Around the beginning of 2016 I was inspired to reduce my Federal Income Tax withholding to a point where our family would not get a return, and instead increase our weekly take home pay so that we could spend it more responsibly than we would with a huge windfall in February.
How did I do this? I looked at a tax table and calculated how much tax we would need to pay on 100% of our income.
I always always give a whole lot of wiggle room so I didn’t include the fact that some of our income was nontaxable: health dental and vision insurance, flex spending and 401(k) contributions were not taken in to account. I wasn’t aiming directly at a $0 refund (not brave enough) but I did significantly increase our take home pay by about $50 a week! I felt like I got a raise, it was great!
Then, my mom took me to bingo for my birthday in April. I’m an old lady at heart! Can you believe I won $6,200?! I firmly believe the reason that I won was because I looked at the jackpot and calculated how much money we would all get if I split it between myself, my mom, and a friend that came with us (it was also her birthday). Then I did win, and I promptly gave my mom $1,550, the friend $1,550, myself $1,550, and I opened up a 1 year CD for $1,550 to pay taxes on what I assumed the amount due would be. I cannot for the life of me remember what I used my $1,550 on but I searched my bank account and it looks like I paid a whole lot of bills on 4/8/2016. It looks like I was catching up?
Anywhosies, come April 2017 I will have another 1,550 windfall since we did our taxes and we are actually getting a small refund! We are going to use the refund to pay labor for the handyman to put in the new doors. The $1,550 I think I will hold on to a bit more for our auto insurance renewal which will be put on the auto pay credit card on 5/11. This way instead of knocking us on our butts again and taking a few months to recover we can continue with our debt pay off! Smart, no?
I hope if you are expecting a windfall that you are planning out the most responsible way to use yours as well!