Let’s talk about taxes. Last week I told you that 1/3 of your paycheck/resources would end up going to them.
“But Bridget, I’m not in the 33% tax bracket??”
You’re right- you might not be in the 33% federal tax bracket. You do end up paying around that amount. Let’s think about all of the things you’re taxed on. Federal tax (15% to 25% depending), state tax (Virginia 5.75%), Social Security tax (6.2%), Medicare tax (1.45%), personal property tax, real estate tax, sales tax, gas tax, and any possible city or locality tax.
See how that can add up real quick?
That’s a lot of taxes! I’m not anti-tax, we need some tax to provide for programs, roads, and schools. But when is enough tax…enough?
If the government is taking one third of your paycheck for services and programs, don’t you think you should keep that same amount for yourself? That’s where the investing/saving third comes into play. If you pay the government a third of your paycheck/resources, you should pay one third to yourself.
For a young professional this is a lot easier said than done.
As an advisor, I practice what I preach. When I make my monthly budget, I use the “third, third, third” rule. As a young professional who is a under a year out from school, I know it’s hard to live off of one third of your paycheck. Using that rule has made my savings and investment accounts grow a lot more than they otherwise would have.
I learned to live on a budget right out of school and decided it was a good habit to keep. That first paycheck was wonderful. I could and would have been able to spend it all in a few trips to Home Goods and the grocery store. I tried not to fall into the trap of “I owe it to myself.” It is all too tempting to go out with that paycheck and say I deserve this lamp and this nice duvet cover. Don’t fall into that trap!
What I’m saying is: If you try to live off of just one third of your paycheck, you will save more. Odds are, you probably won’t be able to, and will end up using some of the investing/saving third. Trying to stick with this rule will make you aware of how much you spend and hopefully help you save a little bit now so you don’t have to worry as much later.
Here’s a personal story about me and taxes.
I bought a new car this year. Exciting, right? My old car was my dad’s that he had bought in 2001. I loved that car, but there comes a point where you need to know that it will start in the winter no problem and will get you from A to B without leaking all of its oil along the way. I would have kept driving that car, but the constant cost of repairs were not in the cards for me.
Guess what happened in December? I got hit with a personal property tax bill. Luckily, I only had to pay December’s bill. Turns out my county sends two out a year- one in June and one in December.
I’m not going to lie, I was pretty upset about it. Why did nobody tell me this? Shouldn’t there be a disclaimer when you buy the car? Why are they taxing me when I got a more gas efficient car? It might as well be a hybrid! The government should be thanking me. These were all of the thoughts that were going through my head. Some were said aloud. You can ask my boyfriend, Patrick. I was an angry elf.
I paid the tax bill. Do you know what I did next? I put the exact same amount of money into my savings account after. Why wouldn’t I want to pay myself what I had to pay the government? Gotta look out for #1. The government’s doing it, why shouldn’t you?
Silver lining to that story? I know those two tax bills are coming this year and you can bet that I will have money set aside in anticipation of them. I know they’re coming, and I will be ready.
Last week was my birthday. Naturally, I had a tiara on at the dinner table. See? Taxes & Tiaras. I feel like TLC could use this idea for a spinoff show of Toddlers & Tiaras. I can see it now… toddler beauty queens doing taxes for their talent portion of the show.
The cake I talked about last week turned out great! I had seen a lot of rosette cakes pop up on Pinterest and wanted to give that a try. I put my 1M tip on a piping bag and started icing the cake. Turns out you’re supposed to start rosettes from the inside and work your way out. As a novice rosette maker, I started from the outside and worked my way towards the center.
I thought it still turned out pretty good for a reverse rosette. Here’s a tip for all you first time rosette makers: use a biscuit cutter (or any type of circle shape) to outline where you want each rosette to go. If you plan it out before you start piping them on, you can make sure you don’t have any awkward gaps.
Feel free to email me if you would like to talk more about “third, third, third” of if you want the cake or icing recipe.
Thanks for taking the time to read this week!