planning

Those Predictable But Irregular Bills

Things like property tax, car registration, the half-yearly car insurance bill, holiday spending, vacations, big car repairs, replacing appliances are all things we know will happen. Because they don’t happen every month like rent/mortgage and utilities, it’s harder to plan for them.

Years ago I had a system for that. I added up all of those expenses for the year, divided by twelve, and put that much in a savings account each month. It worked very well. I never had to use credit to pay anything, and felt a certain financial serenity that was very nice.

An article in the Dollar Stretcher today informed me that that method is called a “sinking fund.” According to Dave Ramsey, this is different than an emergency fund. The items in the sinking fund aren’t unexpected emergencies, they are expected but irregular expenses. https://www.daveramsey.com/blog/stop-the-panic-sinking-fund

 

 

Marie Brack is the author of Frugal Living for the 21st Century: Adventures in Using Your Money Wisely. It’s available on Amazon.com in both Kindle and paperback versions.

amazon.com/author/mariebrack

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Prepping – For Taxes That Is

When Federal income tax was first instituted in 1913 the form was three pages long, the instructions only required one page, and that’s all there was to it. Ah, the good old days. Last year I filed a tax return that was 22 pages long.That was my own silly fault for having so many different tiny streams of income, each requiring its own page or pages. Lucky for me I actually enjoy keeping records and since I got bifocals I don’t have a problem filling out forms. If you itemized deductions or if you have a business with deductible expenses, you kind of have to keep records even if you don’t enjoy it.

The first thing I did was get in the habit of saving all paperwork and receipts that I would, or even might, need for taxes. I have a file folder for it and just drop them in all year long. When tax time comes I have a messy stack of papers, but I have them all and I know where they are. Failing to prepare for an unpleasant task doesn’t make the task go away, it just makes it harder. If it’s too late for this idea to benefit you this year, act today to make next year better. Designate a spot for any and all tax-related paperwork. A file, a box, a drawer, wherever it will be easy for you to put the papers as they come in.

Recently I made Excel spreadsheets that mimic the tax forms that I use. I can enter income as it comes in and deductions as they happen. At any moment I have a snapshot of what my tax situation is shaping up to. This is helpful for making decisions that effect one’s taxes. It tells me if I need to start saving up to pay self-employment taxes. When it’s time to fill out the forms, I just move the numbers from my spreadsheets to the forms.

Plan ahead and act on the plan.