Purpose of this document

This document is meant to be a reference guide with advice related to investments and other goodies when it comes to working in Mainframe.

General Knowledge

Career

Advancing in your career is a mix of the following:

1- Making yourself as indispensable as you can, the fastest you can. Whether that being a technology gap that you cover (or can cover in the near future), building trust from your peers and managers, or just plain working on anything you can get your hands on, without losing a beat.

2- Getting yourself out there, connecting with people (online and offline), lobbying is never a waste of time.

3- Knowing the industry. This is a broad statement, as things change. Follow your favorite people, from the top ISVs and IBM, and make sure you try anything trending.

4- Constant learning. That's it, learn anything related to what you are currently doing, or would like to do.

Benefit Plans

It is an obscure subject, when it should not really be. Whatever your company gives you, take it, that is true for:

Any health insurance - Even when in a country with free healthcare, you never know if you are going to need that sweet discount at the pharmacy, or when doing a costly test. Of course, Dental.

Stock Option - If they ever give you the stock option, you take it. The answer is simple: Stocks are unrealized gains...so they essentially do not pay taxes. Have a call with your favorite accountant to make sure you are doing the right thing first.

Retirement Contributions - Yes, always. The earlier you start, the more you will benefit from compound interest. Whatever you can contribute (up to the firm's limit) is going to then go into an investment. REMEMBER that if you do not invest the money you put in your retirement plan, it will not generate that much.

Having your own Business

When choosing to have your own business, you have to consider the following carefully:

What kind of business you want to create?

Essentially, there are usually 3 (or more) kinds of businesses:

1- Sole Proprietorship - You are the only owner and have a limited amount of tools to action for your activity. Limited amount of employees, limited amount of expenses and of earnings. You are responsible for any monetary and legal implication of the business activity (you have to sell your own stuff to pay for the business if it comes to any financial issue). The good part is that you do not have that many responsibilities when it comes to filing taxes and expenses. You are not made present financial statements to the government. *** This could change depending on the country.

2- Limited Responsibility - You can have a few owners. The good thing is that it is a whole new entity, which means that it responds to itself by itself, and if it goes bankrupt or has issues, it will liquify its assets to pay. It becomes a little more blurry when it comes to legal actions, like fraud, so you can get impacted if it comes to that. In some cases you can appoint a Director for it, or as one of the founders, one of you can be an administrator. Financial statements, many kinds of fees, operational costs, and tax filing are required for this kind of business, and they have to be presented by a registered accountant. Another good thing is that you pay taxes AFTER you present your expenses, so if you have expenses in the likes of rent, car expenses, travel expenses, etc., they can all be deducted from your gross earnings.

3- Corporation - This can be open or closed, but it essentially has owners (stock holders) and managers (directors and the like) that are employees of the firm. This is the most expensive kind, and it is not a good choice when you are looking to have your "work entity" to provide consulting support. This is for major projects and sustained flow of money, along with a medium to big number of employees.

Useful

Taxes depend on your country and province.

They are usually 3 kinds:

Taxing your income:

ANUAL Tax. It is usually a gradual scale that starts on 0 income, and it depends on how much you are making a year. It would apply a % value on the first scale, then another % on anything after that mark, and so on. It could be several % over your set income for those layers, or once you are over that level you have a fix amount of money that would have to be paid. So it goes something like this:

Example 1, % on each scale:

0-10 - 10% 10-20 - 15% 20-30 - 20%

If you make $25, you pay 10% of your first $10, then 15% of your second $10, then 20% of your leftover $5: Ans=(1010%)+(1015%)+(5*20%)= $3.5 in income tax.

Example 2, % on each scale and fixed amount after it goes over the level:

0-10 - 10% or 1 10-20 - 15% or 1.5 20-30 - 20% or 2

Ans=1(fixed)+1.5(fixed)+(5*20%) = $3.5 in income tax.

It could be beneficial or not, depends on the jurisdiction.

There are also DEDUCTIONS from your income. They are usually separated in GENERAL (like health insurance and/or health expenses) and PERSONAL (having dependents, like your spouse or children). They will be applied in different stages of the Tax Determination Process, and they all have either a fixed amount or a maximum percentaje given from your income. This could be your total gross income or the income being calculated on that stage, which has already been deducted other things.

Taxing your assets:

Holding assets can also lead to paying taxes. It depends on the asset and the values the government assigns to them.

Taxing your expenses:

You already know that you pay taxes for whatever you "consume". This has different names, but they are taxes applied to groceries, cars, plane tickets, etc. These are all pretty much unavoidable, unless you have a business and can take these as expenses.

Tax Free Account Types

There are different Tax Free options around. Anything that would get you taxes back is THE BEST long term option, because you are getting back about 20-25% that is just plain income tax.

Tax Free Savings Account (or similar): What you put in it, has already paid taxes. The income generated by those contributions does NOT pay taxes. It usually has a maximum amount per year for contributions.

Retirement Account (or similar): What you put in it, gets taxes back TODAY. The income generated by those contributions is taxed. When you take the money out, it PAYS TAXES. This account has a higher contribution range, but the downsize is that you will pay taxes on it when you get it back when you retire, or make a withdrawal. In summary, you are deferring the payment of taxes today, to pay them tomorrow.

In the US, there is the ROTH IRA account, which allows you to funnel money into it, and both the money you invest as well as all the gains from those investments would be tax-free once you withdraw them. The catch is that you can only withdraw tax-free after you are 59-and-a-half years old.

First Home (or similar): What you put in it, gets taxes back TODAY. The income generated by those contributions do NOT pay taxes. This is great, but you can only take the money out by buying your first home.

Investment Types

Direct Investments: Any money made from your contributions will pay taxes.

Stocks: You purchase a part of a company, hoping it grows in value, to influence its decisions on the investor board, or to reap the dividends.

Bonds: You purchase debt from a country, and they will pay you interests for it.

Marketable Bonds: You purchase debt from a company, and they will pay you interests for it.

Commodities: You buy an index representation of a commodity (oil, grains, etc.)

Indexes: You buy an index representation of a market (SP500).

There are many other kinds that are not covered in this document at this point in time.