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Ron Caruthers Profile picture
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16 Dec, 6 tweets, 2 min read
1. How to know when it's time to quit your day job and go full time on your side hustle.

My thoughts.

I got asked this yesterday, and here is the formula I've used with clients that seems to work.
2. First, I recommend that you make AT LEAST 2x your day job income before even THINKING about quitting.

Yes, you can do it on less, but remember: right now, you're getting a steady check while you make side money, so it takes a lot of pressure off of you.

That will change.
3. Also, you are probably going to have to pay more in taxes, and cover your health insurance, so you'll NEED to make more money to take care of those things.

That's why I recommend 2 times your day job income.

Also, unless you work for a start up, you check has been steady.
4. That changes if your sole income is from business because business gets messy sometimes, and businesses can be cyclical.

Both seasonal and over a period of years.

Tons of mortgage brokers are getting rich right now, but when interest rates rise, their business will dry up.
5. Also, I would earn that income for a set period of time like 3-9 months and live off of if ONLY while banking your dayjob check.

This will let you make sure the income keeps coming in, allow you to stash some cash for when business slows, AND let you get used to paying bills
6. from just THAT money.

Also pay attention to any pension milestones or retirement or bonus vesting that may be near that you don't want to miss out on.

We don't want to leave anything on the table.

So, anyway, that's my $.02 on when AND how to pull the plug on your day job.

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More from @roncaruthers

Ron Caruthers Profile picture
16 Dec
1. Your 401k sucks beyond the match because you are postponing paying taxes on it AND on EVERYTHING THAT IT EARNS.

And, you're postponing the calculation of the tax.

So, what should you do instead?

Here are 3 solid options:
2. First, a Roth IRA is a solid choice.

With a Roth, you do not get a current year tax deduction, BUT...

...your money grows tax -free AND after 59 1/2, you can withdraw it tax-free.

Also, you can access what you contributed without penalty or tax at anytime.
3. You can also pull $10,000 from a Roth IRA without tax or penalty for the purchase of your first home, as long as you've had the account for at least 5 years.

And the definition of 'first home' simply means you have not owned a home in 2 years.
Read 17 tweets
Ron Caruthers Profile picture
9 Dec
1. Will you get audited if you employ tax savings strategies, like @WCarlRussell is concerned about.

It's a pretty rational concern.

In fact, the IRS COUNTS on enough people having this fear so that they do NOT try anything.

However, how real is it?
2. First off, your odds of getting audited statistically DO climb if you add self employment income OR losses.

But, they climb from a .8% chance each year to a 1.2-1.4% chance each year.

In other words, about 8 people out of 1,000 get audited, vs 12-14 that own businesses.
3. So, the odds are WAY in your favor that nothing ever happens.

And there are things you can do like filing at the last minute that seem to improve those odds in your favor.

However, the SECOND point is even more important than the first:
Read 8 tweets
Ron Caruthers Profile picture
8 Dec
1. How to write off your next mattress or hot tub. (yes, hot tub)

First off, this thread is for business owners.

BUT, you should read this even if you do NOT have a business..so you have some idea of what I mean when I say that the tax laws were all written for business owners.
2. With this strategy, here is just SOME of what you can legally deduct:

-air conditioning

-a mattress (those suckers are EXPENSIVE!)

-hearing aids

-a pool

-a hot tub

-vitamins

-weight loss programs,

-etc.

Now, HOW do you do that?

Read on:
3. What you need to set up is a Medical Reimbursement Plan, also known as a 105(b) plan.

It is NOT a typical insurance plan.

It is a legal fringe benefit plan that permits you to claim FULL deductions for reimbursing your employees (including spouse and family) ...
Read 36 tweets
Ron Caruthers Profile picture
5 Dec
1. Have you refinanced your mortgage yet?

Rates are still as low or lower than I've ever seen them.

Recent example: one friend of mine's parents refied their mortgage from 4.5% down to 2.5%.

The payment went from $1,700 a month to $1,300 a month.
2. So even though they added 4 years because their mortgage had 26 years left and they refinanced to a 30 year,

if you run the math, they STILL are saving $61,400.

Even AFTER adding 4 more years to the mortgage.

OR....
3. If they invest that difference of $400 a month at 7% (easily done over a long term with even index funds, though there are better places IMHO)

They will have...

....wait for it.

$487,988.

NOT a typo.

Or.....
Read 11 tweets
Ron Caruthers Profile picture
3 Dec
1. Since it is year end, now is the time to check the beneficiaries of your stuff....life insurance, brokerage accounts, trusts....things like that.

Making sure your ex-wife/husband is NOT the beneficiary of your life insurance is step number one!
2. I'm not a lawyer, and I don't play one on TV, so you should seek competent legal advice and not listen to really anything else I say in this thread, etc, etc

BUT, if you choose to stick around, here are some things to watch out for.

You know, from your non-lawyer friend Ron.
3. So first off is to make sure who you want is correctly listed.

And usually that should NOT be your minor children.

In most states, a minor child can only inherit between $5,000 and $10,000 directly without involvement from the court.
Read 11 tweets
Ron Caruthers Profile picture
29 Oct
1. Little known IRS relief just for the asking!

If you're new in business, it is really, REALLY easy to get behind on taxes.

However, there is a little known rule called 'first time abatement' where they will waive the penalities IF you ask:

No reason required!
2. Here is how it works:

If you get behind on filing your taxes, they can assess you up to 25% in additional penalties

AND ANOTHER 25% for failing to PAY the tax.

However, you can request a 'First Time Abatement' without giving a reason as long as:
3. This can apply to Failure to File, Failure to Pay AND Failure to Deposit (if you have employees).

You can request this simply by making a phone call to the IRS and requesting First Time Abatement, and it will most likely be granted if you meet the following criteria:
Read 5 tweets

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