Plug the Holes in Your Budget
Sunday, July 16th, 2006
We have added a new article on our website titled “Filling the Holes in Your Budget”. Here is an excerpt from the article.
We’ve all experienced it. You write out your budget. Everything looks good and you have all your numbers in order. Then when it comes time to pay your bills, it hits you. There are holes in your budget. There are two common holes in personal budgets. The first is withholding too much federal income tax, which results in you loaning money to the federal government interest free. The second is maintaining very low deductibles on auto and home insurance, resulting in higher than necessary premiums.
Federal Tax Withholdings
Over the last few years, the federal government has implemented many tax cuts. But, many workers have not adjusted their withholdings resulting in an average $2000 refund per household in 2002. Let’s realistically think about what a tax refund is. This is merely a refund of overpaid tax dollars. In essence by not adjusting your federal tax withholdings you are loaning the federal government your money interest free for 15 months. I don’t know about you, but I sure wish I could get a 15 month interest free loan.
Yes, you should pay your fair share of taxes, but overpaying is not the answer. Let’s examine the $2000 average refund. If you were to adjust your withholdings through your employer to the right amount, it would equate to approximately a $166 pay raise each month.
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