How do you pay yourself ??? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

How do you prevent yourself from opening the trading platform. 7 replies

How do you pick yourself up after getting wiped out? 23 replies

Please EURO Stop it..You are Embarrasing yourself. 45 replies

What do you ask yourself before a trade? 4 replies

How do you pay yourself ???

  • #1
  • First Post: Dec 15, 2008 8:40pm Dec 15, 2008 8:40pm
How do you guys pay yourself ?? Do you take a % of monthly profit or anything above your monthly target ??
I don't think I've seen anyone discuss this ever on here
It's NOT GAMBLING when the odds are in your favor
  • #2
  • Dec 15, 2008 9:36pm Dec 15, 2008 9:36pm
If you are very familar with the numbers of your approach you know when to take profits


Best regards


Dale
  • #3
  • Dec 15, 2008 9:42pm Dec 15, 2008 9:42pm
I can live quite comfortably on 20k/year. I have an annual budget which I follow and trade with the rest. I withdraw from that account only once a year (tax time).

If I do require more money elsewhere, I have other investments which help with my passive income. Trading I use if I need bursts of capital, or places to park my money because I can't invest it elsewhere.
  • #4
  • Dec 15, 2008 10:06pm Dec 15, 2008 10:06pm
Quoting User Name
How do you guys pay yourself ?? Do you take a % of monthly profit or anything above your monthly target ??
I don't think I've seen anyone discuss this ever on here
Before I ever thought of paying myself, I started paying off all of my debt. House payments, car payments, huge-ass big screen TV, etc....

What was left were the essentials, and if you think about it, those don't add up to much. You would be surprised how little you actually need to live off of if you don't have any debt. Once my debt was payed off, everything that I spent money on was extra, and I therefore now I am living very handsomely without much stress of worrying about supporting the bare minimum. In my opinion, if you wish to live off of trading, this is a very smart way to go. The last thing you want on your plate in the morning is the added stress of having to meet a figure every day in order to make house/car/TV payments, in addition to simply putting food on the table.

If you choose to trade markets for a living, ie you live off of the management of money, then you should stand above all others in the ways you manage the money you make!

Abolishing debt is step one. Once this is taken care of, even if you then have the worst draw down of your career, you are still saving/making money by simply not paying off your debt!

Then, if you do decide you are ready to start paying yourself, and even living solely off of that income, then you need a backup plan. For me, if I do happen to have a bad week/month/year, I always keep a savings account at my disposal. Again, because of my extremely low bare minimum living standard, this savings account is not ridiculously huge, and I can invest the majority of my money in the markets.
Headline: USD drops due to news of USD dropping!
  • #5
  • Dec 15, 2008 11:06pm Dec 15, 2008 11:06pm
Quoting Ronald Raygun
I can live quite comfortably on 20k/year. I have an annual budget which I follow and trade with the rest. I withdraw from that account only once a year (tax time).

If I do require more money elsewhere, I have other investments which help with my passive income. Trading I use if I need bursts of capital, or places to park my money because I can't invest it elsewhere.
Off topic a bit:

Do you still need to pay tax even if your are 18?
  • #6
  • Dec 15, 2008 11:19pm Dec 15, 2008 11:19pm
Quote
Before I ever thought of paying myself, I started paying off all of my debt. House payments, car payments, huge-ass big screen TV, etc....
That is perhaps the best advice I've read in regards to managing one's trading income.

Pay off your debt and lower your monthly expenses. From there draft up a concrete budget, and move on from there. Ronald's "once a year, after taxes" strategy is probably best, since it means you aren't worried about meeting your ends every month.

To add to that, I'd make sure a full IRA contribution is made every month, along with building up a 6 month emergency fund. Take that from your personal income side, just make sure it's included in your budget. This way you're building retirement outside of your trading, while providing long term stability in the event of an emergency. I have a self-managed cash account IRA (no leverage) w/ one of my brokers, you can set one up too very easily.

From there the trick will be keeping your budget down and balanced. As income goes up, people tend to want to spend more to fill in the cracks in their life. I'm pretty sure you'll have to overcome that desire if you plan to live off trading, otherwise the pressure to earn will always be there to hurt you.

Quote
Do you still need to pay tax even if your are 18?

Of course you do. You have to pay it even if your 16, it counts as household income. If you don't pay it, then your parents will have to claim it.
  • #7
  • Dec 15, 2008 11:41pm Dec 15, 2008 11:41pm
Quoting Rabid
Of course you do. You have to pay it even if your 16, it counts as household income. If you don't pay it, then your parents will have to claim it.
I mean for your trading income? If you have to, then I would be considered lucky LOL
  • #8
  • Dec 16, 2008 1:04am Dec 16, 2008 1:04am
Quote
I mean for your trading income? If you have to, then I would be considered lucky LOL

Well, for the US at least, currency trades have a special designation. Called a section 1256 contract. They are given a preferable blended capital gains tax rate. That information is filed along with a standard 1040a form just as any other capital gains would be.

If you're over the age of 18 (or have been emancipated) and not being claimed as a dependant (ie: in school) then you would need to file it yourself. If you're claimed as a dependant on your parent's tax returns then they will need to file the above w/ theirs.
  • #9
  • Dec 16, 2008 1:15am Dec 16, 2008 1:15am
Quoting arcus
Off topic a bit:

Do you still need to pay tax even if your are 18?
I'm amazed at how uneducated young people are on tax laws these days.

Yes, you do. It doesn't matter what age you are, if you make money the government is going to get some, if not all of it.

That is how I look at it, haha.
  • #10
  • Dec 16, 2008 1:52am Dec 16, 2008 1:52am
Quoting Verto
I'm amazed at how uneducated young people are on tax laws these days.

Yes, you do. It doesn't matter what age you are, if you make money the government is going to get some, if not all of it.

That is how I look at it, haha.
unless we move to Dubai or Bermuda etc
Grabbing the bull by the horns!
  • #11
  • Dec 16, 2008 1:56am Dec 16, 2008 1:56am
Quoting Rabid
Well, for the US at least, currency trades have a special designation. Called a section 1256 contract. They are given a preferable blended capital gains tax rate. That information is filed along with a standard 1040a form just as any other capital gains would be.

If you're over the age of 18 (or have been emancipated) and not being claimed as a dependant (ie: in school) then you would need to file it yourself. If you're claimed as a dependant on your parent's tax returns then they will need to file the above w/ theirs.
That's great if you have only profits for the year, or are a futures trader.
Check out Section 988 of IRC regarding currency gains and losses as ordinary income or loss.
The limitations under Section 1256 are different than under Section 988.
Elections have to be made and are usually irrevocable without IRS permission.

Check it out, could be worth $$$ next April.
  • #12
  • Dec 16, 2008 2:37am Dec 16, 2008 2:37am
Quote
That's great if you have only profits for the year, or are a futures trader.
Check out Section 988 of IRC regarding currency gains and losses as ordinary income or loss.
The limitations under Section 1256 are different than under Section 988.
Elections have to be made and are usually irrevocable without IRS permission.

That's a good point.

If you've taken a loss or would rather take the income as ordinary income, you can opt for that with section 988. I'm not sure what benefits that would carry tho, since you can claim exemptions and deductions on top of the capital gains income. But I guess if you are in a lower income tax bracket and don't plan to have a lot of trading gains, then you could benefit from it.

In addition to that you can carry back your 1256 losses for the next 3 years, altho you cannot take a net loss deduction you can use it to offset gains in future years. Assuming you plan to have them... hehe.

The 988 election tho does pose a problem since it might not be easily changed. All in all, it's worth considering, altho I suspect it's only useful for a small minority.
  • #13
  • Last Post: Dec 16, 2008 3:05am Dec 16, 2008 3:05am
Hello,

You should be able to make a profit first before you start thinking of how you will pay yourself. Also you will probably start your account with too little money to pay yourself and grow your account at the same time. So even if you can make profit you will have to reinvest all the profit or most of it back into your account so you can make more profit, and only after you have a large enaugh capital for trading and can make a good profit you can withdraw whatever the amount you dont need for trading and invest it somehwere else safer, like property or use it for your own comfort.

So if you just starting your career as a trader, it will be a long time before you will start thinking of how to pay yourself.
0 traders viewing now