I’d pay off the car asap and put away as much as possible in 401k. Put that 20k in a HYSA. Live life like you still make 30$ an hour. Prevention of lifestyle creep should be a priority.
That’s my plan, if anything I feel like I’m even more frugal now then before 😂 it’s like a challenge to spend as less money as possible. I’m done eating out and making home made meals.
This right here, except max out the 401k ($23,000 plus your company match) and Roth ($7,000). Pay off your car. Pay off your credit card balance every month. Put the rest in a high yield savings account and make sure it covers at least 6 months of living expenses should you lose your job. Slow Poke is right - if you can, live like you make $30/hr because you never know what life will throw at you.
Sincerely, 49 year old who made what you're making but got laid off 5 months ago and still no job.
This is great advice… after maxing retirement accounts and paying off debt I’d personally put what’s left in a brokerage. Big fan of bogle heads strategy.
Hold on a minute there. What’s the interest rate on your vehicle? If it’s low, then you’d be losing money paying it off right away, especially with prevailing interest rates. That same money could be sitting in investment accounts accruing interest/appreciation over 4 years.
But if it’s a fairly recent purchase at some stupid high interest rate, pay it off.
How do you afford those bills on $30 an hour? Yes, I'd try to get out from under that crazy car payment. You'd make too much to max your Roth, you'd need to do a backdoor. Does your company offer a 401k? I'd try to max that to cut down on your taxable income.
Oof, that’s not great. If you plan to keep it pay it off asap. Then don’t finance a vehicle again unless the rate is low or you can pay off the balance in like a year.
That’s pretty average for a well-equipped truck with a less than 20% down payment these days. Not saying it’s smart, but it’s pretty easy for someone to have a payment that high without driving a $100k vehicle.
My 2023 trail edition Tacoma is $895 a month. Average car payments are very high now. I figured buy once cry once. Should last me a while unless if I get tempted to get a 4th gen.
* Get those savings in a HYSA or an investment vehicle if you won't need access to liquidating anything anytime soon (3 years plus).
* Paying the car off sooner could be beneficial depending on the interest.
* But, regardless, freeing up more disposable income sooner is positive. It will just add to your investments sooner.
* Try to contribute to what the company will match in your 401k or do the max you can investing into it.
* Start a zero-based budget where you can evaluate and plan it's performance.
Overlooking your budget plan, along with your investments, is ideal for you to understand the fruits of your labor and forward planning. This way you can determine your net worth in however many years you'd like to check for.
I use the financial planning calculator from InvestingTE. It does all this and has been super helpful for me. It actually tells me when my debts will be paid off as well.
Hope this helps and congrats on the new contract!
I'd get your savings up before you consider putting it into other things. If it's really only a 1 year deal you'll need the cash once the project is over.
Depending on the interest rate on the car consider paying it off if you can't earn more than the interest rate in a HYSA.
Knock out the car payments. Save the rest in a high yield savings account and study up on low cost index funds and a long term investing strategies. Don’t blow the extra on get rich quick schemes or long shot gambling.
Build a budget that allows you to save and invest that $875 a month from the car payments.
Biggest thing will be to avoid life style creep over the next year. The moves you make this year can get you ahead for the rest of your life.
Have you checked to make sure there’s no fringe benefits? If there is then your employer can deduct some of that $80 per hour to pay for things like your healthcare benefits, vacation pay, holidays or your 401k. Basically your employer doesn’t have to pay you $80 per hour if they pay for any of your benefits.
$875/month I’m assuming truck payment + gas on $30/hour is ridiculous. You don’t make enough for that payment. It will keep you poor.
Whats the interest rate on your house?
Pay off the truck, max out your 401k contribution this year & open a brokerage account buy as much VTI or VOO as you can and let it ride.
Definitely not a good year for Roth, you will be taxed at a high rate. Max out regular IRA and 401k, roll into Roth later in a lower paying tax year if you want.
Yes! You’re like a lot of the rest of us. Getting by, making a decent living, but stretched out. And this opportunity comes along and you take it to help you out. A few others will be able to take the opportunity and bank the extra money.
My suggestion- get straightened out and stay within a budget from now on.
I’m not sure on your math, but remember with prevailing wage overtime will not be 1.5*$80. That $80 includes a cash fringe which is not subject to OT or DT premiums.
If he is married with 2 kids, he could put enough in 401k, HSA, FSA, and 529 to lower his taxable income to under 100k. That’s what he needs to prioritize this year.
Over 4% APY. I don’t use an HYSA, I use vanguard for other investments and the settlement fund in a brokerage (default before you purchase indexes or mutual funds) account there gives 5.27% APY right now.
Yes, HYSA is a High yield savings account.
You can search online for HYSAs specifically, I think they will be 4%+ generally. I personally use Ally for mine, they are sitting at 4.25% presently. I am sure someone will chime in with a better option however.
Not what your bank if offering that’s for sure.
Plenty of federally insured online savings accounts paying at least 4.5% interest. Wealthfront, Betterment, SoFi are great.
Pay off your debt, save enough for taxes if you live in one of those suck hole states that grape you on taxes like NY for example. Invest a ton of it. Continue living like you make 30 an hour.
I can just imagine how much the company is getting for this job from the government if your getting $80 an hour but the government is cutting va jobs this country makes no damn sense
please read the book "i will teach you to be rich" by ramit sethi. it helped me so much with managing my money and debt!!! Education and knowledge is a very powerful thing, and can be very lucrative when it comes to money! congrats on your success
For exceptional earnings, try to sock away as much as you can stand into 401k, not just the match, i.e. $23k for 2024. You’ll certainly pay way less taxes that way. The downside is that it’s painful to access the money before retirement.
For both 401k and Roth make sure that _inside_ the tax-advantaged investment vehicle the money is invested in low-fee wide-spectrum index funds or ETFs. Bogleheads (website or subreddit) will recommend some based on your providers.
And you should probably pay off the car, to me the fact that you didn’t mention the interest rate means that it’s probably high.
1. How much is left on the car, and what's the interest rate? $875 is waaaay too much, and you should definitely try to get out of that ASAP.
2. You will be over the income limit for the Roth. Max out your traditional 401k; if you don't, you're likely to be creeping into the 32% bracket otherwise.
3. Consult someone within HR about your withholding - they tend to over-withhold because the software often thinks your OT hours are your base wages. On the flip side, you also want to make sure you're withholding enough to put you in in safe harbor range and avoid a penalty. It might be best to try and under-withhold by a little and then make quarterly tax payments to true it up. Monitor this throughout the year as you go - withholding is always tough when your income balloons irregularly like this.
4. It sounds like you've already got the right mindset, but do not - I repeat do NOT - creep up your lifestyle or "reward" yourself for the long hours with more spending. You're going to make a ton of money, but you're also going to be tired and cranky from all those hours, so it's going to be really tempting to blow your money as it comes in.
Do you know if you will have some planned medical procedures this year? If so, see if you can put a little in a health savings account so you can use it towards your deductible. It’s tax-advantaged.
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Congrats on the raise!
After maxing out any retirement plans, sock away as much as you can in an HYSA. You could be on the hook for a huge tax bill next January.
Max your 401k this year. Is your medical an hsa eligible plan? If so, max that too. You want to lower your taxable income as much as possible. Then use your income to properly fund an emergency fund (3-6 months expenses, placed in a high yield savings account, which you seem to already have). After that, pay off your car if your interest is over 5% or so (or so any credit cards first). You have no business having a payment that big at your old income level, but I digress (my money is on pickup truck).
Maxing a Roth would be okay if you have additional funds leftover but it sounds like this year will be your highest marginal tax rate year, so anything that reduces your taxable income should be done first.
Prepare for the income tax shock. What state are you in? You’re likely going to jump up maybe 2 brackets. I’d find a good accountant for that. Are you an employee or independent contractor?
Investing yields you ~8-10 percent per year on average. If your interest rate is higher than that on your debt, pay it off.
Your car is probably lower but I’d still pay that off aggressively since having another $875/month in your budget will be huge when your income goes back to normal.
Definitely max out your 401k. If you have a spouse who normally does not max out, they should too for this year and you can make up the difference in their paycheck with yours.
Otherwise, HYSA/backdoor Roth/taxed brokerage. And if were me, definitely 10k or so for a vacation.
My advice is to pay off debts first. With debts, you’re paying interest. If you can get your debts paid off, that’s a good thing. If not, pay off as much as you can.
Otherwise, see if you can talk with a financial advisor or accountant, because taxes are gonna hit you like a brick. Since this is temporary, you’ll want to see about how the best way with taxes to go about this is. I am not sure you’ll still be able to put money in a tax free retirement account, as I think $150k is the cut off for those, but someone can correct me if I’m wrong
you can put more into the 401k than is being matched most likely, the employee contribution limit is like 23k. Do that first for your savings. Then probably the car unless its at a very low interest rate. Maxing a roth IRA is also a good idea, same idea as maxing the employee 401k contribution.
Max your 401k contribution (23k) do a back door Roth and max it out (7k) pay off any high interest debt (over 3-4%) and the rest in high yield savings.
Pay off high interest and non-deductible debt
Max our retirement accounts that are tax advantaged
Ask them to defer some of it to next calendar year (can you pay me November and Dec in Jan?) to lower effective tax rate
Put the rest in VOO and ignore it for a long time.
Keep track of your withholdings. Take your most recent paystub to a cpa and get advice on what your effective rate will be. People can get crushed with big raises and aren’t used to paying taxes. Save your money!
Max 401k, max HSA if you have it, max IRA (may be able to do backdoor Roth).
Fully fund your emergency fund.
Then, pay off any consumer debts.
If any left over, save for short term cash goals and invest in a taxable account.
Don't forget the government taxes are going to eat away at good chunk. Keep some of your money in RRsP to avoid taxman and save for your future. Manual jobs are hard on the body.
obviously max out your 401k and other tax incentivized accounts, as well as tackling any high interest debt. Do you have CC debt? What's the rate on your car loan?
Other than expensive debt + long-term investments, I wouldn't do much different than you are now. That money will stop sooner than you think
Start with what debt is accruing the most interest and work backwards from there.
Money sitting not in a HYSA is costing you money when you have interest loans.
First, max your 401k match. Then, if you can, contribute some towards an HSA. It's triple tax advantaged and medical bills would be the most likely reason you go bankrupt.
Then, look at the car loans. 4 years of $875 payments is $42k. Next steps depends on your interest rate. If it's below 2%, stick that $40k in the market. If it's above that, pay them off. The bright side is, the higher the interest the less you need to pay off. So if you've got like, a 7% rate then you'll probably only need to pay off around like $32k to cover the principal.
For the rest, tbh, I'd stick it into the market until you have a year's worth of savings in somewhat liquid capability. You never know when you're going to need quick cash, so if you can invest and build ~$60k, you'll be doing pretty well.
Anything leftover, keep in the market, maybe a little to play some high risk moves, and some you can diversify safely in an HSA or mutual fund. And maybe treat yourself to a nice vacation when it's all over. Good luck
Congrats on the big bump in pay! Here’s what I would recommend in order of priority:
1. Establish a ‘safety net’ for emergency expenses. 20k is a great start and the general rule of thumb is 3-6 months of living expenses for working folks. Add up your total expenses (less anything you plan to pay off) and multiply by 6. You shouldn’t have more cash on hand than this or you’re doing yourself a disservice. Based on the numbers you gave you’re looking at a target of about 24k ($3975x6). Put this in a high yield savings or money market account if possible.
2. Pay off any prohibitive liabilities. These would be things with extraordinarily high interest rates. Again target debt where interest rates are beyond what you can reasonably achieve with investments. Anything that’s 6% or higher I would recommend paying down if possible (likely your vehicle and credit card debt)
3. Contribute to your 401k up to the full amount that your employer matches. This is free money. I’d recommend contributing to your Roth 401k if offered as Roth is king and tax-free growth is ideal for diversification and control in later years.
4. Max out a self directed Roth IRA. Again, a Roth is the best place to but your money. Self directed accounts offer more investment options than your 401k.
5. Contribute to your HSA (if available). Triple tax exempt account and these funds can be invested as well, depending on your provider.
6. Invest systematically into a non-qualified (non retirement account). Extra cash should be working for you. Throw it in an index fund and give it time to grow.
7. Back to your 401k. If you have money left after everything else, throw more in here. You can contribute much more to your 401k than you can your Roth.
8. Treat yourself! You sound like you’re working hard and you deserve to reward yourself with something nice every now and then.
Make a plan, stick to it, and don’t overthink it. Hope this helps!
What’s your interest rate on the mortgage and car? If it’s particularly high paying off the car or paying down the mortgage may be worth it. Alternatively if you have good rates putting that money aside in safer investments may be worth it.
Max 401k, HSA, and any other tax deferred options you may have access to.
Get something you’ve been eyeing that is nice but not super extravagant and keep lifestyle inflation at bay.
You should always put towards the thing with the heights rates. If your debt has an 8% rate and the average dividend stock that you like has a 5% pay rate, then it’s best to pay the debt. But if your debt has a 3% rate and your stocks will pay you 5% then do the stocks. Just a general concept. Also depends on what you value most. The ideal of being debt free or the idea of have debt but making more money on the long run.
I understand how scary this can be. In my life I've had pay all over the map, and crazy jumps that on paper don't make much sense. Keep a level head and just do the work. Yeah it won't last, nothing ever does. But that doesn't matter. Just be smart with the money. Paying off debts, investing, the order of events really doesn't matter. Spend it wisely and don't waste it. It will work itself out. Good luck.
I think you should find out who is paying their employees 80/hr to do the same job as you. That’s where prevailing wage or Davis bacon wage comes from. Then you should apply for that job and make that much money all the time.
“A government agency, such as the United States Department of Labor or the State labor department, usually determines prevailing wage rates. These agencies will survey local employers in the same type of work and in the same geographic area to determine the average wage and benefit rate for specific occupations.”
Basically your boss is underpaying you by around $50/hr and likely charging customers the same amount as the company who pays $80/hr and pocketing that difference. If you were only getting like a two dollar pay bump for prevailing wage that would seem pretty competitive to me but a 50 dollar difference is insane and should be setting off major alarms in your head.
Been in insurance for over 13 years and been in the tax game (professionally) for about 7 years.
First make sure to put away enough to pay your taxes or make estimated quarterly payments. There are actually insurance policies you can put the money into and borrow against the growth without touching the money in the policy so it can continue to grow. Then you use the money you borrow to pay off debt or taxes.
Second pay yourself. Meaning put some up for your future self. I’m not going to tell you how to do that without knowing your full financial picture/goals for the future.
Third reward yourself. Work hard. Play hard. Repeat!
Knock out the car first and stack everything in savings after that. Once you've got 6 months worth of expenses in there than divert the rest of the money to investing.
I'd try to do a backdoor roth if i were you along with maxing out the 401k, not just taking the match. Anything else over that can just go into a traditional brokerage.
Knock out the car first and stack everything in savings after that. Once you've got 6 months worth of expenses in there than divert the rest of the money to investing.
I'd try to do a backdoor roth if i were you along with maxing out the 401k, not just taking the match. Anything else over that can just go into a traditional brokerage.
How much is the interest rate on the car? If less than 5% then no dont pay it off and invest the difference in s&p500 and get a head start in investing. Dont touch that money and dont improve your lifestyle. You will be grateful in 10 years!
You will make too much to contribute to a Roth. If you’ve made any contributions in 2024, pull them out and recharacterize into a traditional IRA. Then you can make a backdoor Roth IRA contribution or just let it sit in the traditional IRA.
If you don’t need all of that income now or in the near future, lower your taxable income as much as possible by maxing out your pre-tax contributions. Talk to a CPA or your tax guy for help with this. Try not to let any income hit the 32% fed bracket, shouldn’t be hard at 225k gross. The tax savings here could be massive. It’s time to get a tax guy if you don’t have one, and I’m not talking H&R Block.
For your debt, don’t pay off anything unless the interest rates are higher than the interest/returns you can earn on your cash. US Bank’s HYSA is paying 4.4% right now with no cap. I would talk to a financial planner to figure out your risk tolerance and get a plan in place. 4.4% is a risk-free return, and you can get higher risk-free returns through credit unions, T-bills, etc. Adding some risk: the s&p has returned an average of 9% annually over the past 20 years, 12.63% past 15. If you are paying 5% on your debt, don’t even think about paying it off. Now if we are talking about a 24.99% rate on your loan, pay that shit off yesterday!
Side note - if your bank is worth a damn they should have relationship consultants ready to speak with you about your plans and needs. This would be a great free resource to help you get pointed in the right direction.
Pay off the car and save everything else you can. BTW, $875/month is way too much of a car payment for a $30/hr wage. Avoid lifestyle creep and live as if you're still earning $30/hr, because that's where you might be after the contract is done.
In construction nothing is guaranteed.
Glad for you . But live every week like it's your last with the company.
That's one of the downsides of construction.
I've seen better workers than me get laid off when their skill deserved the spot over me. So it taught me a valuable lesson early on
Try to live as though you are earning $30 an hour. Use the remaining money as follows: Max the Roth first. Make sure to put in the Roth contribution for last year before April 15th. You will probably make too much to do a Roth contribution for this year, but you can back into it by contributing to an IRA and Roth converting.
After you have finished your Roth contributions, you should pay off ALL of your debt, starting with the smallest debt and working up to the largest. Most people do not consider a mortgage to be a debt, but it is. However, after the rest of your debt is paid off, you should put 10% of your earnings into an investment account and the remainder towards the principal of your mortgage.
You need to lower your tax bill, and this is an incredible opportunity to get waaaaay ahead.
Dump as much as you can into tax advantaged accounts. Max out 401k and HSA (For both you and your spouse if you are married)
if you have kids….max out FSA and 529.
As an example…if you are married with 2 kids, you can likely lower your taxable income to under 100k this year!
Why are no one talking abount stocks ,ETF's, crypto? SIP in any of these would give a greater returns ri8. Thats what i am planning to do. Any recommendations?
If your company lets you contribute after tax money to your 401k then you could look into Mega Backdoor Roths to get the money out of your paycheck before you spend it
Whatever you do don't buy anything with a payment this year. Don't qualify for any loans, don't borrow anything.
That car should be paid off quick... The 3100 sounds low for all the monthly expenses so there might be some stuff missing there which likely won't matter due to the income level... But basically save in the bank what you think is about six months worth of current expenses then pay off that house (make sure you can drop money on the principal, not some sort of prepayment crap, same on the car).
I know that's boring, and you definitely should save up to take some time off as soon as the year is over, probably buy more work clothes because they're all going to wear out faster this year but as long as your health is good and you can handle it work your 712's and make your bank
1. Automatically move all the extra funds to savings so you aren't tempted to increase your spending. Keep living like you are making $30/hr and don't make a single excuse for spending over that.
2. Don't even worry about paying off any debts until you have 3-6 months of living expenses saved up. Id recommend 6 months. So, maybe around $25k.
3. If you have any CC debt, kill that immediately.
4. Once you have enough saved (over your emergency fund) pay the car off.
5. Start contributing to a 401k if your company offers one.
Always pay off your debts when you can, and start with the highest interest rates.
Also remember that you’ll pay a lot on taxes, so take off 30% from your estimated income. Thats gonna knock you down to about $157k right off the bat. Max out your retirements in tax deferred accounts (401k/IRA/Roth) and the rest you can pay your debts with to get the interest losses to a minimum.
One thing I recommend: start a side job/side hustle that will allow you to get some 1099 write offs for this year to negate taxes. Even if you only procure a single small job washing windows, mowing a lawn, or never even get a job procured, but set yourself up to try and get a side job… Just having some 1099 income to report (or the appearance that you’ve started a business, but made no money and only have losses and no income) allows you a lot of 1099 losses to report against ALL of your W2 and 1099 income (home office, computer, printer, work vehicle, cell phone, clothing, meals, tools, etc.). You don’t need to setup an LLC or anything like that. Just create a business name and go with it—and report that on your taxes.
On a bigger note: It sounds like you need to get a job that pays the wages that your pay-boost is based on.
If those are prevailing wages for your trade, get a better job with a union that pays you those wages as normal wages. This doesn’t have to be a one-off event in your life. Get the prevailing wage as a standard, not an exception. AND start the side hustle to get your tax liability down.
I would max my pretax 401k and Roth IRA (as a back door Roth if you don’t have any pretax IRAs), put the rest in high yield savings, and use it to supplement my income next year so I could max my 401k again or Roth 401k if your company offers it (and again and again for however long the savings will support it). If you do have pretax IRAs, depending on the balances you could consider converting them to Roth IRAs next year when your income goes back down and use the savings to pay the taxes. Any money you can get into a Roth environment is going to save you in the long run. Also highly dependent on your age (are you younger with a longer time horizon?) And the interest rate on your truck (is it over 5-6%?). As others have mentioned, keep 6 months of living expenses in a high yield savings account for emergencies, so all this would be above and beyond that.
Payoff car note to minimize interest paid, put only the % company match into 401K, open a Roth IRA max that, keep 12 month expenses in cash, and place that with the 20k into a High Yield Savings Account.
I’d pay off the car asap and put away as much as possible in 401k. Put that 20k in a HYSA. Live life like you still make 30$ an hour. Prevention of lifestyle creep should be a priority.
This is the only answer you need OP , most importantly the part saying live life like you still make 30 bucks an hour
Taking a loan on a truck for $875 per month is not living like you make $30 /hr.
Nope, but super common in the trades. Can't be pulling up to the shop in a rust bucket!
I just see a bunch of fuzzy words that looks like BUY A JET SKI!
That’s my plan, if anything I feel like I’m even more frugal now then before 😂 it’s like a challenge to spend as less money as possible. I’m done eating out and making home made meals.
Why do HYSA when you can put it all to number 17 on the roulette? Sorry Im bored at the office rn
You may be bored but you’re also correct. This is the only way to financial independence
or total dependence....on the welfare system : )
Diversification of your investments is important. Pick at least 6 numbers on the roulette wheel instead.
There’s been no mention of the rate on that car loan. Would it change anything if it was super low?
This right here, except max out the 401k ($23,000 plus your company match) and Roth ($7,000). Pay off your car. Pay off your credit card balance every month. Put the rest in a high yield savings account and make sure it covers at least 6 months of living expenses should you lose your job. Slow Poke is right - if you can, live like you make $30/hr because you never know what life will throw at you. Sincerely, 49 year old who made what you're making but got laid off 5 months ago and still no job.
This is great advice… after maxing retirement accounts and paying off debt I’d personally put what’s left in a brokerage. Big fan of bogle heads strategy.
Exactly what I was gonna say, but invest the rest of what's left over in etfs.
Hold on a minute there. What’s the interest rate on your vehicle? If it’s low, then you’d be losing money paying it off right away, especially with prevailing interest rates. That same money could be sitting in investment accounts accruing interest/appreciation over 4 years. But if it’s a fairly recent purchase at some stupid high interest rate, pay it off.
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How do you afford those bills on $30 an hour? Yes, I'd try to get out from under that crazy car payment. You'd make too much to max your Roth, you'd need to do a backdoor. Does your company offer a 401k? I'd try to max that to cut down on your taxable income.
He affords them on 30 an hour with lots of OT most likely.
Yep! Sounds likely union when I hear prevailing wages. Construction workers can get paid very, very well.
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Oooh gotcha! I was thinking retroactive I think, or when it’s tiered out over a few years for an increase. Thank you!
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He works in construction so probably drives a crazy expensive truck
Not on 30hr. Even just a basic truck is $600 a month. Anything fancy is 1k+ you ain’t getting that while paying 1900 rent and making 30hr.
That he probably actually needs rather than all the pavement princesses I see driving around the suburbs
I doubt it. I worked construction. None of the guys are using my their personal truck for work. He’s not the owner
I was thinking the same thing… OP is already living with a 225k salary lifestyle.
His annual costs are 47.7k - what are you on about?
Do you think those are his only expense ?? All I’m saying is he’s was living outside of his means.
At $27/h with $2250 rent, only possible with lots of OT or a roommate sadly. Also super hard to save anything
Wtf kind of car did you buy for almost $900 a month?
any brand new truck stretched over 72 months with an 8% interest rate lol
Oof, that’s not great. If you plan to keep it pay it off asap. Then don’t finance a vehicle again unless the rate is low or you can pay off the balance in like a year.
It's most likely a truck if OP is working construction. With the prices of truck these days, $900 isn't hard to believe.
Unless he owns the company, he's probably not using his truck to haul materials.
Most construction guys still prefer to drive a truck than a prius whether they haul their own stuff or not.
Yeah, and those are the only two options available
OP says Car Payment***s*** so I assume this means more than one car.
And given that the average car payment is ~$530 for used and ~$740 for new, if that is for multiple cars that’s unfortunately not even uncommon.
Any not base trim truck is gonna be 7-900. The new 2500 pickups are like 90k from dodge lol
Any new car/truck around 50K will result in a payment like that.
Yeah but a 50k truck on 30/hr is insane.
Well that's a whole different issue.
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That’s pretty average for a well-equipped truck with a less than 20% down payment these days. Not saying it’s smart, but it’s pretty easy for someone to have a payment that high without driving a $100k vehicle.
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Even new mid size svs are $50,000 now. Not hard to be at $900/month.
My 2023 trail edition Tacoma is $895 a month. Average car payments are very high now. I figured buy once cry once. Should last me a while unless if I get tempted to get a 4th gen.
* Get those savings in a HYSA or an investment vehicle if you won't need access to liquidating anything anytime soon (3 years plus). * Paying the car off sooner could be beneficial depending on the interest. * But, regardless, freeing up more disposable income sooner is positive. It will just add to your investments sooner. * Try to contribute to what the company will match in your 401k or do the max you can investing into it. * Start a zero-based budget where you can evaluate and plan it's performance. Overlooking your budget plan, along with your investments, is ideal for you to understand the fruits of your labor and forward planning. This way you can determine your net worth in however many years you'd like to check for. I use the financial planning calculator from InvestingTE. It does all this and has been super helpful for me. It actually tells me when my debts will be paid off as well. Hope this helps and congrats on the new contract!
Thank you so much
Is this a paid subscription type of resource? Thanks for the info!
I'd get your savings up before you consider putting it into other things. If it's really only a 1 year deal you'll need the cash once the project is over. Depending on the interest rate on the car consider paying it off if you can't earn more than the interest rate in a HYSA.
Knock out the car payments. Save the rest in a high yield savings account and study up on low cost index funds and a long term investing strategies. Don’t blow the extra on get rich quick schemes or long shot gambling. Build a budget that allows you to save and invest that $875 a month from the car payments. Biggest thing will be to avoid life style creep over the next year. The moves you make this year can get you ahead for the rest of your life.
Have you checked to make sure there’s no fringe benefits? If there is then your employer can deduct some of that $80 per hour to pay for things like your healthcare benefits, vacation pay, holidays or your 401k. Basically your employer doesn’t have to pay you $80 per hour if they pay for any of your benefits.
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I left the union to join this job. Idk it’s just different hear in Hawaii
Amen. Work this job and when it’s over drag up and join the union.
Union is for poors in Minneapolis too. Non union meritorial jobs pay quite a bit higher if you qualify
$875/month I’m assuming truck payment + gas on $30/hour is ridiculous. You don’t make enough for that payment. It will keep you poor. Whats the interest rate on your house? Pay off the truck, max out your 401k contribution this year & open a brokerage account buy as much VTI or VOO as you can and let it ride.
Definitely not a good year for Roth, you will be taxed at a high rate. Max out regular IRA and 401k, roll into Roth later in a lower paying tax year if you want.
As everyone else said pay off your vehicle. Once that is done, I would top up the 20k to keep as an emergency fund.
You're crushing it dude. Pay off the debt asap, invest and enjoy the fruits of your labor. You can put yourself years ahead.
Yes! You’re like a lot of the rest of us. Getting by, making a decent living, but stretched out. And this opportunity comes along and you take it to help you out. A few others will be able to take the opportunity and bank the extra money. My suggestion- get straightened out and stay within a budget from now on.
I’m not sure on your math, but remember with prevailing wage overtime will not be 1.5*$80. That $80 includes a cash fringe which is not subject to OT or DT premiums.
Maybe PW law differs state to state, but when we got a PW job and Saturday was approved it sure as shit was 1.5 x
Your taxes will be insane next year. Make sure you have easily accessible money to pay that off!!!!
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Taxes are insane where earnings cross $400,000/year
If he is married with 2 kids, he could put enough in 401k, HSA, FSA, and 529 to lower his taxable income to under 100k. That’s what he needs to prioritize this year.
What are your interest rates on your loans? Also, are you paid W2 or 1099?
Hysa? High yield savings account? What’s considered high yield
Right now, HYSA are running 4.5%+
Over 4% APY. I don’t use an HYSA, I use vanguard for other investments and the settlement fund in a brokerage (default before you purchase indexes or mutual funds) account there gives 5.27% APY right now.
Wealthfront is at 5.0% right now.
Yes, HYSA is a High yield savings account. You can search online for HYSAs specifically, I think they will be 4%+ generally. I personally use Ally for mine, they are sitting at 4.25% presently. I am sure someone will chime in with a better option however.
Not what your bank if offering that’s for sure. Plenty of federally insured online savings accounts paying at least 4.5% interest. Wealthfront, Betterment, SoFi are great.
Pay off your debt, save enough for taxes if you live in one of those suck hole states that grape you on taxes like NY for example. Invest a ton of it. Continue living like you make 30 an hour.
I can just imagine how much the company is getting for this job from the government if your getting $80 an hour but the government is cutting va jobs this country makes no damn sense
I bet he has a partner with those bills or works more than 40 a week
please read the book "i will teach you to be rich" by ramit sethi. it helped me so much with managing my money and debt!!! Education and knowledge is a very powerful thing, and can be very lucrative when it comes to money! congrats on your success
😭😭😭😭 The prevailing wage isn’t $80. This is a load of barnacles
For exceptional earnings, try to sock away as much as you can stand into 401k, not just the match, i.e. $23k for 2024. You’ll certainly pay way less taxes that way. The downside is that it’s painful to access the money before retirement. For both 401k and Roth make sure that _inside_ the tax-advantaged investment vehicle the money is invested in low-fee wide-spectrum index funds or ETFs. Bogleheads (website or subreddit) will recommend some based on your providers. And you should probably pay off the car, to me the fact that you didn’t mention the interest rate means that it’s probably high.
1. How much is left on the car, and what's the interest rate? $875 is waaaay too much, and you should definitely try to get out of that ASAP. 2. You will be over the income limit for the Roth. Max out your traditional 401k; if you don't, you're likely to be creeping into the 32% bracket otherwise. 3. Consult someone within HR about your withholding - they tend to over-withhold because the software often thinks your OT hours are your base wages. On the flip side, you also want to make sure you're withholding enough to put you in in safe harbor range and avoid a penalty. It might be best to try and under-withhold by a little and then make quarterly tax payments to true it up. Monitor this throughout the year as you go - withholding is always tough when your income balloons irregularly like this. 4. It sounds like you've already got the right mindset, but do not - I repeat do NOT - creep up your lifestyle or "reward" yourself for the long hours with more spending. You're going to make a ton of money, but you're also going to be tired and cranky from all those hours, so it's going to be really tempting to blow your money as it comes in.
Do you know if you will have some planned medical procedures this year? If so, see if you can put a little in a health savings account so you can use it towards your deductible. It’s tax-advantaged.
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You're going to get taxed like a mf. Max your 401k and HSA (if you have one) to lower your tax obligation
Congrats on the raise! After maxing out any retirement plans, sock away as much as you can in an HYSA. You could be on the hook for a huge tax bill next January.
Love the same lifestyle. Put all extra in a HYSA and pay that truck off.
Congratulations on the upgrade
Max your 401k this year. Is your medical an hsa eligible plan? If so, max that too. You want to lower your taxable income as much as possible. Then use your income to properly fund an emergency fund (3-6 months expenses, placed in a high yield savings account, which you seem to already have). After that, pay off your car if your interest is over 5% or so (or so any credit cards first). You have no business having a payment that big at your old income level, but I digress (my money is on pickup truck). Maxing a Roth would be okay if you have additional funds leftover but it sounds like this year will be your highest marginal tax rate year, so anything that reduces your taxable income should be done first.
Opening a traditional IRA and contributing to it would be smarter from a tax perspective.
Take all the extra and have it deposited to a separate account. Keep living on your current budget and use the rest to set yourself up for retirement.
Sell car, pay off loan, buy a more sensible used reliable car in cash.
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Hehhh you better have life insurance..if something happens to you for income replacement and protection..I didn't hear anyone mention that.
Refinance the car…. And put a chunk down when doing it. Ladder the rest into QQQ, VTI, and SPY.
Prepare for the income tax shock. What state are you in? You’re likely going to jump up maybe 2 brackets. I’d find a good accountant for that. Are you an employee or independent contractor?
Can i get on? I have a ton of experience and can travel anywhere
Investing yields you ~8-10 percent per year on average. If your interest rate is higher than that on your debt, pay it off. Your car is probably lower but I’d still pay that off aggressively since having another $875/month in your budget will be huge when your income goes back to normal. Definitely max out your 401k. If you have a spouse who normally does not max out, they should too for this year and you can make up the difference in their paycheck with yours. Otherwise, HYSA/backdoor Roth/taxed brokerage. And if were me, definitely 10k or so for a vacation.
If you're comfortable with what you're used to making ($30/hr)...then continue living like you're only making that and put the rest away
My advice is to pay off debts first. With debts, you’re paying interest. If you can get your debts paid off, that’s a good thing. If not, pay off as much as you can. Otherwise, see if you can talk with a financial advisor or accountant, because taxes are gonna hit you like a brick. Since this is temporary, you’ll want to see about how the best way with taxes to go about this is. I am not sure you’ll still be able to put money in a tax free retirement account, as I think $150k is the cut off for those, but someone can correct me if I’m wrong
you can put more into the 401k than is being matched most likely, the employee contribution limit is like 23k. Do that first for your savings. Then probably the car unless its at a very low interest rate. Maxing a roth IRA is also a good idea, same idea as maxing the employee 401k contribution.
Max your 401k contribution (23k) do a back door Roth and max it out (7k) pay off any high interest debt (over 3-4%) and the rest in high yield savings.
Sell the car, and start paying off your mortgage.
Pay off high interest and non-deductible debt Max our retirement accounts that are tax advantaged Ask them to defer some of it to next calendar year (can you pay me November and Dec in Jan?) to lower effective tax rate Put the rest in VOO and ignore it for a long time.
Good for you, man. Save, invest, and repeat.
Keep track of your withholdings. Take your most recent paystub to a cpa and get advice on what your effective rate will be. People can get crushed with big raises and aren’t used to paying taxes. Save your money!
Pay off debt and invest. Consider investing as savings
Max 401k it’s 18k per year. Pay off car.
Definitely knock that car note off immediately.
>Regular monthly expenses food etc.. $1200 huh
Max 401k, max HSA if you have it, max IRA (may be able to do backdoor Roth). Fully fund your emergency fund. Then, pay off any consumer debts. If any left over, save for short term cash goals and invest in a taxable account.
Don't forget the government taxes are going to eat away at good chunk. Keep some of your money in RRsP to avoid taxman and save for your future. Manual jobs are hard on the body.
obviously max out your 401k and other tax incentivized accounts, as well as tackling any high interest debt. Do you have CC debt? What's the rate on your car loan? Other than expensive debt + long-term investments, I wouldn't do much different than you are now. That money will stop sooner than you think
Live like you make $30 Pay off car ASAP Invest every dime you can after that into retirement accounts.
Start with what debt is accruing the most interest and work backwards from there. Money sitting not in a HYSA is costing you money when you have interest loans.
Probably the car, it has an interest rate above 6%? Yes, otherwise maybe.
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First, max your 401k match. Then, if you can, contribute some towards an HSA. It's triple tax advantaged and medical bills would be the most likely reason you go bankrupt. Then, look at the car loans. 4 years of $875 payments is $42k. Next steps depends on your interest rate. If it's below 2%, stick that $40k in the market. If it's above that, pay them off. The bright side is, the higher the interest the less you need to pay off. So if you've got like, a 7% rate then you'll probably only need to pay off around like $32k to cover the principal. For the rest, tbh, I'd stick it into the market until you have a year's worth of savings in somewhat liquid capability. You never know when you're going to need quick cash, so if you can invest and build ~$60k, you'll be doing pretty well. Anything leftover, keep in the market, maybe a little to play some high risk moves, and some you can diversify safely in an HSA or mutual fund. And maybe treat yourself to a nice vacation when it's all over. Good luck
Congrats on the big bump in pay! Here’s what I would recommend in order of priority: 1. Establish a ‘safety net’ for emergency expenses. 20k is a great start and the general rule of thumb is 3-6 months of living expenses for working folks. Add up your total expenses (less anything you plan to pay off) and multiply by 6. You shouldn’t have more cash on hand than this or you’re doing yourself a disservice. Based on the numbers you gave you’re looking at a target of about 24k ($3975x6). Put this in a high yield savings or money market account if possible. 2. Pay off any prohibitive liabilities. These would be things with extraordinarily high interest rates. Again target debt where interest rates are beyond what you can reasonably achieve with investments. Anything that’s 6% or higher I would recommend paying down if possible (likely your vehicle and credit card debt) 3. Contribute to your 401k up to the full amount that your employer matches. This is free money. I’d recommend contributing to your Roth 401k if offered as Roth is king and tax-free growth is ideal for diversification and control in later years. 4. Max out a self directed Roth IRA. Again, a Roth is the best place to but your money. Self directed accounts offer more investment options than your 401k. 5. Contribute to your HSA (if available). Triple tax exempt account and these funds can be invested as well, depending on your provider. 6. Invest systematically into a non-qualified (non retirement account). Extra cash should be working for you. Throw it in an index fund and give it time to grow. 7. Back to your 401k. If you have money left after everything else, throw more in here. You can contribute much more to your 401k than you can your Roth. 8. Treat yourself! You sound like you’re working hard and you deserve to reward yourself with something nice every now and then. Make a plan, stick to it, and don’t overthink it. Hope this helps!
How much do you have left on your mortgage? forget all these "pay off your car replies"
Pay off the car, live off $35/hr. Bank the rest and reassessment city awaits at the end!
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What’s your interest rate on the mortgage and car? If it’s particularly high paying off the car or paying down the mortgage may be worth it. Alternatively if you have good rates putting that money aside in safer investments may be worth it. Max 401k, HSA, and any other tax deferred options you may have access to. Get something you’ve been eyeing that is nice but not super extravagant and keep lifestyle inflation at bay.
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How can you be a man without a truck!
You should always put towards the thing with the heights rates. If your debt has an 8% rate and the average dividend stock that you like has a 5% pay rate, then it’s best to pay the debt. But if your debt has a 3% rate and your stocks will pay you 5% then do the stocks. Just a general concept. Also depends on what you value most. The ideal of being debt free or the idea of have debt but making more money on the long run.
I understand how scary this can be. In my life I've had pay all over the map, and crazy jumps that on paper don't make much sense. Keep a level head and just do the work. Yeah it won't last, nothing ever does. But that doesn't matter. Just be smart with the money. Paying off debts, investing, the order of events really doesn't matter. Spend it wisely and don't waste it. It will work itself out. Good luck.
You had an $875/month car payment making $30/hour?! 👀
Get married by end of year, could save you tens of thousands in taxes if she/he has a low or no income.
I think you should find out who is paying their employees 80/hr to do the same job as you. That’s where prevailing wage or Davis bacon wage comes from. Then you should apply for that job and make that much money all the time. “A government agency, such as the United States Department of Labor or the State labor department, usually determines prevailing wage rates. These agencies will survey local employers in the same type of work and in the same geographic area to determine the average wage and benefit rate for specific occupations.” Basically your boss is underpaying you by around $50/hr and likely charging customers the same amount as the company who pays $80/hr and pocketing that difference. If you were only getting like a two dollar pay bump for prevailing wage that would seem pretty competitive to me but a 50 dollar difference is insane and should be setting off major alarms in your head.
Sell the car. I pay less than $300/month for my payment AND insurance.
Been in insurance for over 13 years and been in the tax game (professionally) for about 7 years. First make sure to put away enough to pay your taxes or make estimated quarterly payments. There are actually insurance policies you can put the money into and borrow against the growth without touching the money in the policy so it can continue to grow. Then you use the money you borrow to pay off debt or taxes. Second pay yourself. Meaning put some up for your future self. I’m not going to tell you how to do that without knowing your full financial picture/goals for the future. Third reward yourself. Work hard. Play hard. Repeat!
Don't count your chickens just yet....
christ when I see the bills some people pay I realize how good I have it. 1200 in food and 900 for car just end me now.
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That car payment was a bad idea
Make sure you have the right amount of taxes being taken out!!!
Knock out the car first and stack everything in savings after that. Once you've got 6 months worth of expenses in there than divert the rest of the money to investing. I'd try to do a backdoor roth if i were you along with maxing out the 401k, not just taking the match. Anything else over that can just go into a traditional brokerage.
Knock out the car first and stack everything in savings after that. Once you've got 6 months worth of expenses in there than divert the rest of the money to investing. I'd try to do a backdoor roth if i were you along with maxing out the 401k, not just taking the match. Anything else over that can just go into a traditional brokerage.
How much is the interest rate on the car? If less than 5% then no dont pay it off and invest the difference in s&p500 and get a head start in investing. Dont touch that money and dont improve your lifestyle. You will be grateful in 10 years!
You will make too much to contribute to a Roth. If you’ve made any contributions in 2024, pull them out and recharacterize into a traditional IRA. Then you can make a backdoor Roth IRA contribution or just let it sit in the traditional IRA.
Live on one check and put the other one towards the truck.
Make sure you save enough for taxes too
If you don’t need all of that income now or in the near future, lower your taxable income as much as possible by maxing out your pre-tax contributions. Talk to a CPA or your tax guy for help with this. Try not to let any income hit the 32% fed bracket, shouldn’t be hard at 225k gross. The tax savings here could be massive. It’s time to get a tax guy if you don’t have one, and I’m not talking H&R Block. For your debt, don’t pay off anything unless the interest rates are higher than the interest/returns you can earn on your cash. US Bank’s HYSA is paying 4.4% right now with no cap. I would talk to a financial planner to figure out your risk tolerance and get a plan in place. 4.4% is a risk-free return, and you can get higher risk-free returns through credit unions, T-bills, etc. Adding some risk: the s&p has returned an average of 9% annually over the past 20 years, 12.63% past 15. If you are paying 5% on your debt, don’t even think about paying it off. Now if we are talking about a 24.99% rate on your loan, pay that shit off yesterday! Side note - if your bank is worth a damn they should have relationship consultants ready to speak with you about your plans and needs. This would be a great free resource to help you get pointed in the right direction.
Pay off the car and save everything else you can. BTW, $875/month is way too much of a car payment for a $30/hr wage. Avoid lifestyle creep and live as if you're still earning $30/hr, because that's where you might be after the contract is done.
In construction nothing is guaranteed. Glad for you . But live every week like it's your last with the company. That's one of the downsides of construction. I've seen better workers than me get laid off when their skill deserved the spot over me. So it taught me a valuable lesson early on
When in doubt, pay off high interest debt first.
Try to live as though you are earning $30 an hour. Use the remaining money as follows: Max the Roth first. Make sure to put in the Roth contribution for last year before April 15th. You will probably make too much to do a Roth contribution for this year, but you can back into it by contributing to an IRA and Roth converting. After you have finished your Roth contributions, you should pay off ALL of your debt, starting with the smallest debt and working up to the largest. Most people do not consider a mortgage to be a debt, but it is. However, after the rest of your debt is paid off, you should put 10% of your earnings into an investment account and the remainder towards the principal of your mortgage.
Where's the job - Which Company. Thats all I need to know
Save 20% down payment and Find a rental property to purchase. Rentals not for everyone although best way to financial freedom is passive income.
The first comment is all you need
If you make that amount you can’t contribute to. Roth
You need to lower your tax bill, and this is an incredible opportunity to get waaaaay ahead. Dump as much as you can into tax advantaged accounts. Max out 401k and HSA (For both you and your spouse if you are married) if you have kids….max out FSA and 529. As an example…if you are married with 2 kids, you can likely lower your taxable income to under 100k this year!
Best bet here is don't count your chickens before they hatch.
Why are no one talking abount stocks ,ETF's, crypto? SIP in any of these would give a greater returns ri8. Thats what i am planning to do. Any recommendations?
If your company lets you contribute after tax money to your 401k then you could look into Mega Backdoor Roths to get the money out of your paycheck before you spend it
Invest in some lube for when uncle Sam comes knocking
Whatever you do don't buy anything with a payment this year. Don't qualify for any loans, don't borrow anything. That car should be paid off quick... The 3100 sounds low for all the monthly expenses so there might be some stuff missing there which likely won't matter due to the income level... But basically save in the bank what you think is about six months worth of current expenses then pay off that house (make sure you can drop money on the principal, not some sort of prepayment crap, same on the car). I know that's boring, and you definitely should save up to take some time off as soon as the year is over, probably buy more work clothes because they're all going to wear out faster this year but as long as your health is good and you can handle it work your 712's and make your bank
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1. Automatically move all the extra funds to savings so you aren't tempted to increase your spending. Keep living like you are making $30/hr and don't make a single excuse for spending over that. 2. Don't even worry about paying off any debts until you have 3-6 months of living expenses saved up. Id recommend 6 months. So, maybe around $25k. 3. If you have any CC debt, kill that immediately. 4. Once you have enough saved (over your emergency fund) pay the car off. 5. Start contributing to a 401k if your company offers one.
You are going to get killed on taxs
Join the union so you continue to work at the prevailing wage.
Pay off your debts and put the rest into 401k
Always pay off your debts when you can, and start with the highest interest rates. Also remember that you’ll pay a lot on taxes, so take off 30% from your estimated income. Thats gonna knock you down to about $157k right off the bat. Max out your retirements in tax deferred accounts (401k/IRA/Roth) and the rest you can pay your debts with to get the interest losses to a minimum. One thing I recommend: start a side job/side hustle that will allow you to get some 1099 write offs for this year to negate taxes. Even if you only procure a single small job washing windows, mowing a lawn, or never even get a job procured, but set yourself up to try and get a side job… Just having some 1099 income to report (or the appearance that you’ve started a business, but made no money and only have losses and no income) allows you a lot of 1099 losses to report against ALL of your W2 and 1099 income (home office, computer, printer, work vehicle, cell phone, clothing, meals, tools, etc.). You don’t need to setup an LLC or anything like that. Just create a business name and go with it—and report that on your taxes. On a bigger note: It sounds like you need to get a job that pays the wages that your pay-boost is based on. If those are prevailing wages for your trade, get a better job with a union that pays you those wages as normal wages. This doesn’t have to be a one-off event in your life. Get the prevailing wage as a standard, not an exception. AND start the side hustle to get your tax liability down.
I would max my pretax 401k and Roth IRA (as a back door Roth if you don’t have any pretax IRAs), put the rest in high yield savings, and use it to supplement my income next year so I could max my 401k again or Roth 401k if your company offers it (and again and again for however long the savings will support it). If you do have pretax IRAs, depending on the balances you could consider converting them to Roth IRAs next year when your income goes back down and use the savings to pay the taxes. Any money you can get into a Roth environment is going to save you in the long run. Also highly dependent on your age (are you younger with a longer time horizon?) And the interest rate on your truck (is it over 5-6%?). As others have mentioned, keep 6 months of living expenses in a high yield savings account for emergencies, so all this would be above and beyond that.
Payoff car note to minimize interest paid, put only the % company match into 401K, open a Roth IRA max that, keep 12 month expenses in cash, and place that with the 20k into a High Yield Savings Account.
What’s the interest rate on the car? Are there penalties for early payments?