How Income Taxes Work and My $0 Tax Bill

Taxes seem really complicated. So complicated that a reader asked me to write about how they work so here goes.

No, not all CPA’s are tax experts. Though I had to have an understanding of how taxes worked in order to pass the exam, my work has never involved income taxes. But, we’ve always done our own taxes, even when they were complicated by business sales and rental property.

Even if you hire someone to do your taxes, no one cares about your money as much as you do, so you need to be at least a bit knowledgeable about them.

I use Turbotax. I buy it at Costco in late December/early January when it goes on coupon special. I like answering all of their questions and making sure I’m getting it all right. The Federal e-filing is free and the process is super straight forward. There is an extra $20 charge for e-filing the state return but I still do it because it’s just so easy.

I use last year’s software to get an idea how our current year will pan out. I make a copy of last year’s return and replace the numbers with estimates for the current year. With Obamacare subsidies and the 15% bracket limits, earning an additional $1 of income can cost thousands in additional taxes and premium credit paybacks. So being able to play with my current year’s numbers is important. I know last year’s software won’t be completely accurate but it will be close.

Do you really know how much you are paying in federal income taxes? Continue reading “How Income Taxes Work and My $0 Tax Bill”

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You CAN Break the “Rules” and Still Get Here

Being retired early is like a really good chocolate cake. Once you’ve experienced it, you want everyone you care about to enjoy it too.

I’ve been writing so much about budgets lately, my readers are probably saying “enough!”. But I truly believe I reached financial independence because I budgeted and tracked my net worth. When people want to get their financial act together, I suggest they start with a budget. It’s one of my rules.

But you CAN successfully reach financial independence in spite of breaking almost all of the “rules” of personal finance.

I’ve spent a ton of time reading FI/RE (Financial Independence/Retire Early) blogs since I Googled “Can I Retire Yet?” after a particularly trying day at work. There are hundreds of these blogs but most of them were saying this:

Get or stay out of debt
Live on less than you make
Invest the difference

BAM! – simple right? There are a bunch of ways to do this and each of the bloggers (now including me!) are trying to help you by sharing their path to FI/RE with you.

There are fewer paths than you would think: Continue reading “You CAN Break the “Rules” and Still Get Here”

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It’s Budget Time!

Queue the Fixer Upper “It’s Demo Day” excitement because it’s budget time! Y’all know I spend New Year’s Day working on my budget and this year is no exception. Vanilla latte, Rose Bowl Parade and my budget . . . so cozy.

You know I love my budget but if you don’t love the idea of a budget, skip it. Yes, gasp! you can skip a budget. Decide what percentage of your income you are going to save and set up automated transfers to get that money out of your checking account. Invest it and live on what is in your checking account. Read my Budgeting Doesn’t Work For Me post for more help.

If you’re still reading, YAY! let’s budget! But what does budget time look like? Sorry but it’s even less exciting than you probably think. It takes about an hour, maybe an hour and a half. 99% of my budget this year will be exactly the same as it was for 2017.

Exactly the same you ask? Shouldn’t I increase each budget by inflation or some amount? Nope, I shouldn’t and I don’t. My “spending” category is my largest one and includes groceries, going out to dinner, buying clothes, etc. It’s pretty much anything other than utilities, vehicle/boat expenses, gifts and vacations. And my “spending” budget is the exact same amount as it was in 2006. Yep 12 years ago. Continue reading “It’s Budget Time!”

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You Only Get One

This time of year, I like to reflect on my life. I think about my good fortune and share some of it with others through our donations. I think about what I’d like to add to or subtract from my life. And though I don’t like to make resolutions, I do like to make plans.

Because we only get this one beautiful life and I don’t want to waste it. Some of us will get many years and some of us will get far too few. But no matter the number of years we receive in this, our one beautiful life, we all want to thrive.

Thriving for me probably won’t look like thriving for you–we’ll each have our own definition or vision of what thriving looks like.

I have several visions that help define thrive for me. Continue reading “You Only Get One”

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Do You Make New Year’s Resolutions?

I’m kind of jealous of people who can make a New Year’s resolution and stick with it. Resolutions don’t work for me. In the past, my resolutions have typically been about starting an exercise program or losing weight. By the end of January, little progress was made and little thought was being given to whatever resolution I had set. So now I don’t bother to make resolutions.

Want to know the best resolution ever made?  Mr. Ms. Liz walked into his office one January 2nd over 30 years ago and his colleague and good friend asked if he had made any resolutions. He replied that he was going to “find himself a woman” that year. I walked in that office 24 days later.  Resolution achieved!

So I love a good “resolution” though I no longer make them myself. I do use the excuse of the New Year to set my financial goals. I guess I could call that a resolution right? As you learned last week, I finalize my full year budget on New Year’s Day. Continue reading “Do You Make New Year’s Resolutions?”

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I Started My 2018 Budget . . . Have You?

It’s become a joke among my friends that I spend New Years Day doing my budget.  I usually start working on it a few weeks earlier but I get it finished up while watching the Rose Bowl Parade.

I guess it’s one of my holiday traditions–vanilla latte, parade and budgeting.  Sounds cozy doesn’t it?

I budget my net worth so the earliest I can finish up my budget is New Years Day.  Until I know my starting investment and retirement balances, I can’t budget my investment earnings.

Budgeting one month at a time works for lots of people but I prefer to budget for the full year.

Because I have some ugly months. Continue reading “I Started My 2018 Budget . . . Have You?”

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I’ve Stopped Wishing My Life Away

My Dad used to tell me not to wish my life away.  I was always looking forward to what was coming, what would make my life better.

When I was 7 I couldn’t wait to be 10–double digits!
When I was 10 I couldn’t wait to be a teenager.
When I was a teenager, I couldn’t wait to drive.
When I could drive, I couldn’t wait to graduate.
When I graduated I couldn’t wait to go to college.
When I went to college I couldn’t wait to graduate.
When I graduated, I couldn’t wait to hear if I passed the CPA exam.
When I passed the CPA exam, I couldn’t wait to start my real job.
When I started my real job, I couldn’t wait for time off.
And for the last 22 years, I couldn’t wait for summer.
While I also couldn’t wait to retire. Continue reading “I’ve Stopped Wishing My Life Away”

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Are You Protected?

I’ve had a few questions lately about insurance.  Particularly about Umbrella and Long-term Care policies.  I’ve had this post in draft mode for about six months so I thought I’d dust it off and put it out there for y’all.  Hopefully it’s a quick scan if you think you’re in good shape or a careful read if there are some things you need to look after.

Insurance is best used to protect against low probability, high cost risks.

Low probability means the bad thing you are protecting yourself against doesn’t happen often.  If it did happen often, we couldn’t afford the premiums to protect against it.

High risk means the bad thing you are protecting yourself against would be financially devastating for you.  What is financially devastating for each of us is different and could change over time.

And our need for insurance changes over time.  As we age and add dependents, property or just wealth, our needs can change.  So what insurance do we need as we get older? Continue reading “Are You Protected?”

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Who Are You–Really?

I’ve found one of the real benefits of retirement is being able to be 100% me, all the time.

I remember my surprise 30th birthday party like it was yesterday. Partially because it was so damn stressful.

In the same house (ours that thankfully my Mom had cleaned) were my work friends who knew Liz version 1.0, my college friend who had become very religious who knew Liz version 2.0, my party at the lake friends who knew Liz version 3.0, my family who knew Liz version 4.0 and Mr. Ms. Liz who knew them all.

I felt a bit like Sybil (now I’m really dating myself) with all of her personalities in the same room. Though each personality wasn’t completely different from the others, they were different sides of me.

As I got older, my non-working personalities merged and I landed in a job and in a company that allowed me to be, well more me. But there were still a few work personalities. The Liz that my boss knew was a bit different from the Liz that my staff knew and both were quite different from the Liz that my Boards of Directors knew.

At times, these versions of me didn’t feel authentic.  Because you can’t tell a staff member to shut up and get to work and you can’t tell a Board Member he’s a psychotic self serving ass. Well, you can’t say those things and keep your job anyway. So there was still a bit of tongue biting going on. Continue reading “Who Are You–Really?”

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Speed and Attitude

We had a little adventure in the desert last Tuesday.  Really no adventure is little in the desert with all those cactus and other pricklies.

We were riding our mountain bikes and got stuck on a trail with tire sucking gravel and ended up walking our bikes.  Mr. Ms. Liz saw what I now think was a game trail off to the left and thought it would be a great idea to follow that.  The goal being to find a trail better suited for our bikes.

Half an hour later, he greeted me with a “Ta Da” because we had, finally, found a better trail.  But getting there sucked.  I was bleeding from a scratch in my leg, my shoulder was wonky, I was NOT happy.

Mr. loves these adventures, I do not.  Yet I continue to follow him . . .

Whilst we were on this adventure, the constant refrain that was running through my head was:

What can I control?  Speed and Attitude. Continue reading “Speed and Attitude”

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