go.
But I guess it’s a good problem to have
@DollarD — It’s a wonderful problem to have.
Maxing out your IRA already is GREAT. Great job! Can’t say the same for my wife and I, but we’re working on it
@TB – Thank you! I know you and your wife will get there soon.
I love that you mention the way investing holds you accountable! We get very used to working for our money and not thinking about what we do with it because it all becomes so routine. But staying diligent and really focusing on how to make it grow, like you’ve been doing, is a much better way to prepare for a great financial future!
Can’t wait to find out how you decide to spend your May earnings. Good luck!
@Nell — I can’t wait to figure it out myself!
I’ll keep you posted. Thanks for commenting!
Paula, I really like the way you are going about this. You SHOULD look at yourself as Paula Inc. and invest stategically for the highest return on investment.
@BusyExec — Thank you! Haha — “Paula Inc.” — I like that!!
Hello,
Your post is fabulous! Kudos to you for being able to stick to the strategy and max out your IRA. I myself have currently am almost completely out of debt with the exception of a few student loans left.
I look forward to hearing your May outcome. This is my first time here and I will definitely be back frequently. I’ve got some planning to go do now that you’ve inspired me to try something new.
Cheers,
Felicia
@Felicia – Thanks for visiting the site, and congrats on being almost totally out of debt!
Paula, I’ve read for a while and I don’t know whether I missed this answer to my question in another post or if you haven’t addressed it. Since you are living off Will’s income and investing all of yours are you investing in him as well? You mention maxing out “your” Roth IRA but what about his? Is it an equal investment plan? I’m just curious since if his income is covering your expenses as well does he have anything left to invest on his own?
Thanks.
@Lee — Great question! The original idea was to contribute the first $10,000 of “my” income into each of our respective Roth IRAs — $5K mine and $5K his. However, we’ve become eager to invest aggressively, so we’ve decided that he’ll contribute $5K of his own money into his own Roth IRA. The rest of the money that we invest (real estate, websites) we consider to be “our” money and “our” joint venture projects.
I should note that Will and I consider all of our income to be “ours.” Our strategy of living on his money while investing mine is more of a budgeting strategy than anything else. When I’m buying sheetrock at Home Depot for a rental house, for example, I’ll simply put it on a business credit card, pay that card from my bank account, and – voila – I can make sure that everything I’m earning is getting spent on a real estate project, with minimal time in front of a spreadsheet. Plus, he makes a steady paycheck while my income fluctuates; budgeting to live on his income alone allows us to plan our personal spending in a very predictable way.
Thanks for responding! I wanted to understand the arrangement you two have so I thought I’d ask. And since you are not married (as far as I’ve read so far) I was curious how you made sure that both of your investments are protected in case of a split? I know that’s not exactly the sweetest question and no one wants to think the worst but I’m starting to get into a similar situation and would like to know how you and Will have made your joint investments and yet protect yourself.
@Lee — Just conceptualize that you’re investing with a business partner; any regular Joe Schmo or John Doe business partner. The fact that you happen to be in a relationship is irrelevant. Structure your business agreements like business partners, with interests that are fair based on the level of time and money each person has brought to the table. I highly recommend the Nolo Guide to Forming LLCs, which is the single best how-to-create-an-LLC-agreement book that I’ve read. It walks you through planning for worst-case-scenario events.
Your post is very much interesting and Awesome! thanks for sharing it.
Why not pay down financing thus leading to an increase in cash flow later on OR creating a retirement account through the LLCs that will have a higher contribution limit then the measly 5K you get from an IRA?
@Evan — Because I’m more interested in investing than de-leveraging (question #1), and because I’m more interested in investing in my businesses rather than in retirement accounts (question #2).