Is it possible to save more money than you earn? Depending on how you want to look at the math, it is. The key to the math is to look at your earnings the same way your company does: total cost of payroll.
It should come as no surprise that the cost of an employee is more than the money you earn. The company likely has to pay for benefits such as medical insurance, workers compensation, disability costs, retirement costs and many other expenses.
Before you even start saving on your own, consider fully what your company can offer you in benefits for savings. The most advantageous kind of savings a company can offer you is what is called deferred compensation. This is money that you or the employer can set aside for future consumption.
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We are approaching another tax season. If you are an investor with taxable accounts, there is additional work you need to do on your tax return. From my point of view, I like filing out my tax return because I’m a numbers kind of person. Even if you dread filing out your return, there are worse things I could think of you could be doing with your time: like going to work! Considering that investors pay less taxes than workers, I think that it’s well worth the time to make money with investments even if the tax return if more complicated.
Today, I’m going to cover a few tips to make sure you don’t forget the important things as well as red flags you should look out for that could cause you to pay more than your should.
A new year brings a new tax return! To get a head start on this I’m going to talk about the filing of K-1 forms. If you don’t invest in MLPs, this will also give you an idea of how these are accounted for on your tax return.
One of the main reasons why many people don’t invest in Master Limited Partnerships (MLP) is due to the complexity of filing taxes. It is more complicated than simple corporate common stock because when you own ‘units’ in an MLP you actually are a partner in the company. As a partner, you need to account for each component of the business in your personal taxes including gains/losses, dividends/interest and company deductions.
While it is more complicated, it is not overly burdensome. In this article I will show you what your getting yourself in when you file your K-1 on your income taxes using documentation from a 2010 tax filing. This is meant as a overview of the process, not necessarily an exact how to guide for every type of filing and investment.
If you have investments that earn income such as savings accounts, dividend stocks, bonds, and investment funds you will never pay more in taxes than what you earn at your job. In many cases you will pay less. This means that you get to keep more of what you earn. Sometimes, it is useful to compare investments based upon how much you actually keep after taxes.
Investments are taxed in different ways depending on what type it is. You might be surprised how much more you get to keep with your investments versus your income.
When it comes to investing, the primary considerations to determine which ones you pick will come down to the quality and attractiveness of them based upon their fundamentals. If you pick the right investments and buy them at attractive prices, you will make money. And then pay taxes. In the grand scheme of things, this is a good problem to have because it demonstrates that your investment strategy is working.
In this article, I talk about what you need to know to compare income investments on their tax equivalent investment yield, which is a calculated yield for comparison to a target investment. This investment yield will help you compare income investments because it takes into account taxes.
We answer the question: What return would a money market fund have to earn to equal the return of other investments after considering taxes?