Personal Finance

There are different levels of finance, some are as follows:

Financial Dependance-you depend on an employer for income, this can be a minimum wage job or CEO of a company or a famous athlete or movie star; if you rely on someone else for your livelihood then you fall into this category. The only thing below this level would be if your income doesn't support your lifestyle, again this can apply to a minimum wage employee whose full time job won't cover rent or a movie star who spends more than they make. Below is a clip humorously showing the perils of relying on employers for income.

Financial Indpendance- Here, you control enough of your income that you could cover your normal lifestyle without outside employment. This could be a part time business, side gig, etc. It's not necessarily luxury, but it covers all bills, basic expenses like food and gasoline. This could be a rental property that you manage.

Financial Freedom-This is similar to Independance, the key difference is it's not from labor; it's your money working for you. This could be rental property if you make a profit after hiring a property manager or dividends from a stock you own. Once you have this, your time is your own; you may choose to continue working in the job you've had or you may want to work on a new project. If you have financial freedom, you may work towards wealth; as your necessities are covered by your assets and all earnings are available to put towards your goals (whether thats purely enjoyment or growing wealth.)

Tax benefits-Retirement Savings Contributions Credit (Savers Credit) if you earn less than $36,500 you can get a benefit for even contributing to a Roth IRA. If you earn $21k and contribute $7k to a Roth IRA, you'll save about $650 in taxes and owe nothing on your federal return; you may even get an EITC and get a refund! At the higher level it's only 10% of the investment, but that's still $200 off what you contribute; a bit less than 1/4 of the taxes on that money.

For higher earnings, the higher tax rates might see great savings in 401k contributions which are tax deferred (rather than paying taxes now on money invested inside a Roth IRA) and combined with employer contributions that are also tax free can be a massive windfall. Contributing $23,000 with an income of $700k would yield savings of $8500, if making $70k the tax savings are a modest (but significant) $3585. If employer matching is available (usually 3-6% of income) it gets more dramatic.

For the college student, not only can you get PELL grants and bright futures college scholarships; but you can also get the AOTC tax credit that can put up to $1000 cash in your pocket.

Someone earning $44,000 could contribute $23,000 to a 401k and $7k to a Roth IRA and owe no student loan payments (income based repayment, as of March 2025) and no Federal Income taxes (though eventually they'd pay on money they take out of the 401k.) This can get even better if their company matches contributions. They might be able to earn even more if they can afford a house as mortgage interest is deductible, as is depreciation; as well as up to $2500 in student loan interest. They could also have an employer match of $11,625, you'd have $3557 taken out of your base salary and the employer would pay the same amount (both toward social security and medicare) and most money would go toward retirement planning with about $10,300 left; but this just illustrates things that can be done to lead to tax savings.

If self employed, you can have an SEP IRA or Solo 401k; the total combined contribution limit is $69k and is capped at 20-25% of your income (20% after tax, 25% before self employment tax; ask an accountant to help you that's just a guideline.)

real estate tax benefit: If you lived for 2 years in a house and sell it, up to $250k in profit can be tax free as long as it was your primary residence for 2 of the last 5 years and it resets when you sell. The cheaper your input, the more profit and better shot at $250k tax free you get. Beyond that, there's the 1031 tax deferred exchange; but you won't have that in cash unless you can refinance it and pull out 80% of your equity. My idea, let's say a group of Amish people (really, anyone who can work as a team to build houses fast) buy a lot just outside of a city which is zoned allowing subdivision (turning 1 lot into many normal size lots) they could build the houses as a team and the only labor cost would be electric/plumbing, their cost would be materials, land, permits, taxes and you have to make sure the utilities companies will bring water/sewage/electricity to them if not already there (sometimes an agreed upon amount structured over X years.) In 2 years, this team all has $250k in tax free gains each and can build some serious wealth. Imagine if it were a team of 100 people, sure they'd have to stagger the sales (same rate as which they built) but they could even refer give a long term lease and sell to a corporate landlord who wants to trade cash for income. Of course, all you have to do is find a property that will be worth $250k in 2 years and buy it; you could theoretically make $125k/yr doing that alone (double that if married.)

More coming soon.