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Now $22,082 Cash-Less! ;)

by J. Money on Tuesday, March 13, 2012

retire beach

But for a much MUCH better cause this time, haha… our retirement ;) Even though yesterday’s tax fail was a major hurt in the wallet, it could have been a TON worse had we not invested anything into our SEP IRA as well. Every dollar that goes into that bad boy, is one less dollar that can be taxed due to the way it’s set up (kinda like a Traditional IRA, except for business owners). Only the max amount we can put in a SEP is not set at a flat $5,000 a year – it’s based on the biz’s profit.

Soooo, after my accountant ran all the numbers, and came up with the magic amount I can invest into our SEP this year (or, last year, I should say, tax-wise) it was my job to go in and INVEST IT ALL to make sure I don’t have to pay even *more* taxes from everything. Like a good $8,000 more!! On top of the $6,000+ I already had dropped yesterday. Pretty nasty stuff… but also avoidable as long as I maxed out my SEP allowance ;) I did this last year too and saved over $2,000 – it was awesome!

And that magical number came out to $22,082 this year. Which is now sitting happily in my investments. I pretty much get forced to save for retirement, and then the government “let’s me keep” that additional $8,000 that would have normally gone to them instead. Seems like a fair deal to me ;)

So that’s where and why we came up with the $22k number. NOW the question, of course, become *WHAT* to invest it in? And if you recall my previous post on investing in stocks you love a couple months back, part of my decision had already been made for me.

Here’s where all the $22,000 went:

  • TJ Maxx (TJX) — $2,000 — My go-to discount store for everything!
  • Target (TGT) — $2,000 — My go-to chain store (I can’t stand Walmart anymore…)
  • Starbucks (SBUX) — $2,000 — The one place I never feel bad spending money! :)
  • Panera Bread (PNRA) — $2,000 — The one place I’m always the most comfortable at.
  • Amazon.com (AMZN) — $2,000 — The only online store I use (well, like 97 .8% of the time).
  • Bankrate, Inc. (RATE) — $1,000 –  This one’s a personal test just to see what happens, but these guys pretty much OWN the online personal finance world when it comes to rates, credit cards, calculators, and even some of your favorite personal finance blogs (Bargaineering being one of them). I don’t know if it’s a smart investment choice, per se, but I do like the idea of supporting our own niche here. So consider this one an emotional pick :)
  • QuinStreet, Inc. (QNST) — $500 — Another personal finance behemoth, and the competitor to Bankrate. These guys also own some pretty popular blogs like Get Rich Slowly, Five Cent Nickel, and more recently Consumerism Commentary – all sites I totally respect.  Maybe one day Budgets Are Sexy will be among them? ;) (You’ll see why I’m only investing $500 into it soon)
  • SandRidge Permian Trust Common (PER) — $4,500 — A company one of my really smart research friends suggests (as with Motley Fool), and an area I haven’t concentrated in at all – oil.
  • First Potomac Realty Trust Comm (FPO) — $6,000 — Another recommendation from my friend, this time getting into more real estate stuff.

So half into stocks I really like and/or use almost daily, and another half into more strategic picks. That a good friend of mine has suggested based on his own professional research (he does it for a living).  Still pretty risky moves overall considering we’re talking about individual stocks here (I def. don’t recommend you following suit), but for me it works.  I like to keep a majority of my investments much more safe and sound with my Traditional IRA accounts (which has about $180,000 in them), and then “play” more with the other accounts. It keeps me entertained.

And I’ll say it’s also not the smartest thing to do financially, if you haven’t already guessed ;)  But as you all know by now, I work on 50% emotions and 50% “by the book.” And so far it’s worked out just fine. It’s actually funny, when I ran the idea of buying both RATE and QNST up there by my friend, he said (and I quote):

“Neither one jumps out at me, and frankly I would never buy either one.  If you had a gun to my head I would rather hold RATE

So obviously we’re going with more of the “fun” and “gut feeling” type here, haha… but again, it all goes back to personal preference. And with that we wrap up a big week of xfering money all over the place – some for the good, and others for the bad.  But it’s not many times in the year these major things come up, so when they do I like to embrace them and have a little fun with it all… the best way to stay engaged is to keep things interesting, right?

I’m hesitant to ask what you think about all this, haha…, but of course I’m gonna do it anyways. Think I’ve gone bat crazy?  Where would you have invested the $22,000 instead?  (Or would you have paid the additional $8k in taxes and saved your stash of cash?) Shoot your answers  below, and we’ll have a nice little debate on our hands… the good part about this stuff is that you can always change directions at any time :)

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PS: For a more interesting read on finance blogs going up for sale, check out Dough Roller’s post on it, pretty fascinating stuff! –> List of Personal Finance Blogs that have Sold for $1 Million or More

PPS: All opinions, stock choices, etc, are all of my own – PLEASE do not take these as recommendations or advice, I am far from being a professional! ;)

(Photo by shazwan)


{ 26 comments… read them below or add one }

1 Frugal Fries March 13, 2012 at 7:49 am

I think you took the best approach–you get to have your pie and eat it too!

As for your investment choices, well…who am I to judge! Plus, how sexy would budgeting be if you didn’t get to put some of your money into fun stocks which represent your own consumer habits and preferences?

Not sexy at all, obviously.

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2 Michelle March 13, 2012 at 8:20 am

Very exciting! We have SEP at my work and I’m enrolled in that also.

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3 Brian March 13, 2012 at 8:42 am

Oh that silly Uncle Sam rewarding people for saving!

As far as investment choices I would have gone in a slightly different direction. But everyone one has their own strategy and you do have a lot invested in other accounts.

Here’s to your continued success!

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4 Andrew March 13, 2012 at 9:00 am

I think it’s awesome that, instead of telling others what to invest in, you’re telling others what you’ve invested in.

Also, I like your idea of having a lot of money in safe investments and a little in fun investments to keep you entertained. I’ll probably do that too, but change the ratio every few years the closer I get to retirement.

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5 Well Heeled Blog March 13, 2012 at 9:09 am

Hey, your approach has obviously been (sexily) working for you. Congrats on having the $22K to invest – that is awesome. As I always say, your Future You thanks you! I do like it that you didn’t put all your money into pf-related niche or online stocks. Diversification is sexy too. ;)

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6 Maydog March 13, 2012 at 9:32 am

Where did the $22k transfer from? Or was this from another ‘magic’ account that’s been left off your net worth?

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7 DebtnTaxes March 13, 2012 at 10:11 am

I think you would of been crazy not to pay yourself $22k. Contributing to your retirement is never a bad thing. As for the investments you chose, I like a couple of them and their fundamentals. Did you just straight out buy them already or are you waiting for an entry?

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8 The Happy Homeowner March 13, 2012 at 10:34 am

This, my friend, is a check in the “good financial moves” column—way to go!

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9 J. Money March 13, 2012 at 10:37 am

@Frugal Fries – Haha, that’s what I was thinking :) Sometimes ya gotta take some risks, eh?
@Michelle – Oh cool! Yeah you *totally* should if you can afford to put in up to the max – it’ll help you so much down the road!
@Brian – Thanks man! Still curious as to where you would have put it though :) I’ll need ideas for my next round of investments one day!
@Andrew – There you go! I think it def. makes it more fun, even if you pick some losers every now and then (as long as you keep the % down in your overall portfolio). And honestly I couldn’t tell people what to invest in even if I wanted to cuz I have absolutely NO experience or skills in that department! Haha… I just do the best I can for what works for *me* :)
@Well Heeled Blog – Haha, true that! I like the whole “future me” idea too – always learning from the current you! :)
@Maydog – We got a comedian up in here today! Who obviously still reads the blog even though he/she doesn’t approve of my style… To answer your question, this money came from my $99,000+ in cash, which I have been storing up for days like today. I hope that’s okay with you.
@DebtnTaxes – I try and buy them as soon as I can, or I’ll just go crazy trying to get in at the “perfect” time. Probably not the best move, but it keeps me sane :) (Do you have a good method that you like to use here?)
@The Happy Homeowner – Woohoo! Thanks for the support :)

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10 Mrs. Money Mustache March 13, 2012 at 10:38 am

WOW! That is hardcore! :)

I would have put it in an index fund myself. I have a few set up through Vanguard and I probably would have split them up equally.

Good luck!

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11 SupaDad33 March 13, 2012 at 11:42 am

Keep in mind that SEP withdrawals are taxed as ordinary income… so you’re really just kicking the can down the road. I would much rather pay taxes now (even though it hurts) than later, as I would bet a lot of money that tax rates will only rise in the future.

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12 DebtnTaxes March 13, 2012 at 12:00 pm

@J. Money- I use this site http://stockcharts.com/h-sc/ui to look at charts for each company before I buy, looking for stocks near support or on a new breakout, or breakdown. As with any method, its not going to work 100% of the time, it is just something that helps me, with making decisions when to buy into a stock I like.

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13 Penny March 13, 2012 at 1:46 pm

I think it’s great that you were able to invest some of your cash. Since you asked for opinions and everyone has one….here is mine. You have a lot in retail which can be risky if the economy doesn’t get better. How about a medical or a tech stock to really get you diversified. Just my humble and totally unprofessional opinion! I say every dollar you are able to shield from taxes is GREAT!

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14 Sarah March 13, 2012 at 2:15 pm

Hey J,
I am struggling with keeping track of all my financial results/ budget on a timely basis. I have USAA too. Do you use their expense categories to quickly fill out your budget? Or do you have tips on making sure that you are on top of it (that’s what she said hehe)?

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15 Sarah L March 13, 2012 at 6:11 pm

J$! It’s been a while since I’ve commented, but I still read every post! :) I actually am tracking with you; I just had to figure out where to park $16K…since I’m interning for a financial planning firm, I get to invest at NAV (no fees) at American Funds and have invested in a couple of their international funds (I needed more int’l exposure, and they do a good job with managing the risk). I think I want to try out Betterment, though! Have you heard of it? I feel like you would be curious to try it out as well. Here’s the link to their site: https://www.betterment.com/how/

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16 Tyler S. March 13, 2012 at 6:18 pm

So it will be a while before I’m getting into a lot of investments, but it’s interesting to see what you like to do “for fun”. lol.. That’s quite a bit to play with.

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17 Maggie@SquarePennies March 13, 2012 at 9:31 pm

I am with you about Bankrate. They are almost the personal finance bible. We refinanced our house after gathering info there. Great site! I’m too frugal to go to Starbuck’s except as a treat, but I love, love, love Panera. Their coffee is great and I’m addicted to their Bacon Turkey Bravo sandwich!

Good luck with those investments! They sound pretty good.

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18 MoneySmartGuides March 13, 2012 at 9:35 pm

Any small business owner is crazy for not taking advantage of a SEP IRA. It’s certainly a win-win scenario.

As for your investments, they’re a little aggressive for me, but if they work for you, that is all that matters. Everyone’s risk tolerance and investment of choice is difference. The key though is that you are taking advantage of the retirement plan.

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19 Julie @ Freedom 48 March 13, 2012 at 10:36 pm

That’s a great spread! I love when people invest in things they use, know, and believe in. so much better than following a “hot tip” or throwing money at something you’re unfamiliar with.

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20 Kacie March 13, 2012 at 11:24 pm

I’m too much of a weenie to invest in individual stocks. I don’t have the stomach for it. But as long as you know what you’re doing and you’re not putting your whole portfolio in it, good for you!

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21 Jennifer March 14, 2012 at 1:22 am

I work for a publicly traded company on the technology side, there are some amazing companies doing some great things, I would definately do some research in medical and tech stocks… keep it balanced :) I do that with my stocks. I am not nearly as risky as you are, but I also dont have much saved,. I am debt free and about to purchase a home as its a great market, I also have my real estate license and tax license so I try and keep up to date with the latest and greatest ways to save and use my money. Great blog site!

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22 J. Money March 14, 2012 at 10:46 am

@Mrs. Money Mustache -That works! I actually picked up my first Vanguard fund too a little while ago (last year maybe?), really like them a lot :)
@SupaDad33 – True true, very good point there as well. I guess I’m hoping my investments just explode with returns where it would more than make up for the taxes I’ll need to pay at the end? :)
@DebtnTaxes – Oh cool, I’ll def. check it out! Have never poked around anything like that before, so anything will be interesting to me at this poing :) Appreciate you sharing it, helps a lot.
@Penny – Great takeaways indeed! I guess I don’t really think about the diversified plan when picking stocks I love, something to be careful for sure, thanks :)
@Sarah – Haha… great use of “that’s what she said!” – love it ;) To answer your qeustion, no, I don’t use USAA’s money management section there (though I have been thinking about it more lately), but I do think it’s a smart choice esp. if you don’t have any other methods or programs going on you use. It’s hard to say what’s a good route for ya since I don’t know you very well (or, at all! haha…), but have you tried out Mint.com or even one of the budget spreadsheets on this site? That may prompt you to find some better ways to budget :) Again, depending on whether you like to manually track more stuff, or have it automated and you just “check in,” etc. Hundreds of ways to do it differently, but usually I find once you learn what type you like the most, you can start tweaking and testing and narrowing it down. I think you’ll find it soon :)
@Sarah L – Hey friend! Lovely hearing from you every now and then, glad you still enjoy the site :) Awesome about your internship too, how exciting!! Yes, I have heard of Bettermint, and wanna say I have even chatted with them before?, but no – haven’t spent any time poking around quite yet. You’re not the only one who’s said good things about them though, I think they’re def. on to something :) Thanks for stopping by!
@Tyler S. – The funny part is that I’m just as excited to invest $22,000 as I would be $220 :) It’s the mental un-stress that really does it for me!
@Maggie@SquarePennies – Thanks Maggie! Pretty cool you’ve used them to help refi your house :) I’m totally addicted to all their calculators, esp with my new “kill my mortgages” plan in effect, haha… they are awesome!
@MoneySmartGuides – Yup! Thanks :) I agree – maxing out all plans available to you will do WONDERS down the road, no matter what you (pretty much) invest in.
@Julie @ Freedom 48 – That’s what I’d like to think ;) That way it hurts even less too if you get stung, eh? It’s not like I’m gonna STOP using their products or services! :)
@Kacie – Well, I wouldn’t go that far, but I do know enough to not risk ALL my eggs, haha… it’s very smart of you to know how you are, and what you’re comfortable with :) There are PLENTY other vehicles to invest and save with, so no need to jump in yourself if it’s not on the comfort train. Thanks for sharing with us today!
@Jennifer – Cool! I was a realtor for 3 months and loved it (and then hated it, haha…). Thanks for stopping by and checking out the site, glad you enjoy it! :)

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23 Jen @ Master the Art of Saving March 14, 2012 at 11:44 am

22k is a very nice amount to be able to put in your SEP IRA. :-) I’m intertested to see (a bit down the road of course) how your favorite companies stocks perform. I thought it sounded pretty unique when you mentioned it a while back, so I’ve been waiting for you to try it out. Good luck with them and the others you chose. :-)

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24 J. Money March 15, 2012 at 11:37 am

Thanks! I’m interested to see what happens too, haha… hopefully I report back that I’m a genius ;) (but expecting to be not so much)

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25 Finance my Money March 15, 2012 at 7:25 pm

If you are a small business the tax code is definitely structured in a way that pushes you to save. The SEP vehicle is probably the biggest thing you can do to shuffle away income and save for your retirement. Not a bad way to do it and it is great that you get to reward yourself with “play money” and pick some stocks that you personally enjoy. 2011 turned out to be a great year J.Money!

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26 J. Money March 16, 2012 at 11:55 am

Yup! And hopefully it was a good year for you too, my friend :) Here’s to continued success!

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