Life in Transition

Navigating Personal Finances During Life Transitions

Archive for the tag “paycheck”

The Tax Withholding Debate

My co-workers and I have been talking about the checks (or lack of in my case) that we will expect during tax season.  Most of them like to have as much taxes withheld as possible.   One guy who started working here as a bachelor had not changed his withholding once, even though since then he has gotten married and now has an two-year-old daughter.  So, between him and his wife, he’s expecting a $6000 refund.  I asked him why he never changed his withholding.  He gave me the following reasons:

  1. It’s a nice psychological boost getting a big fat check from the IRS
  2. It forces him to save money.  To him, it’s equivalent to automating saving, except the government holds on to the money instead of the bank
  3. It forces him to live below his means, since he gets a smaller than normal paycheck each month
  4. A large check gives him and his wife an opportunity to discuss the progress of their annual financial goals and priorities

I, on the other hand, prefer to pay the right amount of taxes throughout the year instead of overpaying, and get a small refund  instead.  Here are my reasons:

  1. I hate seeing so much of my hard-earned cash being taken out of each paycheck
  2. I tend to be OCD about my money, so getting a slightly bigger paycheck  throughout the year makes me feel like I’m have more control over my finances.
  3. I like to make my money work for itself, so to me, giving the government an interest free loan is a bad deal when I can earn 4% interest if I park the money in my rewards checking account
  4. I think I’m disciplined enough to save money on my own throughout the year

In the end, I don’t think one way is better than another.  I think each person should make their decision based on their needs, priorities, and money management style.

Do you prefer a large refund check once a year, or do you prefer getting a little bit more money on your paycheck throughout the year?

Extra Paycheck!

I currenly work two jobs, but for the same boss.  My boss is a professor at a university here in Louisville, and she’s also started a small bio-tech company.  The two share the same space, so it’s easy to go back and forth between working for the company and the university.

The pay schedule for the two are different.  The company pays monthly, and I get a paycheck the third Friday every month.  On the other hand, the university pays bi-weekly. Typically, for every monthly paycheck I get, I receive two bi-weekly paychecks, and I create my budget base on those premises.  Well, this month I got an unexpected surprise, an extra paycheck!

Now I don’t create monthly budgets based on the calender month.  Instead I begin a new budget on the day I receive my monthly paycheck.  So, my current “fiscal” month began on March 16 since that was when I received my paycheck from the company.  It’ll end on April 19th, the day before my next one.  So far, during this month, I have already received two bi-weekly paycheck, one on March 16 and one on March 30.  Yesterday, I just realized that I will get an extra paycheck before the fiscal month closes.

Since I didn’t budget for the extra paycheck, I’m debating on how I should best use it.  It won’t be much; it’ll be about $325.  Still, I want to use that money wisely.  Should I save it in one of my targeted savings accounts, put in in my Roth IRA, or use the money to buy a more professional looking wardrobe (Note: I’ve slowly realized that I dress too much like a high schooler, since I bought most of the clothes I wear in high school.  I definitely think it’s a good time to re-evalutate my closet and some professional attire more fitting to my age)?  What would you all do with an “extra” paycheck?

 

Post Navigation