Saving Money
I am sure you have heard the old saying more times than you can count: a penny saed is a penny earned. It is true though. One of the best ways to really maximize the money you are earning is to work on your savings and manage what you have already earned well.
Let me give you an example. Being self employed and filing our own taxes, each year we have the angst and concern over what we were going to need to pay. This last year I realized that the amount that was really hurting the most was the Self Employment tax. Now, the self employment tax in the United Sates is essentially the FICA withholding that covers your Social Security “contribution”. Typically if you have a “normal job” where you work for an employer, there is 7% withheld from your check and your employer “contributes 7%. So, you have 14% of your annual earnings approximately which go towards FICA. Well, if you’re self employed you get to see this all at once in April and in your Estimated Tax payments throughout the year.
What we decided to do was simply open another bank account (in our case we chose a Money Market for the greater interest rate.) Now, each deposit we make we figure up 15% of my self employment gross earnings and put it into that account at the time of deposit. Since it’s 15% and from Gross earnings instead of net we are more certain to keep doing it (15% is simple to figure) and it also makes certain we will have more than enough to make the payments for quarterly taxes and the “give us everything you have left” of the yearly taxes.
You can certainly apply this method to income tax as well, just go ahead and count the money as already being committed, put it in a separate account and don’t look at it except to make sure you are on track to have enough to cover your taxes.
We’ve taken a similar approach to our property taxes. We know what the property tax fee will be for the year and used to dread it like the plague. I remember we would always be cutting it close scraping together enough money to pay the bill before it was overdue. Now, we divide the total property tax by the number of weeks in the year. Round that number up and make sure to deposit that much directly in the savings account for property taxes “off the top” of whatever else we deposit.
The nice thing for both of these is that it earns interest and if you do it well, you’ll actually have a surplus in those accounts which you can treat either as an advance on your savings for next year, or a bonus for having saved well.
In the following subpages I’ll address other ways you can save money and make your money go further because I think saving is as important (perhaps more important) than earning.
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