File this one under “good problems to have” but it may be a helpful tip for some of you! If you find yourself with a lot of money in savings and you’re NOT maxing out your tax advantaged accounts (IRA, 401k, 403B, 457, TSP, etc) you might want to consider doing this. Instead of living on my take-home pay, I drag that 401k contribution slider almost as high up as it will go, which is $1,500 per paycheck. That means in 15 paychecks into the year, I’ll hit the $22,500 contribution max. Until then, I live off the money in my savings. This accomplishes the goal of spending my “already taxed” money, and putting as much as possible of my new paycheck money into the tax-advantaged accounts.

I also “front load” the year, maxing out as quickly as I can each year. It doesn’t make a big difference, but since the market goes UP about 70% of years, I might as well try to get more money at the January price instead of the December price.

It has a fun side effect of my paycheck going WAY up around August when the 401k maxes out, those withholdings drop to zero and my take-home increases from about $800/month to about $3,800!

I also overwithhold on taxes. That $991/paycheck WAY more than necessary to cover my $76,000 salary I get from PFC. BUT one of the weird things I’ve learned about being rich is that I tend to have a lot of random income every year. $60,000 or so just in dividends from my index funds. I have some real estate generating income. One of my side hustles generates about $30,000. Sometimes I sell stock or an investment that generates a gain. All that is to say I have been making quarterly estimated tax payments since I started my first company at 22. Putting a lot of my payroll income towards taxes helps smooth that ride a bit instead of having huge quarterly payments due.

p.s. PFC meetup TODAY in Anaheim, CA. Link in bio! Come hang!

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.

-Jeremy

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