I need my money more than they do
I’ve done two important things this week to stretch my paychecks even more than I already do.
First, when I saw that my car insurance premium was about to be renewed, I did some comparison shopping on the internet and found a cheaper policy with the same or better benefits. I should call my old insurance company and use their own tagline on them: "Guess what? I have good news… I just saved money on my car insurance by switching to another company!" ($60/mo, $720/yr) See how they like them apples…
Second, ever since I heard somewhere that a tax refund is just money I’ve lent the government without charging interest, I’d been meaning to do something about that. Of course, I procrastinated. But since I can’t just call Uncle Sam and demand interest on the money that I’m going to get back from them, and there are better things I can do with my money, I figured I’d better find a way to get my money and use it now. I took a paystub to the commercial chain tax preparer on my lunch hour yesterday and asked them if there’s a way that I can estimate my tax liability and then adjust my withholding so that I would have little to no refund due when I file in February. The advice they gave me was to stop withholding for the rest of the year, do what I want with my money (for example, hold it in an interest bearing account) and then pay the government their due next spring and keep the interest. Of course, that would mean making sure that I just held the money in an account. I wouldn’t be able to do anything with it unless I was absolutely sure I would have enough to pay the government come February. I wasn’t so sure I liked that idea.
Right now I’m concentrating on a consolidation loan charging me 12.49% interest. The highest yielding saving account I have is paying me 4.50% interest. So if I had a choice, I’d rather attack the loan - my money will work harder for me there by attacking interest. It’s what I would have used my refund for anyway, but I’d get to use it sooner - with debt repayment, sooner is better.
Another alternative is to adjust the way I claim allowances on my W-4 (that document you sign when you’re hired at your job that tells payroll how to withhold money for the government). Of course, that stuff is like another language to me. Yes, I’ve done my own taxes and I understand that the more allowances you claim, the less money they take. But how am I supposed to know how many allowances to claim in order to adjust my withholding just enough so that the government gets about as much as they are owed and no more (so I can get what would otherwise be my refund now)? Behold the nifty IRS withholding calculator that the people at that useless tax office should have either used or shown me. It helps you estimate your tax liability for the year and then suggests the amount of withholding you should do to keep from overpaying the government.
I was nosing around Single Ma’s Fabulous Financials to see if she’s blogged about this before, and saw that she used this calculator once upon a time when she changed her withholding. Thanks a lot, Single Ma! So now I know, from having used the calculator, that I should file Single with 4 allowances to come out with little to no refund, or 5 allowances to owe a paltry amount.
I’m changing my withholding today, and the extra money from car insurance and having less tax withholding is going straight to killing my debt!
