An anonymous return caller took Paula’s advice and ran with it, doubling her income within a few years. Should she update her investment strategy now that she’s in a higher tax bracket?
Humaira is tired of paying rent with nothing to show for it. Can she leverage some benefits by using her credit card to pay the bills?
Rob wants to retire early, but a real estate investment led to $30,000 of credit card debt. Should he take on more debt to pay it off?
Former financial planner Joe Saul-Sehy and I tackle these three questions in today’s episode.
Enjoy!
P.S. Got a question? Leave it here.
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Anonymous asks (at 03:27 minutes): I’m starting a new job that’ll more than double my current income. Given this significant pay bump, how should I structure my investments going forward?
My salary will go from $140,000 to over $290,000, including RSUs and bonus payments.
I am 47 and single. I have a flexible goal of retiring by age 55 with $80,000 in annual retirement income and a paid-off primary residence.
I’ve got $220,000 in a Roth IRA, $20,000 in a Traditional IRA, $520,000 in a Traditional 401k, and $140,000 in a brokerage account where I have 75 percent invested in laddered T-Bills.
The combined equity between my existing home and one rental property is $500,000. Lastly, I have $90,000 cash in high-yield savings accounts and Certificates of Deposit (CDs).
I’m considering making these adjustments in 2024:
- Roll my previous 401k into my new employer’s 401k. Despite entering a higher tax bracket, should I make partial or all Roth 401k contributions into this new account? I will have an employer match.
- I want to convert my Traditional IRA to a Roth IRA. My taxable income will be less this year because the new job starts mid-year. And, keeping the pro-rata rule in mind, if I convert all of the existing IRA it’ll clear the way for future backdoor Roth contributions.
What are your thoughts on these adjustments? Even though I prefer to be a DIY investor, should I involve a financial advisor in some of these decisions?
Humaira asks (at 24:09 minutes): Would be better if we paid our rent with a credit card where we can earn cash back or miles for travel?
Is this something that people have done before?
Rob asks (at 35:33 minutes): I’m 31, married, with no kids. My goal is to quit my job in three and a half years.
My wife hasn’t worked since 2020 when I quit my corporate job and we sold our house. I earn $65,000 annually from freelance consulting, rental properties, and employment.
We have $325,000 saved up. Our expenses are $3,000 a month and $5,000 in travel a year.
I own real estate through two rental property partnerships. Partnership One has had issues, but I’m working through it based on your advice from previous episodes.
But I need help with Partnership Two, where I’m a 50 percent owner of two properties worth $160,000 and $125,000.
The mortgages are $92,000 and $78,000, respectively, at 3 percent and 2 percent. The combined monthly cash flow is $700 after all costs are factored in.
I underestimated the repair costs when we purchased the properties, so I contributed an extra $30,000 to pay for the difference.
The business is paying me back $2,500 a year, but at this rate, it’ll take years to recuperate these costs. We’ll also continue to be low on reserve funds.
We’re considering a $40,000 to $50,000 cash-out refinance in Fall 2025 when the mortgages renew. I’ll be paid back in full and we’ll replenish our reserves by $10,000 to $20,000.
With a six percent interest rate and a larger loan balance, there’ll be a significant increase in our monthly payments. We’d still have free cash flow, but something still nags me.
What do you think of our plan? Are there red flags that I’m not seeing?
Resources Mentioned:
#504: The Points Guy: Growing a Side Hustle into a 140-Person Business | Podcast
How to Travel for FREE: Insider Secrets | Youtube
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