Tag: 401k

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W2 Bonus Season! Big Checks Are Always Nice!

Part of my overall compensation is my yearly bonus! I am extremely fortunate to earn a bonus each year for the company I work for. I am grateful of all the opportunities they have provided me and the compensation. I have busted my butt to get here, but grateful nonetheless.

My bonus has changed a bit over the years. There are two main things that have changed in regards to my bonus.

First, my bonus is now based off performance. Previously, everyone got the same bonus multiplier. Now, the higher rating you get for performance, the higher the multiplier. This means if you are a bottom performer (which I don’t plan on being) that you can get half or even 0% bonus.

Second, as I have continued to get promotions, my percentage bonus target of salary has also increased. Early on this percentage was small, around 18%, but now my target percentage is at 28% and continuing to grow if I get another promotion.

Breaking Out My Bonus

I will receive my bonus check this Thursday. My bonus came out to be $46,845. Yes, I know for a lot of people that could be a years worth of salary. Again, I have busted my butt at work to get where I am at and I am grateful for having the opportunity to earn this amount.

Overall, this paycheck comes out to $53,390. The reason for this is my normal two week pay is added on top of the bonus.

Of the $53,390, here is a breakdown of where the money is going:

  • Taxes: $10,901
  • Social Security: $3,307
  • Medicare: $773
  • 401k: $3,154 (this will put me at the max of $19,500 for the year!)
  • Net Pay: $35,085

I didn’t detail out some of the line item insurance stuff, but there is the breakout of my bonus!

With all the market volatility, I am going to look at putting a decent chunk into stocks and then the rest will help me float a the hiccup of the impact to my Airbnb business. Click this hyperlink to read more details of how everything that has been going on is impacting my Airbnb business.

Key Takeaways:

  • When negotiating salary, don’t forget that you can negotiate your bonus!
  • I like to frontload my 401k. This will bring much larger paychecks later on in the year. I am excited to say my 401k is now maxed out!
  • Maxing out your tax advantaged accounts is a great way to reduce my overall Adjusted Gross Income (AGI) and helps me pay less in taxes. This is critical because of the amount of money I earn. 
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How I Invest Almost 100% Of My Paycheck – February 9th Update

Time for an update on how I invest almost 100% of my paycheck every two weeks. I find it more and more fun to continue watching progress towards my financial independence. A big component of this is investing almost 100% of my paycheck. When you can automate many of your investments, you allow yourself to sit back and watch cool things happen.
 
Where My February 6th Paycheck Went?
Here is the breakdown of where my paycheck went for investments:
  • $1,000 to my HSA
  • $1,200 to VTSAX in my Vanguard account
  • $3,269 to my 401k
I am continuing to hold strong at the beginning of the year with very small paychecks coming through. It is funny when you go from a paycheck being a little over $4k at the end of the year to $1,200 at the beginning. The main driver behind this is the heavy investments in my tax advantaged 401k and HSA accounts.
 
For these specific accounts, I never see the money hit my bank account. And for me, this is a great thing. For many, when you see money in your bank account you will think to spend it. For me, seeing money in my bank account makes me cringe. I cringe mainly because if money is sitting in my bank account, then it isn’t making money for me! This is my first core principle: Your money should make money for you. 
 
Why I Contribute To MY 401k
I highly recommend for everyone to take advantage of some key accounts if you access to them. A 401k is one of the accounts I try to take full advantage of. To read more on what the advantages of a 401k are, click the link above. 
 
There are two main reasons I invest in my 401k. First, it is a tax advantaged account that allows me to save $6,825. My last bit of salary is in the 35% tax bracket, which is why the amount of tax savings is so high for me. It is really a no brainer for me to max out this account each year.
 
Second, my employer offers a 6% match on my 401k contributions! That is right. Free money. Who can say no to free money?! I know I definitely can’t. This year, I will receive a match of $10,200 from my employer. I could not be more grateful for the match opportunity my employer provides.
 
Three more paychecks to go before my 401k will be maxed out! I am excited to start seeing larger paychecks coming into my account soon.
 
Key Takeaways:
  • Automating your investments allows you to not see the money hit your bank account. It is fun to sit back and watch your investment accounts grow!
  • Living paycheck to paycheck is an incredibly powerful. No matter how much you make.
  • Don’t miss out on your employer’s 401k match if they offer it! If you say no to the match, you are throwing away free money!