If you're seeing this message, it means we're having trouble loading external resources on our website.

If you're behind a web filter, please make sure that the domains *.kastatic.org and *.kasandbox.org are unblocked.

Main content
Current time:0:00Total duration:5:48

Author: My budget and planning for the future

Video transcript

I'm max Gladstone I'm a novelist and make about $48,000 a year so my financial goals are to save roughly 1/3 of take-home income and put that into stable growing retirement assets when I was a kid even of some of my some of the money that I'd bring in from like working at a local pizza joint would go into a Roth IRA and my parents had a very rigorous matching program that they'd talk with me about that kind of stuff right so I had a sense that this was very important and I was continuing to put whatever I could into it through college and then while I was in China I was running off of grant income that didn't actually allow me to invest in a Roth but then when I got back into the States I started trying to do it again when you are a self-employed which I functionally am as a writer there's no 401k program you also don't have any w2 to income so it's tricky to take advantage of tax deferred or tax exempt retirement accounts there are things that you can do I have just not been savvy enough to do them yet but you can have a self-employed 401k which will allow you to take a chunk of your self-employed income and put that in a text deferred situation which is really really great because as self-employed person you're not only getting hit with income taxes you're getting hit with business taxes or self-employment taxes when you're self-employed your employer because they don't exist isn't taking a chunk out of your paycheck every year - every paycheck to send off to the government so the government asks you to complete quarterly estimated taxes of your income based on what you think you're going to make over the course of the year and that you're generally allowed to base that estimate on what you made last year so at the beginning of the year you take this form fill it out with your estimates of your income and you crunch a whole bunch of numbers and it'll give you how much tax are supposed to send to the government which is generally a federal and a state government level q 1 q 2 q and cute for then you have to include that in your budgeting for the course of the year so I generally assume that a third of whatever comes in is going to go out in tax form this means that I try I'm I try to keep as much of the income that I'm making untouched over the course of the year the artistic income 1 touch Tovar the course of the year for taxes and things like that and then I can bank it all and do stuff with it over the course of the next year my wife and I are very fortunate in that we can largely do our budgeting off of her income and then save a decent chunk of that and then my income goes to contributions to savings and retirements and all of that kind of thing so we have that stable base that we can work with if you're not working off of that stable base it's really important to be certain that you are withholding as much as you need to from the checks that are coming in the door if you want to have the illusion of having a more regular pay structure you can set up a number of systems that will approximate that some of them involves just having a separate account at a bank and then setting up some kind of automatic payments or automatic transfer from whatever savings account you have into your sort of checking account or the sort of usable income account then there are some that are don't just involve budgeting software so I've used budgeting software to basically and amortize the amount of income that I have I was really lucky in that my dad and his dad were always very interested in talking to me about money and interest and how it worked and so I've always had a pretty strong ethic around trying to hold on to funds and try to get them into the market when possible and when there's a good time to do that the biggest thing that I've had to learn as I've become a professional writer and it become more freelance has been see all of the responsibilities around running your own business keeping track of your money knowing where it can go and where it can't go and what you can do with it and what you can't and the and and sometimes also the fact that you need to spend a little bit of money to get yourself out there to go to a convention or something like that and how to balance the costs that a particular sort of promotion will give you versus the opportunities that they'll give you and the really exciting thing and also scary thing about all of this is how much there always is to learn about your own business about the financial world even about what happens to your own money and when you're especially when you're working with with another person when you have that partner who's in it with you for life it's important to be able to talk very carefully and kindly and it's considerately through the complexities of dealing with money it's subject that a lot of people get a lot more emotional about than they need to it's a subject in which a lot of people have deep-seated and unexamined convictions and so it's important to be able to communicate with whoever you're working with around those issues
Careers brought to you with support from Better Money Habits® Powered by Bank of America® Bank of America, N.A. Member FDIC. Equal Housing Lender. Investment Products: Are Not FDIC Insured, Are Not Bank Guaranteed, May Lose Value