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Tax withholding?
billf:
--- Quote from: shmokes on October 16, 2007, 02:39:52 am ---
--- Quote from: shmokes on October 15, 2007, 11:46:29 pm ---
Of course it's better to put the extra money into a savings account if you have the discipline . . .
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It's worth pointing out that it takes more discipline than simply putting the $75 into the savings account every two weeks (that's $150/mo.). A measure of discipline is also required in order to keep it there rather than emptying it out every couple months whenever "something comes up". You can roll your eyes all day long, but you can't get around the plain fact that the VAST majority of Americans do not, in fact, have the discipline that you speak of so casually. Most, actually, are in debt up to their eyeballs and live paycheck to paycheck.
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Actually doing something is always going to more difficult than to say it. But once you do it, you'll have a feeling of success and once you start, it does become easier. Not relying on the gov't to 'save' for you (wow that's hard to type without chuckling) is a big step toward that success. Do you really think the rich and wealthy are getting rich and wealthy by letting the gov't keep their money. No.
LPZ:
--- Quote from: shmokes on October 15, 2007, 11:46:29 pm ---I know full-well that this is the wrong answer, technically, but I really like it anyway. I have always withheld the maximum amount, regardless. It acts as a savings account. I am fully aware that the big difference is that a savings account earns interest and tax withholdings do not, but that's only relevant if the alternative to my withholding was that I would put the money in a savings account. I wouldn't. It would just disappear to every-day expenses. My paycheck would be slightly bigger every two weeks is all, and my lifestyle would most likely just be slightly better. What are we talking, $75 per paycheck? That's not going to make a huge difference in your day-to-day lifestyle, but when you get a $2000 tax return, you suddenly have a REALLY REALLY useful lump sum of money. Are you going to put that extra $75 per paycheck toward your credit cards, or are you going to keep paying minimums and go out to dinner a couple more times per month? Who knows? But when you get that $2000, you can plunk that right down on a credit card and then cut the sonofabitch up permanently. Or make it a vacation fund.
Of course it's better to put the extra money into a savings account if you have the discipline, but the big question is, "Are you filling up that savings account right now?" If the answer is no, then what do you have to lose by having the IRS provide the necessary discipline? A little interest, of course, but really, if you're planning to empty out the account once a year anyway, how much interest are you losing? How much interest does a savings account that never gets above a couple thousand dollars accrue in a year?
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I'm with shmokes on this one. Every year we get a huge refund and we have taken care of some projects on the house, built a deck, pool, etc. This year we're looking to move so that will add to the down payment. Saving week to week sounds easy, but the extra money disappears so quickly. I know alot of people frown by letting the government have their money all year, but If the money is out of sight, it also out of mind until tax return time.
ChadTower:
I actually am pretty good at the saving/keeping savings stuff... I have a min savings level I feel comfortable with as a cushion and rarely go below it, which represents probably a solid 3 months of household expenses plus some left over. I actually keep it closer to 4+ months' expenses. That rarely gets touched beyond the occasional transfer out of a few hundred to cover something like a car repair and I get nervous about that until I replace it. With that in place, I drop an extra $50/month to my wife's car, an extra $100/month principal only to our mortgage, and my wife's whole salary is going to the home equity line since she has run it up getting an associate's degree and teaching certification over the last 18 months. That $150 month for the car/mortgage are covered by my driving a '99 Civic that has been long since paid off.
shmokes is absolutely right about most people not having any discipline whatsoever. I know quite a few people that are making good two income money and still live paycheck to paycheck. One interruption of income and they're in panic mode. Lose a job and all hell breaks loose. I grew up really poor so I'm very conservative with money and my wife is dead straight Irish so she'll squeeze a nickel until it becomes a dime. That's why I get nervous about stuff like this... I'll be damned if anything short of a massive coronary puts my kids into the manner in which I grew up.
Maybe if some folks used a partial direct deposit to put $75/month into an account you barely ever look at? That's out of sight and the deposit schedule is out of your hands in the manner of a 401k.
zaphod:
--- Quote from: ChadTower on October 16, 2007, 09:03:18 am ---Maybe if some folks used a partial direct deposit to put $75/month into an account you barely ever look at? That's out of sight and the deposit schedule is out of your hands in the manner of a 401k.
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I've do this and it works great. I have numerous sub accounts setup within my ing account that I have the money broke out into: annual insurance, vacations, entertainment, emergency fund, etc. Each month $x goes into each automatically. That way I have all the money needed for each bill when it arrives. Plus it makes it real easy to show the wife how much money we have saved for example the appliance fund. Sounds really anal, and it probably is. But it works for us.
I agree with Chad's thinking on this topic. I'm very conservative too and will do whatever I can to try to ensure my family never has to make a decision whether to buy food or keep the electricity on. I will drive my '96 Nissan (and the family takes the newer SUV) until it stops running- you sure cannot beat the payments. :)
ChadTower:
That and shmokes' $2000 return figure... folks with a big mortgage usually get at least that much from the interest deduction alone. I think I paid like $12,000 in mortgage interest last year and our mortgage is pretty conservative for this area.
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