Vol. 45 - How Nurses Should Handle Their Finances in 2021
In this episode, Charles Adi of Blueprint 360 and I discuss the common questions and concerns nurses have had over the years, which would be a huge help in handling our personal finances starting this year. Especially now that we have been able to take advantage of career and income opportunities we have not been able to have before. We cover:
Common tax questions of nurses
Avoiding the common pitfalls on tax concerns or filing
Tips in withholding the amount for tax
Opportunities on income that can be explored
Reviewing your accumulated financial products
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TRANSCRIPT:
Naseema McElroy: [00:00:00] What's up nurses on fire. I have the honor to have my friend trout ID certified financial planner, and he is going to talk to you about what you need to prepare for financially in 2021. What's up Charles.
Charles Adi: [00:00:18] Hey, what's up. What's up. Hey, I appreciate you for having me. I'm excited about the conversation.
I'm ready to get into it.
Naseema McElroy: [00:00:24] Let's do it. All right. So we are going into a year and this is an unprecedented year, especially for nurses because nurses have faced a lot of things just in dealing with COVID, but just a lot of transitions in the nursing profession, as far as how we practice. But there has been a lot of opportunities for us to get money in ways that haven't necessarily presented.
Themselves before like this, like across the board in nursing, there are some areas that historically pay a lot more than a small number of nurses have access to. But now with these COVID contracts popping up, like a lot of nurses are out here, get in the bag and they want to know what they should be looking out for in this coming year.
So trials, thank you for helping us navigate that.
Charles Adi: [00:01:13] Yeah, no problem. And I can tell you, I've seen it on my side as well. I'm a financial advisor and I've been practicing for about 10 years now. And I've worked with nurses throughout my career, but you know, 2020 is the only year that I've seen multiple nurses come to my office with income in excess of 20 and $50,000.
And that is crazy. So with that money, you know, it feels good. It looks good, but there's a lot of questions that they've been asking and hopefully I can clear some things up.
Naseema McElroy: [00:01:42] All right. So what are some of the questions that they ask when they come to you?
Charles Adi: [00:01:45] Gotcha. Yeah. So the first thing is all about taxes, right?
this money that's coming in, the first question is Charles house's money tax. And I would say the first thing is you really got to understand what is your payment type? How are you getting paid? Are you a independent contractor getting paid a 10 99? Are you a W2 employee? Because that designation is very important when it comes to your tax planning and a really, you know, set you up to do a lot of creative things, tax planning. If you were a 10 99 person versus someone who is W2.
Naseema McElroy: [00:02:18] Nice. Okay. So A lot of nurses are W2 nurses. And I know there's limited things that you can do as far as planning for taxes as the W2 person.
But these people who are on these contracts and then they're given the option and they're saying they're giving the option to file exempt. Right. And a lot of people have asked me this, and this is why I'm bringing this to you. What do you tell nurses who are wondering if they should file exempt?
Charles Adi: [00:02:49] Yeah. So what I say is exempt is another word for a trap in my book because you know, being. Finally exempt is not really doing a lot for you from a tax perspective. All that is is telling your employer not to withhold money from your paycheck. What you really want to know is are you 10 99? Or are you W2?
Because no matter which status you are, you have the ability to file exempt either way. So most people who are filing exempt. They're typically going to be W2 employees. And what they're finding out now is that their employer did not withhold any money for taxes and, come April 15th, 2021.
And they're going to be hit with a rude awakening that if they had not been responsible with their money and they have not saved, let's say that benchmark of 30%, they're going to have to figure out some other way to come up with the cash to pay the IRS. So the big picture is just because you have the option of going exempt does not mean you should do.
So. I encourage all my clients if they're W2 to have their employer with posts and money, because that exempt tax trap is definitely real. And most people don't have the discipline to see that money in their account and just let it sit and not spend it. So that's the first thing I would say exempt is definitely a trap.
Naseema McElroy: [00:04:04] Definitely. Definitely. And is there a rule of them, the amount of withholdings you tell people to take or is there just like, of course, I mean, I know it's individual, but like with those people that you see that are making like 250,000, obviously they're pushed up into one of the highest tax brackets.
Like what are some things that you tell them to make sure that they're withholding numbers wise or dollar wise.
Charles Adi: [00:04:33] Yeah. So I tell my clients to withhold a certain percentage. So typically if your income is around a hundred thousand or less, I tell you to withhold 20%. If you get to be around one 50, 200, we put that up to 25.
If you're over 200, you'd definitely want to withhold 30% and keep in mind for those individuals who are not W2. And let's say you are a 10 99 independent contractor. Then I will tell you to always add 10% to that number. So if you're. 10 99 making less than a hundred thousand, I would say save 30%. Right?
If you make it more, increase it to 40, because you still have to pay for self-employment taxes. That's a social security and Medicare, and most people, when they start thinking about taxes, they only think about that federal piece and they oftentimes forget that stuff and pointing portion that, you know, you definitely have to pay if you are tonight nine.
Naseema McElroy: [00:05:25] I know you don't have any state taxes, but I'm in California and we have massive state taxes. So that's another thing if you work in California, but you're from another state, we got to get that money. So, so plan for that. But yeah, I like that tip that you share it because I wouldn't necessarily think about like the social security and all that stuff, not being taken out.
And I totally forgot about that, but yeah, that's made up by a self-employment taxes, so yeah. Definitely something to keep in mind.
Charles Adi: [00:05:53] One thing that I'll also share is depending on what state you're working in. So let's say you're working in California, you work in the New York, those States do have state taxes.
So you definitely want to consider that. And oftentimes those state taxes are not withheld from your paycheck either. So you're responsible for paying that as well, when it comes time to filing your annual return. So yes, there's a lot of different traps that can be, you know, involved when it comes to planning for your taxes.
But the best thing that you can do is be aware, understanding your tax treatment, understand your jurisdictions. I mean, what States you're working in and whether or not they have state taxes or not, and then save. So if you're unsure, I'll put up the 40%, if you don't feel confident, Go up to 50%.
But definitely want to set some money aside. The other thing that I want to say that a lot of the clients that I'm working with, they, are not aware of that, that per diem, that you're receiving for your housing, for your travel, for your food, that money is not taxed. So although your total compensation might be 20, $50,000.
When I'm saying save 30%, I'm saying save 30% of your taxable income. So it makes sure that you back out that per diem from your total income, and then save according to what's actually going to be taxed at year end. Yeah,
Naseema McElroy: [00:07:06] I think it's just a good idea, a good rule of thumb, especially when you're navigating into territories where you're making more money and in a different way than you're used to making it to always talk to a financial professional about what you should be planning for, because there's things that you just don't think about.
And not just any financial professional, because I don't think everybody is aware, you have to speak to a financial professional that like works with nurses that is understanding like the per diem. Like not everybody understands that part of our travel contracts that there's housing costs in there.
There's pretty, and there's all these things in there that don't come with every other job. So, yeah, make sure. You work with somebody who knows your industry. So I think that's really important, but like, what do you tell people who are like, but still I have all this money, like what do I do with it?
Charles Adi: [00:08:04] Yeah. So, I mean, that is a beautiful problem to have. And while I like to encourage my clients to do, or the people that I'm working with is you have opportunities. So don't think about it as just the money. Think about it. Yeah. As opportunity. So what are some of the things that you always wanted to do?
So I can tell you, I have clients now who have been buying houses, whether that's a person, a resident, or they're purchasing some real estate, so they can rent out to get some passive income. Right. I have individuals who are investing in other people like their family and friends who have businesses of starting a business.
So they're helping them kickstart their business and get their business off the ground. I have individuals who just like you are using that money to pay off their debt. Right. So, I mean, I like to look at it. You have three primary opportunities with your money. You can use it to pay down your debt.
You can use it to invest in the stock market, or you can use it to invest in some other business, whether that's real estate are some other venture. So, you know, just look at as opportunity and figure out what floats your boat and go for it.
Naseema McElroy: [00:08:59] So, okay. Do you have like one final thing that every nurse should know in 2021 and when it comes to their money before we share how they can work with you?
Charles Adi: [00:09:09] Yeah. So I would say every nurse said. Take a second and stop and really take a stock of what they currently have in their financial tool chest. Because what I'm finding is most people, particularly those who've been working for about 10 years, they have acquired a lot of financial products. Sometimes I call it your financial junk drawer, where you have a Roth IRA here, you have an old 401k there.
You might have a term insurance policy about 29 for your children, a permanent life insurance policy. You know, if you just have all these different things and. You really don't have a clear purpose for having each one of them at each particular point in time in which you purchased them. You understood exactly why you have it.
But now you're 10 years in looking back and you're looking down like, wait, I have a plate, all these different things, and you're not really sure why you have them. So just have that conversation with yourself, understand why you have the products that you have and make sure that they're still relevant for you today under your current circumstances.
Naseema McElroy: [00:10:05] And what if you just don't know, like, how do you know that those things are relevant to you?
Charles Adi: [00:10:10] That was one of those things where, you know, if you don't know for yourself or you don't feel comfortable doing some research online, definitely reach out to a professional. Any professor will be able to look at the products that you have and kind of help you put together, that story to remind you as to why you had it and let you know whether or not it makes sense for you today.
So for example, you might've bought. You know, a term policy, $250,000. When you graduated from college that you might've gotten married, you would purchase another 1 million and they had another child. You probably purchased even more. And before you even know it, when you add into what your company has for you, you might have upwards of three or $4 million worth of life insurance.
The question is, is that what you really need? Are you just buying it off of the emotion of the event and you thought it was necessary. So that could be an opportunity for you to scale down or vice versa. You might not have enough. Are, you might have, you know, three different 401ks with three different employees.
Because in my experience, a lot of nurses tend to hop around and they don't pull that money with them. So you might have one account that you're looking at every single day, that's performing very, very well. But the other two from your other employers, you haven't tested in three or five years, so that money has been forgotten about, but it's actually real dollars.
So can you pull that into your new plan or roll it over into a 401k and do something a little, sorry, not a formal. Okay. Roll it over into an IRA. And manage it a little bit differently so that it's consistent with how you're managing your other money. So it's just one of those things where you just really gotta pull all your products together, figure out whether or not they make sense.
And if you don't feel comfortable with yourself and definitely reach out to a financial advisor or some other professional to help you out. And you
Naseema McElroy: [00:11:42] are one of those financial advisors. So let the good people know how they can get in contact with you if they want to work with you. And you specialize in working with nurses.
So a great resource for the nurses on fire community.
Charles Adi: [00:11:55] Yeah, definitely. Definitely. So I've been working with nurses and other medical professionals for the past 10 years. Like I said to reach me, you can find me on my website. Site www.theblueprintthreesixty.com. When you get on the site, you can schedule an appointment by sending me an email, or if you want to call me directly you can do so at (832) 409-5575.
But I'd say the best way to reach me is to go to my website. Send me a quick email and I reached back out so we can schedule some time to talk.
Naseema McElroy: [00:12:24] Sounds good. Well, thank you so much, Charles. You are always a wealth of knowledge, so I appreciate it.
Charles Adi: [00:12:32] No problem. I appreciate you as well. All right.
Hey there I’m Naseema
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