Saving for retirement – Traditional IRAs vs. Roth IRAs

What’s up, everyone?

I’ve been away for a while, and I’m back!

I just revamped my budget spreadsheet, resumed my exercise routine, and I’m motivated to get my budget back in order.

I am a religious reader of budgetsaresexy.com, and one of my takeaways from reading the website is how important it is to max out your retirement accounts: your 401K and your IRA’s.  I’m not tryna be broke when I retire, so I’m trying to really attack these retirement accounts.  For this post, I wanted to write about IRAs.  An Individual Retirement Account (“IRA”) is an “investing tool for individuals to earn and earmark funds for retirement savings.”  There are a couple of different types, including: Traditional IRAs, Roth IRAs, SIMPLE IRAs and SEP IRAs.  Below, I’ll talk about the Traditional IRA and the Roth IRA.

Limitations

There are some limitations on each.

For a Roth IRA, single tax filers must have modified adjusted gross income (“AGI”) of less than $132,000 in 2016 to contribute to a Roth IRA.  Married couples filing jointly must have modified AGIs of less than $194,000 in 2016 to be able to contribute to a Roth.

For a Traditional IRA, anyone with income, who is younger than 70 ½ can contribute.

Tax Breaks

Both Traditional and Roth IRAs come with tax breaks.  The difference is the timing.

A Traditional IRA gives you a tax break – at both the state and federal level – the year the money is earned.  The withdrawals in retirement are then taxed at the regular income tax rates.

A Roth IRA provides no tax break when you contribute, but then it is tax free when you withdrawal.

In summary, with Traditional IRAs, you avoid taxes when you put money in, and with Roth IRAs, you avoid taxes when you take it out in retirement.

You gotta love tax breaks!

Conclusion

I do love tax breaks, and I wanna save money for retirement!  Based on that, I actually have both a Traditional IRA and a Roth IRA.  The more money you invest now, the more you’ll have available for retirement!  Moreover, the money you put in now will compound.  It’s a beautiful thing.  So…if you haven’t been thinking about it yet, you should certainly look into different IRAs.  I’m no tax specialist, but I know that tax breaks – whether now or later – are a beautiful thing.  Take advantage!

Here is a good comparison chart that explains those and other differences based on 2016 information:

  Roth IRA Traditional IRA
2016 Contribution Limits $5,500; $6,500, if age 50 or older $5,500; $6,500, if age 50 or older
2016 Income Limits Single tax filers with modified AGIs of less than $132,000 (phase-out begins at $117,000); married couples filing jointly with modified AGIs of less than $194,000 (phase-out begins at $184,000) Anyone with earned income can contribute but tax deductibility is based on income limits and participation in employer plan
Tax Treatment No tax break for contributions; tax-free earnings and withdrawals in retirement Tax deduction in contribution year; ordinary income taxes owed on withdrawals
Withdrawal Rules Contributions can be withdrawn at any time, tax-free and penalty free. After five years and age 59 ½, all withdrawals are tax-free, too. No withdrawals required during account holder’s lifetime; beneficiaries can stretch distributions over many years Withdrawals are penalty free beginning at age 59 ½. Distributions must begin at age 70 1/2; beneficiaries pay taxes on inherited IRAs.
Extra Benefits After five years, up to $10,000 of earnings can be withdrawn penalty-free to cover first-time homebuyer expenses. Contributions lower taxpayer’s AGI, potentially qualifying them for other tax incentives; up to $10,000 penalty-free withdrawals to cover first-time homebuyer expenses, but taxes due on distributions.
2016 Contribution Limits $5,500; $6,500, if age 50 or older $5,500; $6,500, if age 50 or older

 

LexisNexis Rewards & Amazon Gift Cards

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Interested in Amazon gift cards? LexisNexis gives them away if you’re willing to put in a little work. I received over $300 in Amazon gift cards while I was in law school, and I could have earned even more if I was more diligent.

What is LexisNexis: LexisNexis is like google for lawyers and law students. It has a full library of cases, secondary sources, etc. Every law student gets a free account. It’s a handy resource, for sure. LexisNexis credits your account just for using its services.

Here’s how to earn points:

Daily: LexisNexis gives you 10 points everyday that you run a search. During certain months, LexisNexis will give you double points (20) everyday that you run a search. All you do is log in and type anything and press search. (I would usually just type “smith” or “jones”). Boom, you have earned 10 points, and that took 15 seconds.

Weekly: LexisNexis does “Minutes to Mastery” weekly quizzes. They will email your law school email address reminding you of the quiz. The quiz is your typical multiple choice quiz. The idea behind the quiz is that it will show you how to use LexisNexis to do research – pretty helpful stuff.

If you don’t want to learn how to use LexisNexis, you can just guess A, B, C, or D. You have a 25% chance of guessing correctly. And if you guess wrong, you can just sign into the Minutes to Mastery quiz again through the email link. You are not penalized for guessing. Sometimes the quizzes are so easy, you are better off going through the exercise rather than guessing. I guess it depends on your mood. Doing these “Minutes to Mastery” quizzes are really easy to do anytime and anywhere…even during class. It shouldn’t take more than 5 minutes. When you pass a quiz, you get about 400-500 points. These are really easy to accumulate!

Here is a breakdown of how many LexisNexis points are required for Amazon gift cards:

  • 344 LexisNexis points – $5 gift card
  • 665 LexisNexis points – $10 gift card
  • 996 LexisNexis points – $15 gift card
  • 1612 LexisNexis points – $25 gift card
  • 3226 LexisNexis points – $50 gift card
  • 6452 LexisNexis points – $100 gift card
  • 16,129 LexisNexis points – $250 gift card
  • 32,258 LexisNexis points – $500 gift card

Redeeming LexisNexis points is instant: Redeem your points easily by clicking My Rewards at: lexisnexis.com/lawschool.

Here’s a good explanation of LexisNexis and the Reward’s Program: http://www.lexisnexis.com/documents/pdf/20130628051829_large.pdf

Monday Motivation 9.22.15

What’s up, everyone?

If you’re like me, your motivation ebbs and flows. There are certain days when I’m really motivated to adhere to my budget, eat clean, and workout. Then there are days when I just don’t care too much!

I’m always looking for new ways to boost my motivation. Sometimes I read books or watch movies to find motivation. Even just a little quote can do it for me.

For today, I want to share a Ray Lewis video that always gets me motivated. For clarification, I’m not naturally a big Ray Lewis fan – he played for the Baltimore Ravens, and they’re just not my team. But I gotta give Ray some credit. He was an amazing player, and he’s even pretty good as a television analyst – I like his commentary.

I think he’s at his best as a motivational speaker. His storytelling is pretty amazing. He does a great job of creating a sense of camaraderie and accountability. Also, he does a great job of relating to everyone and encouraging everyone that they can be great too. My summary can’t do his words justice. Be sure to check the video out, and I promise you’ll feel pretty jacked up!

What gets you guys motivated? Please feel free to share below!

 

Ebates!

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I have been using Ebates for the last few years. It’s an awesome way to get cash back while you shop online. If you’re not already using it, you’re missing out on easy money!

What is Ebates: Ebates is a shopping portal. All you do is go to ebates.com and shop stores, coupons, or products. The website is pretty easy to use. There is a simple search bar and lots of links to stores that partner up with Ebates.

How does Ebates work:

First: you need to join Ebates. It is free and easy! Follow my referral to sign up: http://www.ebates.com/rf.do?referrerid=jcWzczKHpOv1TgAEmO3R%2Bg%3D%3D&eeid=26471.

Second: you need to shop. There are over 1,700 stores that team up with Ebates will offer a certain specials. For example, Budget Truck Rental currently offers 20% truck rentals and 2.5% cash back! Or Macy’s will offer 3% cash back on your purchases. So long as you go through the portal, your purchases will be eligible for the cash back. The cash back accumulates when you make purchases.

Also, I’ve installed the Ebates Cash Back Button in my browser. The button tells you if the website you’re currently shopping on is partnered up with Ebates and eligible for cash back. If it is a partner store, all you do is click a the button to activate cash back. It’s really easy.

Ebates Button
Ebates Button

Third: Get cash back! You will receive a payment at the end of a three-month period. If you link your Ebates account with you PayPal account, your payment will be transferred directly making it super easy. If you don’t have a PayPal account for whatever reason, Ebates will mail you a check.

Refer Others: After you join, you should refer others. Right now, if  you refer 2 friends, you get $50 and enter to win a trip for a Hawaiian Getaway! I’m pretty sure we could all use a Hawaiian vacation!

Basically, Ebates is a great way to get cash back for shopping online, which almost everyone does. So hurry up and join Ebates if you haven’t already! It’s free money!

 

Side Hustle During Law School

Law school is expensive! Between books, food, entertainment, and all kinds of miscellaneous stuff, I needed additional income. I found it helpful to work during my second and third years. I made a little bit of money, gained some experience, and started building my professional network.

I worked as a research associate for a professor and as a law clerk for an attorney.

Student Research Associate – I worked for an IP professor and did various research projects for him. I basically met with him once a semester, and then we communicated by email for the rest of the year. I was able to do the work on my own schedule, and he did not micromanage me. I didn’t necessarily learn a ton about IP, but I was able to put it on my resume, and I made some pretty easy money. As the semester wound down, I would give him my projects and then the professor would let me study.

All in all, it was great a great way to make some extra cash.

Law Clerk – I got this job through Symplicity. I ended up working 15 hours a week so it wasn’t too bad. The best part was working in a law firm – you can only learn so much theory at school and it is important to gain practical experience. The money was nice and the work was interesting. Toward the end of the semester, I would take an extra week or two off to prepare for final exams. Working had absolutely no negative effects on my schoolwork. I found that just an extra week off prior to exams was enough for me to get all prepped up for exams.

Teacher’s Assistant – At the beginning of the semester, many professors will need assistants. Some of the TA’s found their jobs because they did well or had some kind of a relationship with the professors. I knew other TA’s that got the positions just by applying. One of my classmates just signed up for the job and was given the position with a basic interview.

Some teachers will require lots of preparation and office hours from their TA’s. To me, this translates into hours and money. Other TA’s did less work, and consequently made less money. This is something to keep in mind.

Conclusion – I highly recommend working during your second and third years of law school. The money and experience is nice. Also, so long as you time it right, you should have plenty of time to study for exams.

Obese to Beast – This Dude is So Motivating

This post is a little different from the others. It does not directly relate to student debt or law school. However, I think it kind of does because it speaks to a universal theme – many things that may seem insurmountable can be overcome with enough hard work and determination – even taking down mounds of student debt!

This dude, John Glaude, went from 360 lbs down to 190 lbs. To be clear, he did it with hard work and clean eating. He did not take shortcuts – no surgeries, weight loss pills, personal trainers – he did it all by himself. This guy is such an inspiration!

His story has been on Ellen and he’s even been featured on Bodybuilding.com.

His story gets better – beyond losing weight he has started putting on a lot of muscle. The dude is becoming a serious beefcake.

So whatever you are doing out there, just know that we are all struggling with something. And with enough hard work and dedication, you too can overcome what may seem insurmountable. You just need to start! And realize that things won’t happen overnight – good things need to be earned and change takes time.

Rent Your Textbooks to Save Money at Law School

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Textbooks are expensive! You can easily spend over $250 in a semester on books alone. That’s a lot of cash that could be spent elsewhere…like at the bar or on food! I have saved a lot of money by renting textbooks. This is my method:

When to rent books: As a 1L, you’ll probably want to have your books for the first day of class. As a 1L, your classes are assigned to you so there is no debating whether you will keep the class or not. Also, you may get cold-called on the first day, so you’ll want your books in advance so that you can be ready for day 1 – nobody wants to get embarrassed the first day. Some professors may ease into the semester while others will want to set the tone and establish a Socratic Method from the outset. Bottom line, you’ll want your books for day 1 or shortly thereafter.

As a 2L and 3L, you will not need your books for day 1. In the beginning of the semesters, you may end up auditing classes to see if you like the professor/subject matter. Students add/drop classes a lot during the first few weeks. For that reason, I would not even buy books until I have decided my schedule first.

Continue reading Rent Your Textbooks to Save Money at Law School

Bar Prep Lesson #1: Trust the Process

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The California Bar Exam is a Mofo!

There is a lot of material to review – the exam covers topics from criminal law to professional responsibility to evidence to torts to property to civil procedure to…I’ll spare you from the rest, but you get the idea. It’s a lot of material. The test consists of essays, which require you to memorize A LOT of rules, and multiple choice questions, which frequently test the exceptions to the exceptions!

2 weeks into the preparation, I find myself missing practice questions and feeling dumb. I feel like I should know the answers and never make a mistake. Additionally, I found myself wondering what other people were doing. I wanted to know how their bar prep was going for people on Instagram, #barprep, so that I could compare and validate my progress. I was hoping to find that everyone else was struggling just as much as I was. But when I saw others doing well, I felt like I was even more behind.

Then it dawned on me, bar prep is a process. You begin by reviewing the substantive material. Then you apply what you’ve learned by writing essays and doing multiple choice questions. With lots of review and enough practice, the material starts to make sense and you basically can’t resist memorizing the rules.

My takeaway is that bar prep is a process. It is unrealistic to think that you will know everything from Day 1. It is crazy to think that you will be able to write out every essay with perfect rules from Day 1. The reality is that it takes time to learn and memorize the rules. Anyone who tells you that they are perfect from the Day 1 is either a liar or someone with a photographic memory like Chem.

So long as you’re making progress every day, then you will be just fine. Trust the bar prep process.

Student Discounts

There are a lot of great student discount opportunities out there. From cell phone service to retail stores. Lots of outlet stores offer student discounts. I would recommend that you always ask before paying – it doesn’t hurt to ask!

Here is a list of some good discounts:

  • Music
    • Spotify offers a 4.99 premium plan for students – this is awesome and well worth it! No ads, no limits, simply fantastic!
  • Cell Phones
  • Shopping
    • Banana Republic has a 15% discount for teachers and students
    • Polo by Ralph Lauren has a 15% discount for students
    • Original Penguin has 15% off full-priced items. The discount is not available for factory store purchases or online orders
  • Food
    • Chipotle offers a free drink with purchase and student ID
    • Qdoba offers a free drink with purchase and student ID
    • Chico-Fil-A offers a free drink with purchase and student ID
    • Buffalo Wild Wings has a 10% discount with a student ID
    • Subway offers 10% off w/ a student ID
  • Subscriptions and Memberships

Here are some good links:

Please let me know if I’m missing anything!

How to Avoid Impulse Buys – My 24-Hour Rule

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What’s up, everyone?

As a rule, I don’t  make purchases without thinking about it for 24 hours. This approach saves me $100’s every month! There are so many things that I want when I see them at the store, and then I realize how unnecessary they are once I get home and think about it for a day. I usually forget about the item as I leave the store. If I continue thinking about the item, the delay makes me ask myself, do I really need the item, and am I willing to return to the store to get it. Very often, my answer to those questions is, “No!”

I apply the 24 hour rule for things that I don’t really need such as clothes, electronics, books, etc. I implemented a 24-hour rule years ago, and it has saved me a ton of money! So much money saved by not making impulse buys.

I’m not crazy, I do buy some things on the spot – little things such as gum, necessities such as food, and things that you can’t wait to think about because you’re on vacation and won’t return to that store ever again. There are certainly more exceptions, but you get the idea.

I’m not the only one who has a 24-hour rule. Check out these other Financial Gangsters: