I finished up my tax returns last night. And I am getting a solid chunk of change back. Enough to fund my Roth IRA and then some.
So now there are two questions:
- What to do with the return
- What to change on my withholdings (if anything).
Number one isn’t too hard. Step one, fund Roth IRA. Or at least set aside the money to fund it throughout the year. The remainder will be split between my savings and my home improvement fund. Easy enough.
The second question is a bit more complicated. Clearly, I’m withholding too much. But I’m not sure what to change. I definitely don’t want to have to pay in. I’m definitely making a change to my state taxes. Previously, I was withholding an extra $30 per paycheck to cover the ridiculous amount of money that Maryland wants from me every year. Now that I have a house, I have more deductions, so I can change that.
I may just make that one change and leave everything else the same. I know, I know. It’s not the smartest thing to do. But my budget is working quite well for me. And while I should save the additional money that would be coming in, I’m just not convinced that I would do it.
I do think I’m going to look at my TSP (government 401(k)) and see about taking that additional $30 of withholding and putting that towards my TSP. I’m currently putting about 7% of my paycheck there (plus the 5% match) and that’s definitely something that I could increase.
So the next step is going to be doing some math. And waiting for that big ole check to deposit in my account. Hooray!
Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:
In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.
While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.
Except that’s not what an emergency fund is for.
So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.
I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.