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.
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.