This post could’ve been much bigger with more grammatical mistakes if I decided to write about what IRA is, and all the differences between Traditional and the Roth version of it. This post is not about that. There are a lot of awesome helpful resources where you can read about it:
This post is a simple “how to” Backdoor Roth IRA for those who use Vanguard.
Before you start
If you have money in your traditional, tax-deferred IRA account you can’t use this method. First, you have to do something with this money:
Rollover to an employer’s 401(k) account – not all the plans allow rollovers, but if you plan does and has good investment options you can move money and avoid paying taxes yet.
Have a solo 401(k) account and move all the money there. – if you have a side gig you can open a solo 401(k) account for your earnings and put all your money there. You can also open a SOLO-IRA account, but in this case, you will not be able to use the back door if you have any money in your SOLO account.
Convert into Roth IRA and pay taxes. – you don’t have much money in your Traditional IRA, and you have money to pay taxes on the conversion, you can convert all the money into Roth and forget about taxes on that money for the rest of your life.
How To Backdoor Roth IRA
1. Open Traditional IRA
If you don’t have a Traditional IRA account open, you need to do it. Go to Vanguard website and open an account. It should be pretty easy, you just need to specify what kind of account you want to open.
I opened my account a year ago, and Vanguard keeps the account even with zero balance in it; you don’t need to open another one.
2. Make contribution
You need to contribute $5,500 to the account you’ve created.
Let’s acknowledge one really simple fact, OK? People need to work, they need to do something meaningful in their life, and mostly for their own good. This isn’t an idea I or Jon Acuff invented. Thousands of people have written about the need and purpose of work in our life.
Actor Ryan Gosling dealt with this after the success of the movie “The Notebook”. To combat the sense of drifting aimlessly, he got a job making sandwiches at a deli. Once he said,
“The problems with Hollywood is that nobody works. They have meals. They go to Pilates. But it’s not enough. So they do drugs. If everybody had a pile of rocks in their backyard and spent every day moving them from one side to another, Hollywood would be a much happier place.”
People need to work. You can pursue your early retirement and even can retire early, but without doing nothing, and just playing golf there’s a huge change end up in a rehab for drug addicts.
But there’s a problem, a lot of people hate the job they’re working. They hate their job and dreaming about quitting it, and Jon’s book is for that kind of people. It’s for you and me.
There are different ways of quitting your so-called day job. You can do it wrong, and you can do you it right. I should call my mom, and tell her I’m a damn genius. Jon’s book is designed to help people quit their day job using the right way, the way that doesn’t bring strife, fight and more stress in your already stressful life.
Don’t Quit Your Job
No, not right now. Because every one of us has all these B-ees and Rs: Bills and Responsibilities. We all know that a lot of people are stressed because of money and all the bills.
Can you imagine the level of stress a person would get if he decided to quit the day job right now?
When I started reading this book I thought “Quitter” will help me to understand how to quit my day job faster and start my own gig. But what this book actually does is it teaches you how to be excellent at your day job.
I was surprised when Jon didn’t tell me to use my lunch time to start my side gigs or come early in the morning and write in a quiet environment, no. It’s actually stealing, and I have to agree with the author. It’s stealing from your employer, who’s paying your bills, feeding the family and so on.
Hey, what da crap? How’s that stealing if I start and finish working on my dream job during my lunchtime or before the work?
Good point, but let be honest. How many of you can say that you have never-ever come late for a lunch-break? How many of you can say that you have never ever been late to work?
Don’t steal from your employer. Learn how to be excellent at your day job.
And you have to work hard, really hard at your day job. Why? It’s simple, the biggest reason is that you’re not just working: you’re practicing for your dream.
Power of the morning
Hey, but we have only 24 hours in a day, and a lot of time we spend at work, commuting to and from work. I don’t have time, I just don’t.
Each and one of you have the perfect amount of time each day for things that matter most. The key is spending time on those things. You might be too bored to work on your dream, but just don’t buy into the lie that you are too busy.
That’s exactly what Jon tells us in this book. Hey, if you want something really big and you think you don’t have time during the day, start waking up early.
Like 5 AM EARLY
I have heard a lot about people who wake up early to accomplish their goals, like 5 AM club and others.
It’s 5:30 AM and I’m writing this post. For some of you, it’s a perfect explanation why you think this post is crap.
There are a lot of valuable lessons and motivation in the book, and Jon is a great author that knows how to use humor in the text, how to motivatie and inspire.
Throughout his book, he teaches really important lessons like:
how to make sure your dream is not a result of last night pizza.
how to find more time for your dream.
hustle and grind, baby. Hustle and grind.
important power of enough.
And the most important Jon teaches how to quit dreaming and start working for your dream.
I would highly recommend this book to every one of you who are dreaming about “a dream job” and doesn’t know how to start.
I have a confession I don’t like Google and the products it makes.
Internet blasphemy right here
Google makes good services but horrible products, at least for me. It has screwed me a good number of times already. It has closed all the products that I liked and used: Google Notebook, Google Reader, Google Code.
Recently Google screwed me again. At this time with its Google Maps.
I love motorcycles, adventure motorcycles in particular. I love the freedom they give. There are no words that can describe the feeling of being alone on an empty road; it’s only you, nature and your motorcycle.
You get to see a ghost town in the middle of nowhere
You know why do I love riding my motorcycle? It’s because of a couple of reasons:
You get to meet a lot of great people. A lot of great people drive cars, I know that, but when you are on your bike people tend to talk with you more. Your motorcycle’s like a magnet for them. People ask your story, and you listen to their story. It’s awesome.
Like this guy from Canada. He has ridden his big KTM almost all over the world. If you take a look at his bike or panniers you would see no empty spot, it all covered with stickers from the places and countries he has visited.
You get to see a lot of great places. From my personal experience, the same place the same road or a scenery will look and feel completely different from your car window than through the visor of your helmet.
I wish this old fuel pump was working.
You can find a ghost town in the middle of nowhere with an old fuel pump, or an awesome side road on 10,000 feet elevation.
JL Collins perfectly described the beauty of riding a motorcycle, you can read it here. It’s better in the wind, indeed.
He’s absolutely right. Statistically speaking probability of using life insurance benefits is almost zero; it’s less than 1%
But it’s not so simple.
Insurance in Soviet Russia
Insurance business in Soviet Russia was the government prerogative. There was only one company called Rossgosstrakh which had about 140,000 insurance agents all over the country.
In early 80x, the insurance market in USSR was about 161B Soviet rubles, which is about $550B. But the way the whole market was structured and gained was typical for USSR.
In Soviet Russia, bears will make sure you work, and you do it hard.
Every Soviet citizen was a government employee, because every organization, factory or a service “company” was the government property. People didn’t have any small business it was criminal activity.
From every paycheck, you would have some mandatory withdrawals. Your trade union had to decide what type of withdrawals (in addition to the taxes) you would have.
My father, who was a coal miner, had these:
trade union fees
Because of these additional mandatory withdrawals, people didn’t like insurance at all, a lot of people used to think that this is unnecessary crap that they have to buy because the government said so.
As a result, I grew up with an impression that all insurance business is a scam.
After our immigration to the States in 2013, I realized one simple thing. It was a revelation to me. We don’t have anyone here.
That was a really hard thing to grasp before the immigration, I know.
This is the time of the year where people share their goals, New Year resolutions, and dreams. No, seriously, every FIRE blogger writes about the importance of setting goals and share their New Year resolutions.
And hey, I’m ain’t different by any means. Recently I wrote a post about converting your dreams to your goals. And today I’d like to write about my personal goals for 2018. It will be easier for me to be more honest with myself about either achieving or failing them, and easier to track them for myself.
Without further ado let me talk about my personal goals.
The Wheel Of Life
Zig Ziglar used to talk about this amazing concept called “The Wheel Of Life”. According to Mr. Ziglar, this wheel has 7 independent areas that inflate separately. In order to have the wheel rolling, you have to maintain every of its area.
Having even one area deflated will cause problems: you will have to spend more energy keeping the pace, or you will have to slow down. The more areas are deflated (not taken care of) the more problem you will have in your life. If you want to have a good and quality life, you have to work on all the 7 areas.
Being an evangelical, Bible-believing Christian I believe that Spiritual life is the most important, at least it’s important for me. I am a brand new Christian and still at the beginning of my spiritual life, and these are my goals:
Read the Bible every day – What an amazing about it is, people read it for the whole of the life and every time find something new, isn’t it amazing? I strongly believe this book has all the instruction people need and shows us how to live the purposeful and wonderful life.
Study 4 books from the New Testament – Reading the Bible is important, but to know and understand the context, the meaning, and historical circumstances is more important. Otherwise, there’s a big chance to follow a wrong doctrine.
Start a YouTube channel (English) – One of the reasons I started this blog was to improve my Egnlish. I came to the States in May 2013 without speaking any English, and starting this blog was one of the tools I’ve been using to improve my English. After thinking for a while I decided to open a YouTube channel and keep it at least for a year. This channel thing is a huge step out from my comfort zone. I have no idea what I am going to do with this channel, but I know that I HAVE TO do it.
Visit a Meetup – this goal is a perfect example of killing two birds with a stone. Visiting meetup(s) I will be able to find new, like-minded friends, and improve my speaking abilities.
Disclaimer about our Net Worth
We don’t have any debt, none whatsoever. But we use credit cards to earn some miles and get signup bonuses; we pay the whole balance every month. We own a car and a motorcycle, but we do not include the value of these vehicles in our Net Worth. The same for our kids 529s.
How’d you spend your vacation? Was it good? Hope you had a great time because we did.
Lake Tahoe, CA Still don’t understand people who like living in a city
We spent our vacation at the Lake Tahoe, CA What a great place to spend a Christmas vacation. I don’t know about you, but I LOVE mountains, I really do. When I lived in Russia I lived in a place called Sochi – a host of 2014 Winter Olympic Games. Maybe, for this reason, I LOVE Colorado.
Look at this idyll
Mrs. FR and I are planning to move to Colorado in a year. We would’ve moved already but one news made us move our plan for a year. I will write you about this news later 😉
Net Worth Update
Just WOW… Less than 5 years after coming to the States our Net Worth crossed $200,000 milestone and I have to tell you this, the first $200K is a bitch. You can take a look at this screenshot.
I have no idea what was going on, but Personal Capital made me a hard time
Yearly in December, we were so close to a $200K milestone, but the life happened: our younger daughter had a dental surgery that we had to pay almost $2000 out of pocket.
As it usually it happens to me, I started too fast with too ambitious goals. I posted 2-3 times a week. And it worked, but for a short period of time.
A Russian proverb says, “A bad horse starts too fast.” I was that bad horse. And as it usually happens with a bad horse, it started slowing down in the middle of the race. I didn’t have enough time to keep the same pace I chose.
As a result, I slowed down from 2-3 posts a week to one post a week, and later to one post a month.
Don’t beat a dead horse
Today, as I’m writing this post, I remembered a book I read once to my daughters, “The Tortoise and the Hare” This book has an amazing lesson, you know what?
The Tortoise Always Wins
Remember, the tortoise always wins
This year I learned my lesson, slow and steady…
“SLOW” but the more important part is “STEADY”
I’d like to share with you some stats from 2017. Some of them surprised me, some not…
Top posts from 2017
Net Worth – A series of posts about our family net worth. It’s really great to see how well we did in 2017. And more important it’s really powerful to see and understand that we are really blessed with our income.
First Pay Check in The States – a story about my very first in the States. Don’t know about you, but I keep it and hope, one day, it will become our family heirloom.
A millionaire before 50 – an interview with Menard, a first-generation immigrant who has already reached a great milestone – $1,000,000 Net Worth.
A story about one financial mistake – a year after we came to the States we made a financial mistake that 99.9% Americans make; we financed a car. We learned our lesson, even we regret this purchase.
How to Budget the Russian Way – a budget is a cornerstone of financial success. I was amazed when I realized how many people don’t know what a budget is, and how to budget. And you know what, it’s really easy.
Convert Your Dreams To Your Goals – I used to have New Year declaration and resolution. It didn’t work. You know what works? Goals work. This is why I wrote this post explaining how to convert your goals to the dreams. I hope this method will you as it helped me.
Looking back at the year of 2017 I have to say one thing, “Our family has been blessed“. We have found many good friends, visited a couple of great places and found out that…. I will tell you later about this great news.
Thank you for staying with me and reading this blog.
Isa 9:6 (KJV) For unto us a child is born, unto us a son is given: and the government shall be upon his shoulder: and his name shall be called Wonderful, Counsellor, The mighty God, The everlasting Father, The Prince of Peace.
December is the most beautiful time of the year. I just want to wish you and your family a very beautiful Merry Christmas. Spend time with your beloved ones, play with kids, go on a date with your spouse.
But don’t forget about the spirit of the Christmas, it’s all about giving:
Joh 3:16 (KJV) For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.
I grew up and lived in a country that preached and practiced communism and socialism. After 30 years of living in that environment, I don’t tolerate two things:
Socialism with communism
More Taxes To Help Poor
Recently I’ve had a conversation with a fellow FIRE blogger ZeroDaysFinance about helping poor, free medicine and how people should be taxed more in order to do these good deeds.
You don’t need the government to take care of the people. You can do it without asking the government to take even more money from the people. And yes, all the government is well know of managing $ and thinking about the people. https://t.co/KPelk6a0z8
When people talk about taxes they go bananas, on both sides of the aisle. I am amazed at how many people lose their ability to do critical thinking due to their political beliefs. I am amazed at that, both on the right and on the left. This conversation is the perfect example of that.
Government is not a charity.
Let me tell you something really simple and easy.
Taxation is not a charitable act
You don’t need to be left, right, black or white to figure that out. And so to accuse someone who doesn’t want to pay higher taxes as being uncharitable toward poor people is absolutely absurd.
A charitable act is when someone voluntarily takes money that they have owned and earned, and they give it to someone else.
Let me repeat it again, VOLUNTARILY.
If they do not do that, they don’t go to jail.
If you don’t file your tax returns, it’s a criminal act and you go to jail. Last year about 2,500 people went to jail for failing their tax returns. So, there’s nothing charitable, or loving the poor well about thinking people should be taxed more.
I love December, the spirit of Christmas is in the air. People are “making the lists and checking ’em twice”. Some people are trying to sum up the year, and some are thinking about the goals for the new year.
But before thinking about the new goals let’s talk about the differences between goals and dreams. Otherwise, you will have dreams and not goals, and dreams stay dreams all the time.
We are all dreamers, people dream a lot. Some people dream about money, another dream about becoming famous, and someone (maybe) dream about playing guitar like Steve Vai. People tend to change their dream time to time, and sometimes even the dreams become true. But let’s be honest, most of the dreams remain dreams for the rest of the life. And the main reason for this is this, dreams don’t have the main attributes which are necessary for achievable goals.
You, probably, heard this saying, “A goal without a plan it’s just a dream”. Using the opposite we can say that a goal is a measurable dream that has a plan for achievement.
“I want to become reach” – is nothing more than a dream, but “I want to have $50,000 in six months” – is a goal. Have you noticed the difference? This goal has a specific value – $50,000 and specific time – six months.
“I want to lose some weight” – nothing more than a wish, a dream. And “I want to gain/lose 10 pounds in 3 months“ is already a goal.
Do you already notice the huge difference between a wish and a goal? But that’s not all, goals have more attributes; goals have to be SMART. Continue reading →