2022 was a stressful year for me. It’s the year I made the most money yet the most frustrating. When you make much more money, you’ll soon realize you’ll likely have another set of problems. While I’m grateful for these blessings, I’m also learning that it’s essential to keep my finance organized.
Learning all this tax policy and dealing with my HSA and 401k providers has been challenging. However, I am still appreciative because of the financial freedom progress and the option to leave my job anytime.
Related article:
5 money mistakes to avoid in your 20s and 30s
If you have HSA with your ex-employer, roll it into your individual HSA plan asap.
Avoid those pesky fees. I didn’t realize that I was paying $7 for Wealthsaver every month for pretty much a terrible. On top of that, they also screw up my account by selling my investment in the middle of a recession because they need to switch to a new system. After that, they bought similar investments, but the number of shares did not match. Honestly, it was horrible. I submitted a claim and hoped others to stay away from this issue.
Make sure you don’t overcontribute to 401k.
Last year, I was over-employed. I worked two W2 jobs, and the money was amazing. I made about $12-$13k every month net for three months. However, I quit my first job because my ex boss started to harras and verbally abused me. The environment was too toxic for me, and I decided my health was more important than the money I made, so I quit.
I contributed a lump sump for over $18k with the first company, and sometime in August, I knew I would be maxed out my 401k that month. But crap, I assumed that after changing the 401k system, it would stop contributing. But no, it didn’t. It kept contributing to my account. I didn’t realize it until I saw the paycheck, which was already overcontributed by a few hundred dollars. And it kept going on until a few weeks later.
As a result, I had to request an excess withdrawal and keep chasing down my accountant and my 401k provider. It was so stressful.
The lesson here is you want to track your 401k contribution routinely and anticipate an event like this. Give a buffer of one or two paychecks before you stop your 401k contribution. Even better, call the CS to confirm.
Learn about backdoor Roth IRA when you start making 129k annually or more
Since I made too much money this year, I can’t contribute directly to my Roth IRA, but I did. Thankfully, there is a loophole in the US tax system. If you make more than the IRS limit (129k-144k at the time of writing), luckily, we can still contribute to Roth IRA with a backdoor Roth IRA.
Here are the steps that I took to fix it:
- Requested for IRA recharacterization from Roth IRA to traditional IRA. I have to reach out to my Roth IRA provider, who sent me a form to fill out. This process alone took 3-5 business days. I lost about ~$1200 in my Roth investment during this process.
- Emptied out my IRA account by the end of the year. If you don’t do this, it will trigger the pro-rata rule.
- Did a conversion from a traditional IRA to Roth IRA. My investment was up by $600.
In total, I received two tax forms which are 1099-R with distribution code N (recharacterization) and 2 (conversion). Soon, I’ll have to fill out form 8606, which I haven’t studied yet.
Thankfully this is not as stressful as the previous two issues. But it would have been simpler if I contributed directly to a traditional ira.
Travelling during high season
I went back to Jakarta, Indonesia in May last year. I paid for $1700 round trip for my ticket and $1900 for my mom’s ticket. This was way more that I used to pay. Prior COVID, I think I paid $800 at max for round trip. But if we were to travel in January instead, the avg price of ticket is $1200, so the difference would be $1200. That was a lot of money which we could have spent that money on a trip to Bali instead.
I would say this is the one of the effects of being in a higher income bracket. I kept convincing myself that it was okay to spend a little more, but now looking back I wish I would have been a little smarter with my travel planning. Travelling is almost cheaper during low season which are typically from January to April and September to October.
Vi, a software engineer with a keen interest in personal finance, had planned to retire once she reached her lean FI/RE (Financial Independence/Retire Early) goal. However, after achieving the goal, she took few months of a mini-retirement filled with travel and adventure and decided to continue her career.
For the past five years, Vi has been using Personal Capital (Empower), a free financial tool. Her favorite features include the dashboard for net worth, allocation, and planning, which help track her FI/RE goal and keep those investment fees in check.