I got my first full-time teaching job in September 1989 at the age of 24.  One month later my parents, not too subtly, told me it’s time to move out and find an apartment.  This forced me into budgeting so as to make sure that I had enough money at the end of the month to pay the rent.  My parents gave me good advice, find an apartment that is cheap so you have money left over that you can save.  After several months I had about $2000 saved and even at that time banks did not pay much in interest.  I started thinking to myself about putting this money to work.

I spoke with a financial advisor.  He thought that I should buy rare gold coins.  I read the prospectus and the past performance was very good. Over the next 5 years, I proceeded to lose about 50% of my investment while the stock market was up by more than 50% at this time.  So much for past performance!  This was a valuable lesson for me because I found out that past performance is not indicative of future performance. All was not lost, however, because during this time period I discovered my school district’s 403b plan.  I started with only $50/month and quickly increased it over the years.  I soon discovered the power of compounding stock market rates of return.  It’s truly amazing!  I so thoroughly enjoyed reading about the markets that I eventually got my Series 7, Series 63 & 65 licenses to become a financial adviser.

At around the same time that I moved into that first apartment I wanted to take home more money in my paycheck and have more to pay the bills rather than giving the government an interest-free loan.  The problem with this was that I chose to have 10 exemptions on my W-4 tax withholding certificate.  This created a rather large under-withholding of taxes.  When I was filling out my 1990 tax returns, by hand, of course, that’s how it was done back then, I realized that I owed about $2500 in taxes.  I was petrified!  This led me to talk to my step-father, a retired middle school principal who was tax and investment savvy.  He told me that there are many deductions on Schedule A Itemized Deductions of your tax return that as a teacher you are eligible to take. In addition, I was also involved in trying to start a business and he told me of Schedule C Profit or Loss From Business.  By filing these forms I was able to get what I owed down to $600.  At least now I was able to breathe again.  I immediately changed my W-4 so that I would at least get a small refund during tax filing.

This was a valuable lesson because it made me realize that with reasonably intelligent effort you can use the tax code to maximize your savings and that these two things (taxes & investing) worked hand in hand.  This eventually leads me to take several classes on taxation and later I sat for the IRS Enrolled Agent Exam.  This exam was 11 hours and focused solely on taxation.  The CPA exam does not even focus on taxation this much!

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