“Money is like gasoline during a road trip. You don’t want to run out of gas on your trip, but you’re not doing a tour of gas stations. You have to pay attention to money, but it shouldn’t be about the money.” –Tim O’Reilly
Though I may still be internalizing the fact that I was self-employed last year, the IRS needs no convincing. If I had net earnings from self-employment over $400, which I very much did, then they consider me very much self-employed, and those earnings need to be reported. To be honest, this is something I’ve been chomping at the bit to do for some time, because it unlocks a brand new savings achievement: the Individual 401(k)! Also known as a Solo 401(k), it will allow me to contribute (read: defer) far more of my self-employment income than I could with only an IRA, plus I’ll have the potential to “match” my contributions as the plan’s employer.
To figure out how much I’d be able to contribute, I needed to do a dry run of our taxes. So back in November, I dusted off the spreadsheet I built to simulate Form 1040 and added the following to account for my self-employment income: Schedule 1 (Additional Income and Adjustments to Income), Schedule 2 (Additional Taxes), Schedule C (Profit or Loss From Business), and Schedule SE (Self-Employment Tax). Though that may sound like a lot, I only needed to input 3 values (highlighted in yellow) across those 4 schedules. The values in gray are just references or simple calculations.
Screenshot of my spreadsheet simulating IRS Form 1040 Schedules 1, 2, C, and SE for 2023
I like to reflect on the financial decisions I’ve made over the past year because trying to explain them, in writing, ultimately forces me to better understand the machinery involved, and often suggests additional actions I might consider taking, now or in the future.
“I’m sure you know the quote ‘Writing is nature’s way of letting you know how sloppy your thinking is’, and knowing how sloppy your thinking is allows you to sharpen it, test your arguments, and test different explanations. I find, more often than not, that I understand something much less well when I sit down to write about it than when I’m thinking about it in the shower. In fact, I find that I change my own mind on things a lot when I try to write them down. It really is a powerful tool for finding clarity in your own mind.” —Marc Brooker in Writing Is Magic
This was the “back-of-the-envelope” analysis (to which I’d previously alluded) that convinced us to buy a house in Fresno for the duration of Stephanie’s 3-year doctoral program.
There was a time when I couldn’t wait to start drafting these annual reports. And then, 3 years ago, I stopped working. Without income to save, I thought, what did I have to say about saving? Only recently have I begun to appreciate how that sense of the word, what financial planners call “accumulation”, obscures another sense: “preservation”. And maybe I have learned a thing or two about the ebb and flow of preservation.
The full extent of our savings (spread across a handful of taxable and tax-advantaged accounts) are still invested in a single S&P 500 index fund. No change there. But without the regular influx of cash from a paycheck, every few months I sell shares from one of our taxable accounts to cover our expenses. Think of it as dollar-cost-averaging on the sell-side. What floors me is how well our taxable accounts have maintained their value over the last 3 years—even in the face of a protracted pandemic.
Monthly value of our taxable accounts from January 1, 2019 to January 1, 2022
Landscaping drew me in for a number of reasons, but I had completely forgotten about one until digging it up recently: on February 3, 2020, I got an estimate back from a landscaper that seemed so astronomically high, I decided I just had to start doing the work myself. I hired a tree service company to do what I couldn’t, and they showed up the very next day. You know how people say “Oh, you must be saving a ton of money doin’ that yourself”? My reaction is usually, “I dunno, I’m at Home Depot like every other day,” because it feels like I’m actually spending a ton, but at least I’m learning a ton, and I think I’m getting a better result in the end.
