Keeping Up With The Bulls

A personal finance blog focused on making more money, saving money and smart spending.

  • Start Here
    • Start Here Latest Posts
    • Personal Finance Terms to Know
    • Money in Your 20s
    • Saving Money Tips
  • Career
    • Career Latest Posts
    • Advance Your Career
    • Corporate Benefits
  • Investing
    • Invest Latest Posts
    • Passive investing
    • Invest in startups
    • Retirement
  • Smart Spending
    • Smart Spending Latest Posts
    • Saving Money Tips
    • Housing
    • Food
    • Holidays
    • Wedding Guest
    • Wedding
  • Tools
    • Tools and Resources Latest Posts
  • Contact

Passive investing generates income that requires little or no effort to earn, maintain and grow that income. Passive investing examples include dividends from dividend stocks, 401(k), Roth IRA, interest from high yield savings account and dividends from REITs. Learn more about what are passive investments, different types of passive investments and how to get started.

Accredited Investor – What It Is And Why It Matters If You Want to Invest In Startups

01.06.2019 by admin // Leave a Comment

What is an accredited investor, accredited investor definition

In order to invest in startups you must be an accredited investor. The SEC creates limitations on who and who can’t invest in private companies. The logic behind it is that most of these investments are risky and illiquid so the SEC put rules in place to limit who can invest in these types of investments. With these guardrails, the hope is that these investors have enough money so should they lose their entire investment, or not have access to this investment for years they will still be in good financial shape. So, how do you know if you are an accredited investor and how can you become an accredited investor?

What Is An Accredited Investor?

An accredited investor is defined as someone who has income that exceeded $200,000 in each of the two most recent years (or $300,000 in joint income with a person’s spouse) and they reasonably expect to reach that same amount of income in the current year. A person is also considered an accredited investor if their net worth exceeds $1 million (individually or jointly with a spouse), excluding the value of their primary residence.

The full definition is on the SEC website.

Why Is It Important To Be An Accredited Investor

Accredited investors have many more opportunities to invest than non-accredited investors. They are able to invest in private companies which opens up the door for a lot more investment opportunities. There are opportunities for non-accredited investors to invest in. However, these investments are limited to the stock market and legalized crowdfunding opportunities.

How To Become An Accredited Investor

Understand where you are income wise and net worth wise. Will it be faster to make $200K (or $300K for married couples) for 3 years in a row, or have $1 million net worth? Estimate how long it will take you to reach that salary and add 2 years. Use this calculator to identify how long it will take you to have $1M. Identify which way is fastest, and then identify ways to hit that target faster.

See Also: Make More Money Through Your Career and Side Hustles

Qualify to Become an Accredited Investor Through Income

Income doesn’t equal your salary. Income includes money you make from everything including your investments and side hustles. If you or your spouse don’t have line of sight to hitting the yearly income threshold look for opportunities to create additional income streams.

Qualify to Become an Accredited Investor By Reaching $1M Net Worth

The more money you make, the easier it is to reach $1M net worth. Increasing your income should always be your first focus. To reach the $1M threshold though, you need to keep the money you make – and have that money make you even more money. Automate your savings and increase your savings rate as your income increases. Then, invest that money. Be smart with your spending so you can put additional money towards investing as well. Thanks to compounding interest, the first $100K is always the hardest but it’ll get progressively easier as you go. Your primary residence doesn’t count towards the $1M net worth so you need to consider if it’s worth paying your mortgage off early for this circumstance.

Research Potential Startup Investments

You don’t want to wait until you’ve met the accredited investor requirements to start thinking about investing in startups. Research the different types of investments that are only available to accredited investors before you qualify. If you’re interested in investing in a startup, what industries are you interested in? Many of these investment opportunities develop through word of mouth. It takes time to network with the right people, identify what types of companies you’d like to invest in and then identify companies that meet the target profile that are also raising money.

Accredited investor, what is an accredited investor, accredited investor definition

Categories // Start Here Tags // Angel Investor, Invest in startups, Passive investing, Personal Finance Terms to Know

Max Out Your 401(k) Contributions in 2021

01.08.2018 by admin // 4 Comments

401k contribution limits 2020 - picture of computer with 401k graphs and contribution amounts

A 401(k) plan is a retirement savings plan sponsored by employers that allows employees to contribute to their retirement savings pre-tax. If you can, you should always max out your 401(k) plan. The 401(k) contribution limit for 2021 is $19,500, unchanged from 2020. 401(k) plans have many benefits including tax benefits, employee company match and accelerating funding your retirement. Maxing out your 401(k) every year, or contributing up to the contribution limit, enables you to take full advantage of all of these benefits. Even if you’re not sure how you’ll be able to afford contributing $19,500 to your 401(k) this year there are steps you can take throughout the year to get closer to this goal.

When to Plan Your 401(k) Contributions

The beginning of the year is the best time to plan 401(k) contributions for the year. This way, you can spread out your contributions evenly throughout the year. The amount taken out per paycheck will be consistent that way. However, if you do hit the maximum amount early you’ll get a nice surprise of extra money in your take home pay at the end of the year as well as extra money taken out for taxes. If you wait until later in the year to plan your 401(k) contributions it may not be financially feasible. You’ll have to contribute more per paycheck to hit the max, or you may not earn enough the rest of the year to hit $19,500 in contributions. Don’t forget to check your 401(k) in the summer to ensure your contributions are on track to max out your 401(k) this year.

Make Sure To Always Get the Company 401(k) Match

Does your company automatically enroll you into their 401(k) plan? If not, make sure you sign up! Most companies that offer a 401(k) plan also offer a company match. At minimum, you should always contribute enough to your 401(k) to get the full company match. This is free money! The 401(k) company match is one of the top benefits of a 401(k) plan.

It’s hard when you first graduate college and starting from scratch- all the fees with the first apartment, first furniture buys, starting those student loan payments, etc. You may also have to save for bigger purchases like a house down payment and a car. It’s easy to feel like there is just no money to save for retirement.

Instead, look at how you are spending your money and find a way to contribute enough so you get the full company 401(k) match. After that, there are strategies to increase your contributions without feeling like you now have less money to spend over time.

Increase Your 401(k) Contributions During Raises and Promotions

Every time you get a raise or promotion you could afford to increase your 401(k) contribution more. Most companies have an annual raise cycle and if you’ve set your 401(k) contributions to a percentage of your salary your contributions will automatically increase when you get your raise. This time of year is also a great time to increase the percentage you contribute. You have already learned to live on your previous salary, do you desperately need that increase to buy more stuff? If you get a $5,000 raise you can increase your contributions by $1,000 a year and still have $4,000 of your raise. You won’t miss that last $1,000 while you’re adjusting to the extra $4,000 you are now earning every year. Using the table below, you can take the annual amount and divide it by the amount of paychecks per year to get the amount withheld out of each paycheck.

Increase Your 401(k) Contributions When You Finish Paying A Big Expense

Whether it’s putting down your first down payment, or paying off your last student loan, you now have one less expense. Reallocate what you would have spend on that expense to your 401(k) contributions. You won’t miss having the “extra” money because you didn’t have it before.

Enroll In The 401(k) Annual Increase Program

Some plans offer an annual increase program where you can establish annual increases. It depends on the plan, but at least some Fidelity plans allow 401(k) contributions to increase 1% or more each year automatically. You have the ability to align it to pay increases as well and then just set it and forget it. Automating 401(k) contribution increases is the easiest way to increase your contributions. If you end up needing more cash every paycheck you can always go online to your 401(k) plan provider website and reduce your contributions.

401(k) Tax Benefits

You know contributions to a 401(k) plan is pre-tax, but have you ever done the math as to how much you’re saving in taxes by contributing to your 401(k)? You may think you can’t contribute anymore but don’t forget you’ll also save money on taxes.

If you contribute $19,500 to your 401(k) in 2020 here are the tax savings you can expect with the current federal tax brackets. If you are single and making $62,825 a year (mean salary in the 22% tax bracket) you’ll avoid $4,290 in taxes. When you’re making $62,825 a year as a single filer for every 1% additional of your salary you contribute to your 401(k) you’ll avoid $138 in taxes.

401k contribution limits in 2020 - How much in taxes you avoid by tax bracket as a single filer by contributing the maximum amount to 401k in 2020
2020 Tax Savings for Increased 401(k) Contributions for Single Filers
*Assumes average income of tax bracket
**Assumes all income would have been taxed at the rate of that bracket
401k contribution limits in 2020 - How much in taxes you avoid by tax bracket as a married filing jointly filer by contributing the maximum amount to 401k in 2020
2020 Tax Savings for Increased 401(k) Contributions for Married Filing Jointly Filers
*Assumes average income of tax bracket
**Assumes all income would have been taxed at the rate of that bracket

401k Benefits Include Compound Interest

Last, but not least, if you need a little more motivation to max out your 401(k) don’t forget about compound interest.  The hardest time to contribute to your 401(k) is when you’re young, as you have a lot of big expenses on the horizon and likely the lowest income you’ll ever have. But, thanks to compounding, the more you save early on the less you’ll need to save later. Take this example from the team at J.P. Morgan Asset Management in their  2014 “Guide to Retirement.” Here, they share how much money you can make from investing $5,000 a year over time depending on when you start.

Compounding interest graph showing how much you will make from investing $50,000 over time.
Example of Compounding from J.P. Morgan Asset Management 2014 Guide to Retirement

Don’t forget, a 401(k) is one of several options to save for retirement. After you’ve hit your employee match in your 401(k) plan, start contributing to your Roth IRA account before maxing out your 401(k) in order to fully optimize the tax benefits in your retirement savings strategy.

Categories // Invest Tags // Corporate Benefits, Passive investing, Retirement, Tax Benefits

  • « Previous Page
  • 1
  • 2
  • 3
  • 4

Search Blog Posts

Subscribe to Blog via Email

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Recent Posts

  • Is Amazon Prime Really Worth $119? For Me, Not Anymore June 19, 2021
  • Can You Really Afford That House? It Depends June 1, 2021
  • Should You Continue Working From Home? The Pros and Cons of Working Remotely After Covid May 17, 2021
  • The Roaring 20s are Coming Back – Plan Your Spending Before It Gets Out of Control March 29, 2021
  • How to Invest Money In Your 20s February 1, 2021

Follow Us

  • Twitter
  • Pinterest

Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Keeping Up with the Bulls or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. I am not a financial or investment advisor, and the information on this site is for informational purposes only and does not constitute financial advice.

Copyright © 2022 · Modern Studio Pro on Genesis Framework · WordPress · Log in