After today, I only have six more working days on my AT&T contract where I’ve been a project manager for more than four years. I don’t have another job lined up yet and I’ve been looking forward to having a little time off, as long as it’s only a little time. My wife’s new job covers our regular household expenses now and my income provides us with a small layer of luxury and a source for a strong saving plan that gets funneled towards our TD Ameritrade account after I make my annual $2,000 contribution to my son’s tax deferred educational savings account (ESA).
Without my W-2 income adding to our total income, my only contributions for our financial growth will be from investing and this blog. The blog doesn’t add much yet, but is growing. My investing account should add $2000-2500 per month, but that’s pre-tax and without a real job my taxes will be higher since I’ll have to cover my own Social Security and FICA expenses that an employer typically covers. My W-2 income was enough this year to max out my Social Security payments. I don’t see that benefit being part of our 2008 world, but it could be if I land a good job soon. I’ll accept a job eventually, but for now I’m staying fairly picky.
I see two ways to look at my near term future. Am I unemployed or am I a full time trader? I don’t really have enough ($~88K) in this account to pull a good income from it yet, even after I make another contribution at the beginning of January with my final check. Working with $90k and using the big assumption that I can maintain my 25+% returns, that’s only $22.5k per year. It makes me think I’ll be looking harder for a new job rather than taking less than 25% of what I could make working.
If the end goal is to have a lot of money invested, the decision is clear – I need to work for The Man a few (4-5?) more years. I could always start my own business, but really have no desire to risk so much and sacrafice family time too much. I received an offer from Citibank for a line of credit of $82,000. If I drew that down in full and used it to trade it would be like taking a business loan to finance a start up. Their offer is something close to Prime MINUS 0.6%. I don’t think I’d have trouble beating that in trading returns, but I’m already trading with more than I have, so I’d be in four times my actual cash balance rather the the two times I try to run with now. Until the markets finish this recent turmoil, I’m not risking more than two times my cash value. Actually, I’ve been running light on that goal lately since I’m being fairly cautious.
With that decision made, I can move forward with more confidence on what I want. When I’m setting goals I find it much easier to write down all my thoughts and options (no pun intended) to clear away the cob webs. All that said, while I’m looking for the right job I might end up telling a few of my snooty neighbors that I’m taking some time off to invest until the right opportunity comes along. My true friends will know the truth, I’m about to be unemployed and it sucks.
IMHO, keep looking for a real job — you’ll get bored trading and your skills will become outdated. Don’t use your line of credit or margin for trading. It’s difficult to overcome loan interest plus short term cap gain taxes. If something goes wrong you can lose your home.
You are exactly right and that’s my decision in the end. Money is fun and I need a job to have more of it.
We are all unemployed ;)..just everyone phrases it differently. My girlfriend is great like your wife and covers day to day expenses until things pick up on the net. Wish you best of luck, and the time off should make you creative/thinking again on what you want and how to achieve it.
I’m pretty sure your taxes would not be higher because your investment income is not earned wages and therefore you would not be paying SSA or FICA taxes on it. I maxed out SSA for a number of years but there is no limit on FICA taxes and my CPA has not included my investment income in any calculation for FICA taxes.
I agree with comments of #1. (DO NOT BORROW MONEY TO INVEST IN THE MARKET) I did this when first starting to invest and got burned. Alex, also want to thank you for introducing me to sell OTM naked puts as good way to enter trades. I have 6 naked puts expiring today (Dec. 21) and so far none are ITM. What a great strategy to get premiums or enter positions!!! Thanks again!!!!! Best of luck in your job search. I’m also from the South, SC.
That’s awesome Melvin! You are very welcome. You have to love getting those six premiums during a down quarter.
You are right, I’m not actually going to borrow $ to add to this account. I forgot to mention during this post that the idea didn’t make sense even further because I have $30k in CDs that I’d tap into before borrowing and I’m still planning on leaving that as our safety net.