Matt and his fiance earn $7,500 per month combined. They save more than half of their income. He’d like to take a different job that will decrease his income by $2,000 per month, but improve his quality of life. Should he?
Suja wants to take out a loan for business growth. What red flags should she watch for?
Anonymous and her husband are thinking about buying a half-million-dollar home, purchasing a second car, and having a baby. They’ve saved an emergency fund and a 20 percent downpayment. Are they ready?
Trayci wants to quit her 9-to-5 and start working as a 1099 self-employed lifestyle. How should she manage this transition?
Daria is curious about the economics of a podcast. What do the income and expenses look like?
Jared wants to retire early and then sell off his rental properties, but he’s worried about the depreciation recapture tax rate. How should he plan?
Ali wants to set up a long-term giving plan, but most of the advice out there is geared towards wealthy donors. How should middle-class workers set up their charitable giving?
Financial planner Sophia Bera (hailed by Investment News as one of the Top 40 Under 40) joins me on today’s episode to answer these seven questions.
Here are the details:
Matt asks (at 1:54):
I make $55,000/year, and I get $2,000/month of non-taxable income for mileage of traveling and food expenses. But I’m in a hotel 4 nights a week. My fiance makes $50,000/year. Together, we bring in around $7,500/month. We’re able to save $4,000 of that, along with 15 percent into each of our 401k’s.
Work/life balance is a bit skewed since I’m in a hotel 4 nights a week. If I were to leave and get another job, I’d only have the salary I’m making now ($50,000/year) without the extra expenses. I’ve only been out of school for a year and don’t have much experience.
My question is: is the pay cut and work/life balance of being home at night worth around a $30,000 decrease in pay?
Ali asks (at 8:34):
I’m tired of giving a little bit here-and-there and want to develop a long-term giving plan. Someday, I’d like to have a fund or vehicle that can sustainably contribute money to causes that I care about.
However, most of the resources that I’ve come across are for people with substantial wealth. That’s not me, and probably won’t be for another few years.
I’ve done a deep-dive into my values and have come up with two organizations I feel passionate about. There’s one organization I’d like to donate to and I’m interested in starting a scholarship. I’m already an active community member and I volunteer. Now I’d like some guidance on what I can do with my money. Any suggestions?
Suja asks (at 15:57):
This year I’m growing my real estate hospitality business. I have a few options for handling capital expenditures.
I have a HELOC, which is quite substantial, but at a six percent interest rate.
I also have the option of opening credit cards with a zero percent APR for 12 – 15 months. So I pay less interest, but my credit utilization rate is higher, which decreases my credit score.
I also want to consider how each option will affect my ability to get loans (a small business loan or solar loan for one of my properties). The main issue is probably my debt-to-income ratio, because I’m in a growth phase and I have a substantial amount of mortgage payments that I’m making.
Which option do you think is better, and what should I do about such a high debt-to-income ratio?
Anonymous asks (at 26:36):
My husband and I are in our 30s, and we both have 9-5 jobs in the greater DC area. We rent a small apartment, have paid off all of our debt, maxed out our 401k’s for multiple years, and have finally saved up enough for a 20 percent downpayment on a house. We also have a six-month emergency fund.
While we’re in good shape now, we have a lot of new costs coming up. We want to have kids soon (daycare is $20,000 per child), and we may need a second car as the houses we’re looking at are located on the outskirts of the city, away from public transportation.
We’re wondering: should we pay $100,000-$150,000 more for a home that’s closer to our jobs and public transportation, even if it’s smaller? Our employers also reimburse public transportation costs – they won’t reimburse gas and tolls.
Outside of this decision, our plan is to continue maxing out our 401ks, put 20 percent down on the house, keep the six-month emergency fund, and buy a second car with cash (unless we find a zero percent APY deal, which we’d pay off before the interest rises). But where should we direct our monthly savings now that we’re no longer saving up for a downpayment?
Trayci asks (at 38:15):
I am starting my journey into investing and I’d like to begin by becoming a real estate agent as I figure it’ll make purchasing properties easier.
However, I like my current job – I make good money and I have benefits. How do you recommend that I transition into the real estate world?
I know I would go from being a W2 employee to a 1099 contractor, which means I’d lose my benefits and I’d get paid on commission. But … I still have bills to pay. Should I go part-time at my day job, and then work on real estate from 11am – 7pm? Or go full-time real estate and get a job as a server in the evening?
Jared asks (at 46:25):
I’ve been working toward FI for the past decade, and like you, a fraction of my strategy has been real estate investing. I’m concerned that real estate isn’t as great for early retirees. The IRS rules make me depreciate about $10,000 of my building value each year. Today, that gives me a sweet tax deduction, because I’m in the 24 percent tax bracket. Someday, I might retire early, at which time I’ll drop to the 12 percent tax bracket. Someday even further in the future, I’ll sell my real estate, and the IRS will take back the depreciation reduction, with depreciation recapture. I’ve read that recaptured depreciation is treated like ordinary income, up to a 25 percent break.
Is that an argument for FIRE people to not own real estate when they quit their job?
Daria asks (at 57:33):
How are you able to make money through your podcast? Is it just advertising? Do you reach out to brands yourself? What expenses do you incur?
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