Tags: planning, saving, home economics, goal setting, financial planning, budgeting, networth.
A lot is happening right now - probably too much considering we're moving.
1. I've switched our bank to one that provides a decent level of interest on regular checking and has a competitive money market rate (in the low 4% range).
2. Switching banks meant changing ALL of the EFTs - LOTs of work there. About 10 EFTs are pulling money from my main checking (operating account) automatically. Very tricky to switch them while trying to move my own cash from one bank to another. The ultimate consequence is that I've had to keep extra cash in both accounts while the EFTs are changing. Switching EFTs also means filling in lots of forms!
3. Packing - it's nearly 2 am and I still have tons of packing to do. My wife was so smart. She drove over much of her clothing and unpacked it in the new house. I'm going to have to find time to do the same. I admit I feel strange not having the movers do it, but I do understand how nice it will be to have essential life functions already set-up amidst the clutter of boxes.
4. Packers coming soon. I wonder how much they'll really have to pack. The garage will probably be the worst. Since we're paying for the packing (vs. a corporate relo, we've worked hard to do much of it ourselves). They said they'll reduce charges proportionate to the amount they do -- I wonder what will happen if it's a big reduction - I hope it's a big reduction!
5. Changing addresses galore!! I've contacted many different magazines, financial institutions and government offices to make sure everyone has our new address. I wonder how many will mess it up? It took quite a while.
6. Taxes - I mailed them yesterday. Felt good.
7. Backup - I'm backing up all our data in case there is a problem. I'll move the computers myself.
So quite a bit is happening at once. Tensions are running fairly high in our house - they usually do during moves.
As far as taxes are concerned, we paid:
16.17% of income to feds
4.92% of income to state (NC is one of the high income tax states)
I anticipate that next year's taxes will be even higher (we had some onetime benefits that won't repeat). Probably 22% federal and 5.5% state next year - ugh!
$2M had a nice idea, discussing strategies for lowering next year's taxes.
Our strategies will be the following:
1. Increase charitable giving - especially of items we own that may have appreciated - some collectibles, etc....
2. Direct more income through our business (versus salaried jobs), where we have expenses that will offset a large amount of the income
3. Enjoy the tax deductible nature of mortgage interest and property taxes (we won't be renting this year)
4. Leverage pre-tax accounts such as: dependent care, flex medical spending, 401ks
5. Consider employing our children in the family business, diverting income to them (in lower tax bracket). Set up retirement account for our children.
6. Stay healthy - invest in our health through exercise and nutrition to avoid illness now and in the future.
7. Consider tax free income producing investments such as muni-bond mutual funds (s/t duration) and tax free money market funds - t rowe price offers one that is interesting I think. Will write about it later.
It looks like I've taken a $13k hit to the networth so far.
This can be attributed to:
- payment of state income taxes - I owed about $2500, but will get back about $5500 federal - odd isn't it. Won't see the federal money for a while.
- acceleration of insurance expenses through cash flow - I had to fund the trust accounts that will pay for the life insurance policies. That basically meant paying a year's worth of premiums up front, instead of gradually over each month. I'll still need to accrue each month, but at least I'll be able to invest it over the next year. $8k.
- closing costs - expensive things like title insurance etc... Were fairly heavy. But the most annoying was the requirement to prepay a whole year's worth of hazard insurance. That cost me an additional $2800. Of course they're also escrowing taxes, which adds even more money.
I'm hoping my investments do well this month to help offset the outflows (though Tuesday wasn't a good day for anyone who didn't short).
I do think I might remotely be able to save some money by month's end, but it does assume we won't have any more house expenses -- which are more than likely to happen. That means that real savings won't occur until the end of June or so. Ugh!!
Here is a bright spot. We've found at least $2500 worth of charitable donations that we can make. At 42.25% (state and fed) that's about $1000 back at the end of the year. We receive quite a few professional and academic journals. It just struck me that many are quire expensive and would make a very nice charitable contribution to a local library or college. I'm not sure how to value them, but the magazines print a backissue price usually on page 3 or 4 that seems rather expensive. Anyone have any experience?
Have a great Wednesday,