Financial stuff

Lowering your adjusted gross income (AGI) can save you a lot of money. The most obvious way it saves you money is by lowering your taxable income, thus lowering the amount of tax you have to pay.  Having a lower AGI also saves me money since it increases the amount of my premium tax credit making my health insurance bill less. Since my student loan is on income-based repayment a lower AGI also reduces the amount of my monthly student loan payment. For higher income earners lowering their AGI can allow them to be able to contribute to a Roth IRA. Also, many itemized deductions are tied to your AGI. For instance, medical expenses are deductible to the extent that they exceed 10% of your AGI.

There are several ways to lower your AGI. To find different ways to reduce your AGI all you need to do is look at the Adjusted Gross Income section at the bottom of the front page of Form 1040.  It is unlikely you will qualify for all of the different ways to reduce your AGI but you most likely qualify for a few of them. For 2014 I managed to reduce my AGI from $30,000 to $20,000.  I did this by maxing out my traditional IRA, contributing $2200 to my health savings account, getting a student loan interest deduction, getting a self-employment tax deduction, and the self-employed health insurance deduction. Moving expenses, educator expenses, and the tuition and fees deduction are some of the other common ways to lower AGI.

Contributing to a 401k is another great way to lower your AGI. The 401k doesn’t show up on the Form 1040 because these contributions go straight to the 401k account and aren’t included in taxable income or reported on the 1040. Unfortunately, I don’t have access to an employer 401k plan since my employment is seasonal or temporary. I’m considering opening a solo 401k, but I’m not sure I will have enough money to contribute to make it worth opening an account.

Although I managed to reduce my AGI by almost a third last year I could have done even better. If I would have maxed out my HSA, paid more on my student loans, and opened and contributed to solo 401k it is possible I could have reduced my federal income tax to zero.  Of course, you do need some money to live on and all of these ways to lower your AGI reduce your spendable income so there is a limit to how low you can go on your AGI.

Has anyone else managed to lower their AGI by a large percentage? If you have any other suggestions for lowering AGI I would love to hear them.

January was a decent month for easy money. This is the first month I have kept track of my easy money, but I think this was a better than average month.

In January I received $20 in Amazon gift cards from Swagbucks. If you would like to sign up for Swagbucks I would appreciate if you would use my referral link. Doing so will help me earn Swagbucks and won’t cost you anything. If there is interest I will share what I do to earn Swagbucks.

I earned a $25 Gyft gift card for signing up for Moneystream. That offer is no longer available. I used my Gyft gift card to buy an AMC Theatres gift card. With this gift card, a gift card from Christmas, and a gift card from redeeming my Discover card cash back we won’t have to pay to go to the movies for a while.

I received $10 in Total Rewards from Caesars’s Entertainment that we can use when we go to Vegas next month. Also, I earned rewards by playing MyVegas Slots that I can redeem for free stuff on our next Vegas trip. Rather than tracking the loyalty points I earn on MyVegas I am just going to count rewards redeemed.  Since the value you get for your loyalty points varies quite a bit for different rewards I think this better reflects what I’m getting from the program.

I earned a $5 bonus on my Emerald Card. This deal was only available to H&R Block employees. I also earned a $100 referral bonus from Motif Investing. I have a referral link for that bonus in the sidebar or you can leave a comment and I’ll email you a referral link. If you sign up through the referral link you can also get a $100 bonus. You will have to make a couple of trades to earn the bonus though. It ends up being a slightly over $80 bonus which is still a good deal.

Overall, I made $160 in free money in January. February should be even better. I already had another person sign up through my Motif referral bonus. I also opened a Bank of the West checking account which will pay me $150 in bonuses although I’m not sure if they will post this month. And I opened a Personal Capital account through a referral link which should reward me with a $10 Amazon gift card.  If all of those bonuses come though I’ll be ahead of January and there is still a lot of month left to make more easy money.

My law school loans have been on income based repayment. Since my income has been so low since graduating law school my monthly payments have been $0. Last year I had a good year for income and as a side effect of that my law school loan payments are no longer $0. For the next year I will have to pay $105 a month towards my law school loans. Some people were quite upset when I posted a couple of years ago about my student loan payments being $0 and not being concerned about my student loans. This might make them happy. Although I liked the $0 payments, since the reason for the new higher payments is that I’m making a lot more money than I used to I can’t complain. I’d rather have the higher income than the $0 payments. You can learn about the different repayment plans at fafsa.ed.gov.

The $105 a month payments will not even touch my principal. The payments will be all interest. That will at least give me a little bit of a tax deduction. My loan balances have steadily been rising ever since I graduated and these payments will probably barely slow the increase in my balances.

There is a pretty big drawback to using the income based repayment plan. Using an online repayment calculator at my present rate I would end up paying over $95,000 in interest by the time my loan is forgiven after 25 years. At that time I would still have a remaining balance of over $255,000 that would be forgiven. The calculator makes some assumptions about my income growth and the change in the poverty line which could change the results quite a bit. Also, the calculator is based on 25 years remaining and I only have about 21 years remaining now. A different calculator showed I would have about $200,000 forgiven. It is pretty scary to see that after making $95,000 of payments my remaining balance could be almost twice as much as my original loans. To make matters worse the forgiven amount is counted as taxable income. If the top tax rate at that time is 40% I would end up with an $80,000 tax bill.

If I were to have my loans forgiven under the public service loan forgiveness program the forgiven amount would not be taxable income. You have to have 10 years of public service to qualify for that program. Working for the government or a non-profit is considered working in public service. I have about 1 year of working for the government or a non-profit since graduating from law school. It now looks like working nine more years for the government or a non-profit would be very financially beneficial. The loan forgiveness would add about a $9000 a year benefit to any non-profit or government job. That makes them a lot more attractive. Or I could wait and see if they decide to make the 25 year forgiven loan amounts non-taxable as well. Given the current amount of federal debt I seriously doubt that will happen.

Now that I have completed my initial degree, I plan to continue my education. Not only will this allow me to improve my earning potential, but I will also have the chance to earn scholarships that will help me to pay for my schooling. Some universities offer a 25% tuition scholarship for their alumni. If I am eligible, this credit will allow me to have 25% of my next degree paid for, whether it is a doctorate, a graduate certificate, or even a second bachelor’s degree. From my perspective, I might as well take advantage of every benefit that is provided for me because it will make me more employable.

I have been debating whether to attend FinCon or not this year. I went to the 2011 FinCon and enjoyed it, but missed out on a lot of the activities because I was also working the that weekend. I decided to skip the 2012 FinCon because I was too broke for it be sensible to go. FinCon 2013 was in St. Louis which is just a four hour drive away for me. That made the cost of attending pretty cheap so I bought a ticket and planned on attending. I did show up for the first morning, but I just didn’t feel comfortable with the crowds and left at the lunch break and didn’t make it back for the rest of the convention. It was a weird attack of anxiety like I hadn’t experienced since my high school days. I’m sure almost everyone would have been cool and nice if I had stayed and actually talked to people, but I wasn’t up for socializing that weekend and basically wasted my convention ticket.

If I buy a ticket to FinCon 2014 and end up not using it, that would be an even bigger waste of money. The price of a ticket is a bit higher this year and I’ve already missed out on the cheapest ticket prices. Plus, it will cost me more to fly or drive down to New Orleans. I didn’t bother getting a hotel last year. The weather was nice and I knew of nearby places that I would feel safe sleeping in my car so that is what I did. I don’t know New Orleans well enough to be comfortable sleeping in my care there. I’m not sure if there is anywhere close to the convention that I’d be able to safely sleep in my car. It may still be a little warm to sleep in my car as well, since the convention is earlier this year and in a warmer location.

Other than the financial aspect, my reason for being unsure if I want to attend is that I don’t have any plans to change my blog. The convention seems to be about growing your blog and making it into a big business. I don’t really want to turn my blog into a business. I like to write for my blog and don’t want to spend much time doing anything else having to do with the blog. It would be nice to have more readers and more engagement with my posts, but if that means spending hours each week on social media, constantly tweaking my design, experimenting with plugins, and developing an email list than I’d rather just be content with my blog as it is. For those reasons, I’ve decided not to attend FinCon this year. I do reserve the right to change my mind.