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- เผยแพร่เมื่อ 13 ก.ย. 2024
- Happy Tax Day! Or if you’re like me and navigating taxes while self-employed for the first time: condolences. I thought that being in a lower tax bracket (cecexie.substa...) meant that I would pay a lower percentage of my income in taxes (because that would make sense, right?), but it turns out this is just further evidence that I am terrible with money and finances. In this video accompaniment to my newsletter (cecexie.substa...) , I talk about the shock of seeing my tax bill, why high-salaried people can still be terrible at personal finance, and how I think through whether to apply to jobs again or liquidate my investments/withdraw early from my 401(k). When do you call, when do you fold, and when do you raise?
Read the full essay on my newsletter, debrief: cecexie.substa...
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit cecexie.substack.com (cecexie.substa...?CTA_1)
Oh Cece, I am so sorry this happened to you. Retired CPA here. 🙋🏻♀️ Please know how common this is with the newly self -employed. Also, just to be clear to your listeners, it is not really a “self-employment” tax. What you are paying is both halves of social security and Medicare. When you were in employed 7.5% was automatically deducted each paycheck and your employer paid the other half. Being self-employed means you are paying both halves.
I totally support you betting on yourself (not that you need my support) and using investments as a stop gap until you can refill your emergency fund, but please, 🙏🏼 please do everything you can to not take out your 401k. You will pay taxes and a penalty and lose the compounding interest. Borrow from parents or your fiancée if you have to but leave your 401k if at all possible ❤
I’m rooting for you and so appreciate how brave and vulnerable you are to post this.
It is going to work out for you. I know it. 🥰
this may be an unpopular opinion but the emergency fund IS there to use it. when you have a scarcity mindset (talking to myself here too) you think you can't use it or use some savings. I say give it one more year because you ARE doing really well. You are your biggest investment ❤
I posted something similar. She can rebuild it up over time. It’s there to prevent you dipping into long term savings or going into debt.
I don't hear a lot about this, thank you for being open and talking about it Cece!
I didn't hear about this either, which is why I had to share! W-2 jobs are nice in many ways!!
The reality of betting on yourself is this right here, making difficult decisions. Whatever that looks like in your life whether its financial or interpersonal, it's still incredibly difficult. Thank you for sharing this aspect of your journey and getting vulnerable online. Do what you gotta do to choose you and your dreams ⭐️
I empathize so much. I just quit my horribly abusive but high paying job last week for a much needed break, and i still feel the anxiety, despite bejng fine financially. I root for your success 🎉
Have u figured out what u want to do or are u taking a break to go back
Save the 401k as the last option. It’s a very expensive way to get access to your money-income tax + 10% penalty. However, I do believe any after-tax investments were a gift from your past self, and may yield a better return if you invest them in yourself. You’ve got this 💪
Hey, I recently found your channel and as someone who's a bit lost with my career, I cannot understate how valuable I've found your candid advice. I also appreciate how willing you are to talk through a difficult situation like this, because it's absolutely true that we all have misconceptions about money and who must be good with it. Rooting for you!
Me currently. Screaming inside to go back to 9-5 vs betting on myself. I’m about to dip into my emergency funds too can’t believe this is so spot on to my life thank you for sharing Cece
Ahh good luck!!! We're in this together!!
Shouldn't have taken that full-ride to CLS or NYU?
Nah, because then I wouldn't have met my partner!!
This is a powerful piece of content and speaks to something sooooo many of us are or have had to navigate with little to no guidance, or even solace that we are not the first/only person facing these challenges or having these thoughts. Thank you sooooo much for putting your thoughts and real time processing out there for the world to see and benefit from. Also, grateful for the algorithm for putting this in my path right on time! Good luck to you and everyone else out here putting one foot in front of the other and figuring it out!
such an honest and needed perspective. hope everything works out for you, Cece
As someone significantly older than you, I recommend that you hire a financial advisor to look at things holistically. In addition to taxes, you also mentioned medical insurance. Your corporate job also provided you with life insurance, supplemental short and long term disability, dental, vision, etc. at minimal out of pocket costs. While you are very young, a long term care policy should also be part of a discussion with an advisor. You should also discuss with your accountant the timing of any 401k distributions over different tax years to minimize any incremental taxes (i.e., bumping that incremental income into higher federal, state, and city tax rates). Hiring a financial advisor at your age will be one of the best decisions you ever make regardless of whether or not you continue self employment.
I commend you for being honest and vulnerable with a topic as sensational as personal finances. Best of luck rooting for you ❤
At some point in life we all have to learn to rely on others. I am the same way and am much more used to taking care of those around me. When I started trusting those around me to help take care of me I was amazed by how much it deepened my trust and relationship with them. Please consider talking to your partner before touching your retirement account. I can’t imagine how upset I would be if my partner jeopardized their (really, our) retirement without asking me for help first. I think you’re doing the right thing trying to figure out what is best for you and I can’t wait to get my preorder of the book! Best wishes ❤
Don't feel too bad about this happening setbacks are a part of life. You live and you learn. Just focus on doing your best in the situation you are in. You're have a lot of skills you just don't use them for one reason or another don't let uncertainty paralyze you. Also, congratulations on the wedding!
you hit the nail on the head about people that go into high salary jobs.... so many coworkers i know get paid well and mismanage thier finances.. then i had a boss one time that was divorced, he filed for bankrupcy and foreclosed on his house.... he also said he had bad credit... i was thinking how can i trust your leadership... you are a walking disaster..
You got this Cece - betting on yourself isn't easy but you're doing awesome work and it will pay off sooner than you think!
🥹 thank you ashley!! i don't deserve a cheerleader like you 🩷
@@CeceXie Girl don't make me type YES YOU DO in all caps 😘
Sending you hugs. Such a hard decision. Be kind to yourself and allow yourself to change your mind as things change
thank you 🫶🫶
Cece, I just want you to know that you are an extremely smart and accomplished woman! Things like this happen all the time! You’re a Harvard educated lawyer. You’re time and work is valuable. You can build up your emergency fund in no time! Don’t penalize your future self because you’re beating up your present self!!! You’ll get through this!!
Cece love your transparency and honesty on this topic. I’m in the infancy stages of going 1099 full-time, scared as hell bc I have the same reservations you do regarding money. However, I believe you’re doing the best thing for you at THIS time. It might look different in the next 6months to a year but I honestly believe betting on yourself is the best option! Keep your head up, you got this!!!!
I'm going through the same exact thing: cleaning out my emergency savings to pay the unexpected life expenses. I am absolutely feeling the same way. I have investments put away, and I am also still a student in University so I feel extra overwhelmed. Just wanted to let you know that you're not alone, and this is just a phase we're going through. We will get through this, and see brighter days - I vote investing in yourself, ourselves. Just a rocky road, with lessons learned.
There’s also nothing wrong with going back to work if you have to. The tax burden for withdrawing a 401k early is a lot greater than the unemployment tax. You’re not a failure just because the rocket didn’t reach the moon on its first launch, you only fail when you throw the dream away entirely.
You have options, you could take on a lower paying job that gives you more flexibility, or move to a city with a lower cost of living, etc. What are you willing to sacrifice to see this succeed?
I got classified as an independent contractor by the state AG’s office I interned for over the summer and learned the hard way about the 15% tax. It’s absolutely criminal to be considered self employed as a law student 😭
omg no way!! that is brutal. surely you should not have been taxed for self-employment for an INTERNSHIP jesus
Thanks for sharing and honor the transparency. 50% would honestly really shock me too.
I am self employed CPA. I cannot tell you how many times newly self-employed people get hit with huge SE tax. Real eye opener...I paid $23K in SE Tax. Just SE not income
Came to say this. You’re far from the only one. I do hope to make it clear though that even employees of companies are paying half of that, 7.5% and the employer is paying the other half. So it isn’t a tax on self-employed people as much as when you become an owner, you have to pay the employer portion and the employee portion. I don’t want anyone to get the impression that this tax is just on self-employed people. It is just automatically taken out of paychecks so very few people know/understand it.
@@lauriecole3312 I literally am a self employed CPA. I do taxes for a living. I dont think you need to explain to me....
@@Tennischamp10 I was putting it in the comments so other people could see it, at no point was it saying that you didn’t know what you were doing. I came to second what you were saying and add on things I thought people should know. You’re very sensitive for a CPA (and that’s coming from one).
Even if you did have to go back to work someday, I think you’ll always respect yourself for making this decision.
that's what i keep reminding myself!
This is a amazing and realistic video about taking risk in life I’m thinking about law school now and this video covered so many different thoughts I have
Saw the borgata photo. You are a badass ma’am! Cheers 🥂
would recommend you ask your accountant help you plan for estimated taxes every quarter! it’ll help by breaking up the payments so u don’t have a large bill in april and minimize underpayment penalties
I will certainly be doing so when I talk to her next 🥲
Just a few hours ago turned the notifications to 'All' on your channel and today I get a notification for this upload. Thanks a lot, Cece!
i am honored!!
Hey cece I don't have money so I don't know about such things. But have good faith in your decisions. I think that's a part of being true to ourselves. Good luck!
Facts! I got your newsletter about this today! I’m glad you posted in real time! 😃
I thought about not and just throwing it into a "WATCH THIS BEFORE QUITTING YOUR JOB" video--but I like processing in real time and showing that to folks. Glad you enjoyed the double content day hehe
yes, thank you for sharing!@@CeceXie
Hey CeCe! I’m coming to this a bit late so maybe you already made a decision. My advice in this scenario would be to withdraw from a taxable brokerage account before touching a 401k. Because you’ve already paid those taxes, you just need to pay capital gains. Before you sell anything go back to your accountant and review your cost basis for the investments to sell strategically to minimize capital gains tax. Second, withdraw principal from any Roth IRA, this is less or no penalty there because again you paid the tax on that principal. Third step is to take a hardship withdrawal from 401k and then pay it back a year later. I think if you pay it back and certain other conditions are met, you can avoid a penalty. But you need to talk to an accountant before you decide.
Also please rely on your partner! This is what partnership is for. I would always help my husband with my cash savings and would literally get so mad at him if he touched his 401k because he didn’t want to ask me for money. Even though the savings are in my name, we’re married so his emergency is our emergency and we will get through it together as a team. You should try to look at it that way
Aww Cece, you can definitely cut it. When you're close to your blessing the enemy always has to try to throw you off your A game. It was a huge bump in the road but you got this, keep it up. If I were in your situation I would apply to in house positions if you really have to choose. Im in "mid big law" and let me tell you its ghetto. Its still the same bs and stress that you left behind. You will be fine loves! You are on the right road never forget that.
That's helpful to know, thank you! I was thinking Product Counsel roles, so that aligns :) And thank you for the kind words! I know it's just a bump in the road, but it was a pretty jarring bump ha
P.S. I hope you're doing things to tackle the stress! I'm sorry that mid biglaw isn't any less stressful ugh
Do not liquidate your retirement accounts
Wait so a former layer couldn’t read the tax law?
just like how @brokeloser didn't watch the video
Keep grinding. Think creatively for revenue. Spend less. You will make it. I have a small company and it took awhile, but the journey is worth it. Go get it.
I'm a bit confused here. Is there a self-employment tax on top of the income tax? So, say you make $150k. Would you pay the income tax on that (federal and state), then an additional 15.3% (e.g. New York state rate)? Sorry I have no idea how these taxes work, I was just curious.
It's a bit complicated. Self employment tax is part of income taxes. When you're self employed that 15.3 self employ tax covers social security and medicare, if you were an employee with an employer who took out taxes from your paycheck the employer pays part and you pay part (via your paycheck.) Income tax on the fed. and state level are what tax you owe based off of all your earnings. the 15.3 gets paid on the self employed earnings.
If you're self-employed, yes--you pay income tax (federal and state) and then an additional self-employment tax of 15.3%. You get to deduct half of this 15.3% from your adjusted gross income, though. If you're a salaried worker, this "self-employment tax" is just Social Security and Medicare taxes (that you also split the cost with your employer) that gets taken out of your paycheck automatically (so just looks to you like it's income tax off of your paycheck). Here is more information about this tax in the self-employment/small business context: www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes
Listen I get it. I had to dip into my investments because I had no 401k at the time. You have to do what you have to do. 100% invest in yourself!
If you sell your investments you will have to pay capital gains taxes. This could be short-term or long-term depending on how long you held the investment for.
If you sell liquidate your 401k the IRS generally automatically withholds 20% of it for taxes and they will penalize you with an additional 10% fee when you file your tax return the next year. So that’s 30% of whatever you withdraw gone.
Thank you for this information!!
Yes this is an important point. Please be strategic with the order in which you withdraw funds. Start with the taxable brokerage account (non retirement accounts), then consider withdrawing Roth IRA contributions (note you can only withdraw what you put in but not what gains you’ve made in the account without a penalty). Then consider withdrawing from your HSA if you have medical receipts that you can write against what you are withdrawing from the account. These withdrawals can all be done without a penalty. Please look into the penalties before making your withdrawals.
Capital gains tax is no big deal because it is just a tax on your gains and would have to happen some time or another. Ideally withdraw what will be taxed as long term capital gains first tho! It’s good for it to happen now when you are at a lower income anyway. Penalties however are preventable so please think about this.
I wish you much success Cece! I agree, now is the time to make the bet on yourself before marriage and kids (if you plan to have them). The 401k will fill itself up again. One's lifestyle will adapt. You'll always have a corporate job to go back to. Now is the time to make this asymmetric bet on yourself so that you can live regret free! I'm impressed by your courage. As FDR said, Courage is not the absence of fear, but rather the assessment that something else is more important than fear." There is a recent book,
Taking Stock: A Hospice Doctor's Advice on Financial Independence, Building Wealth, and Living a Regret-Free Life
When you are older, whatever comes from these couple of years would have been a great adventure and story that, in and of itself, is a success. And if that means an author, great. If that is a lawyer, okay too. Just as long as you gave it a try and are happy with yourself. Again, the lifestyle will adapt to the money. But the only time to do this, with the winds at your back, is now.
Also, I would get health insurance through my partner. Can you file for domestic partnership if you don't want to get married yet.
Anyway, Go Cece!
i think this is very brave of you..
Just money. No big deal. Just like the older said:”天生我才必有用，千金散尽还复来”
No need to withdraw from your 401k, you can take a loan against your 401k!
Stings. I wonder if your accountant included any penalty calculations for underpaying quarterlies. SE tax definitely feels like overkill when you run a lean Schedule C. It took me awhile to start thinking about my consulting side gig as a business with its own expenses, so bringing down net income that SE tax is applied to is much more in my focus. I'd advise the same for you if you haven't already thought about it.
I relate so much to the bit about investments and 401K being non-money. In the UK, our 401k equivalent actually CANNOT be accessed until 55 years old (unless you are terminally ill) so it really is non-money in my view. People then will counter my view with - well it’s your choice to lock that money away (as I contribute a significant amount to it - the caps in the UK are much higher) and I can see that argument, but I just hate that money which I could have contributed then being subject to tax. My separate (post tax) investments - people don’t seem to relate to my view of like « it doesn’t exist ». Maybe this is scarcity mindset, but I can’t seem to give up on the promise of a better life that I see offered by those investments and that it’s that that I can’t give up on - almost as if by removing them, that I’ve lost my realistic chance at a happier less stressful life.
So glad to see you and “Currently Workshopping”! Thanks for your transparency around this important topic. Investing in yourself and creative goals is huge!
Im rooting for you🎉
Don’t touch the 401k! Ask friends, family for money and pay them back. Your future self will be happy you held out.
Do not get married for health insurance! That's a whole new bag of worms if something goes wrong
It's why I file S-0 with my employer even though I'm married so that I make sure enough gets taken out and I get a higher than normal return.
I'm right there with you. I'm about to withdraw my unvested pension to agoid going bck to work while I get my business off the ground. ❤
ugh it's financially hard and even more emotionally hard. wishing you the best of luck!!
It's not being bad with money, it's the reality of being lower income in this country
Hmm interesting, in 2022 I had a contract job and I put away 30% per month for tax (CA) made just 30k.
Realest content I've seen on any platform in a long time. Cheering 4 u!
I'm a very casual follower, but perhaps there's a middle ground between heading back to a crazy work schedule or forgoing that important compound interest of your 401k. Lifestyle creep probably happened very quickly with such a high salary, so tightening up the budget to essentials only might be a tradeoff to keep doing that soul-warming creative work --signed a 30-something who had frugal 20s courtesy of pursuing a PhD
I agree! I would probably look for in-house roles if I were to apply to jobs again, so I can try and strike that balance. But I only have a year-ish until my book comes out, so I'm going to tough it out in self-employment until then!
there should be a bad bitch exemption no reason you should pay taxes
how come u didn't film this live? I like watching your podcasts live
I get too nervous to film live 🙈 Building up my confidence to one day get there, though!
Did you say 50%!!!! That’s wild
Why not just wait to rebuild up the emergency fund? Isn’t that what it’s for - “emergencies” - once used, then you re-build it up again. It’s rolling up and down as needed.
She is just being impatient.
Wonderful insight Cece! Thank you!
Hi babe can you take a part-time job? It's pretty common for writers to have a part-time job to support their writing dream.
i can! and will if it comes to that. but i’m okay for now, in between legal work and my investments and my next advance payments
@@CeceXie ok good luck love ❤️ try not to take the 401k you lost so much from that!! Would definitely suggest an appt with a financial consultant
I'm sorry to hear this and 😠angry 😠that your "accountant" advised you to pay the entire balance as a lump sum. The IRS has payment plans at a low interest rate, offers in compromise (settling tax bill for less than full amount), etc. New York state has similar programs. You did not have to put yourself in such a deep hole all at once!
Taxes have payment plans tho!
I have since learned that! It's good to know, although hopefully I will be better prepared in the future so won't have to avail myself of that...
Nothing more satisfying than YOUR OWN PERSONAL CREATIONS ♥️
selling your investments that are in a brokerage account is a good plan. Liquidating retirement assets is not.
I think it really depends on your financial situation and earnings potential trying to rejoin the workforce from self-employment! I spoke with a trusted friend/business school professor about this plan of action--while not a course of action to take for most people, he agreed it was reasonable for me for this next year.
Pay an accountant to do tax, hustle free
i have more faith in you than i do in the s&p 500
Cecee 😃
hello hello
WAIT a minute, so you're thinking you'd rather liquidate your investments and 401k (before time) INSTEAD of getting help from the man you are potentially going to marry soon ??????? and will share finances with ????
it’s an irrational mental block i have due to things that happened when i was a teenager! i talk more about it in my newsletter: cecexie.substack.com/p/id-rather-fake-my-own-death-than
@@CeceXie please look into that first before making such a decision, I know I'm a stranger on the internet and I don't know you but that's I think the real issue here 😭😭 I will read your newsletter to understand better
nono, I totally agree--I know it's illogical and not what I should do at all. I probably won't do something like that but am working through getting comfortable with relying on others
too many ads
To summarise: you didn't bother to check basic tax laws when becoming self employed, but it's ok because you're rich anyway. Would be nice not having to work.
To summarize: She's talking about a mistake to help others. I haven't heard entrepreneur youtubers talk about this. You miss the point and try to dunk on someone when down because you feel incredibly small about yourself
She's never going to kiss you, @@isiddiqui5162
No1 teaches u how to navigate the tax system. The same also happened to me when i started my business. U get so focused on the business, u are stressed daily. No one informs u to hire an accountant. U just find yourself getting hounded by the t@×man after the 1st year end! & u r like "WTF!!!"
We are not your mom and dad girl.
Where did I suggest you were?
@@CeceXiewhat I’m trying to say is that you are talking to your viewers like you don’t want to disappoint us. That’s the vibe you are giving off
@@CeceXieyou’re cute af too but that’s besides the point 😅😉
I think because these talking videos are a lot about processing thoughts to myself--thinking through all the objections and counter-arguments that different parts of me raise. In a way, I make these videos because I don't want to disappoint myself (and all the rulesets that I learned throughout the years, including from my parents)--so I see how it can come across as me not wanting to disappoint the viewer, especially if the viewer carries similar rulesets
@@CeceXie I find it helpful you process out loud for us! It's what makes us follow you and what makes you relatable!