Floundering Financially
Edit: It's all going to be ok. I used this space to get my frustration out, and now with time, have a clearer head. I've also gotten perspective back that there's more important things than money, and money is only a tool to help those more important things. We're going through a sudden medical crisis with my youngest's kitten. He's her emotional support animal and I'll do what is possible to help him, her, and us. I appreciate the kind words, the listen up words, and snippets of advice. I'll take it all in once we are on the other side of this situation.
Remember when I said the awful tax meeting resulted in a multiple thousand dollar swing to the negative? I made adjustments to my W2 to counter and thought I'd have to figure out how to reduce my monthly cash flow by $350. The jokes just keep hitting. I got the new pay day calculation, though pay day is not until Friday. I wish it was -$350. Actually, take home pay will decrease by $686 a month. I literally don't know how to cut that much, but I'm going to have to.
Granted, my old budget included a vacation, Christmas, and cabin/ boat fund, which I deposit into each month, along with amounts for irregular bills. I'll need to cover any of those irregular, but not mandatory expenses, I guess from earned interest and determine what's priority. I had put the largest life insurance payouts into CDs. I had hoped interest would continue to build while CD rates are higher than they've been in my memory. I'll have to rethink those budgets plus my retirement date.
I'm really overwhelmed financially. I feel like I should get to enjoy a bit of the good stuff with my kids without sacrificing the security my husband planned for us. Had he survived, we'd have actually had a refund for a couple years after he retired, plus we'd have been able to live off my income. I know I've got a nice amount growing in interest, but a whole lot sure is wiped out by taxes. What I did in my W2 should make me break even next year when I file, but with this really stretched cash flow situation. I need a longer meeting with a tax accountant and see if there's any other actions to plan. I just can't do it today.
Without knowing your details, I wanted to point out that if your daughter in college is still your dependent, you could use the qualifying widower tax bracket which is the same as the joint bracket, for 2 years. If your daughter is listed as a dependent on your return, be sure to discuss this with your advisor. I'd also favor stocks paying a 5-7% dividend versus CDs with interest. For an income between the range of approximately $47,000 to $518,000 (2024 rates), the tax rate is 15% on qualified dividends compared to income rates in the high teens or low 20% when you pay tax on interest (which is taxed at ordinary income rates).
ReplyDeleteShe graduated in May 2023, no longer in college. I'll have to double check though if there perhaps was an oversight
DeleteHow frustrating. If your tax shortage is $350 per paycheck, can't you adjust your w/h to be increased by that amount? What caused it to be 686?.
ReplyDeleteI'm not following- I did adjust my withholding. What I did was both change my withholding to single and $0, and added an additional amount to offset tax on interest. My estimate had been the net impact would be -$350 per month, but the actual result was $-686.
DeleteMy misunderstanding. I thought you had figured out that, due to what you owe extra this year, that you now need to have an extra $350/ck taken out. As a widow you should get to claim the standard deduction for widows for 2 years, which I think is the same as married filing jointly. Not sure if you were using that in your calculation
DeleteFor 2022 and 2023 he could be included. I miscalculated how much taxes would be on interest income- that was what I was trying to resolve going forward. It is what the numbers say. I just didn't figure correctly going into my meeting. I'll either pay in St year end or throughout the year. I figure I can budget better monthly.
DeleteI don’t understand the intricacies of the US tax system , but I hear your struggle , your bewilderment and your anger . It’s just not fair
ReplyDeleteSiobhan x
I'm not angry, just overwhelmed. It just seems every time I turn there's a new financial hit. I'm just exhausted balancing it all.
DeleteI really don't understand why this is happening for you. I surely hope you accountant didn't add life insurance in as income - as it is not taxable. Can't figure how you went from $350 amount to $686 amount.
ReplyDeleteNot the principle - the interest earned will be taxed. The $350 was my estimate after changing my withholding. I miscalculated.
DeleteThis is just hard and unfair. I also don't understand how your taxes went up so much, but what do I know? Not much! I agree with Cheryl, life insurance is not taxed. It's hard to cut back so severely. I wish you well with that.
ReplyDeleteNo, it wasn't. For 2023 it was the interest that was calculated at 7 months when CDs matured. For 2024, they will mature twice, both April and November, so interest will be double- and then subject to taxes. I accounted for that interest in my W2, and that's why the hike was so high.
DeleteJre I may sound very naive but if a large increase of your tax is because of taxes due secondary to income (interest) which is in actuality a percent of more money you earned in CD’s. So isn’t the money really from profits? Doesn’t make it much less painless but can’t you pay it to the IRS from the CD as it matures not your take home income? Is it all in fact your pot of money, interest taxed now or later although after retirement would probably be lower if reinvested. Sorry if this seems not my business or insensitive but I have a little of the same issue. Each year I have fairly terrible to really terrible taxes owed that I’m sick depending but….. these taxes are on capital gains on a small business I own so I have remind myself it’s actually good as the more I make the more I pay because I’m paying off my profits (maybe like your interest earned?). It is a hard pill to swallow. But if I made no money I’d owe no taxes.
ReplyDeleteThat's why I responded to Siobhan that I'm not angry. I understand that it's taxes on unearned interest. I could set the anticipated tax bite away when CD matured- I'll look into that. The shock of $350 suddenly being $686 caught me off guard. It was more in three months of unexpected, even if I should have, financial dings. I'm tired.
DeleteNo fun this indeed.
ReplyDeleteSo sorry. It's frustrating when you've come to terms with whatever the financial hit is, and then discover it's much bigger than anticipated. Fingers crossed you can find a good solution. Hugs. This year has brought so many changes. (Hawaii Planner - logged in comments still arent' working for me anywhere.)
ReplyDeleteI appreciate the kindness. I will figure it out
DeleteI am sorry you are in the bind you are in right now. I am hoping you figure something out rather quickly. 600+ is a significant hit to the budget.
ReplyDeleteIt is, but I'm not folding. Vacationing will be very modest. Mental vacation this year.
DeleteThe number crunching is beyond me. I'm sorry your home finances have taken such a hit and hope you can find some way of living comfortably and maybe some of the useful sounding advice offered by your kind readers might help. xxx
ReplyDeleteI won't live without needs and there's still some treats. It'll be ok.
DeleteIt'll be ok. I will have needs covered and some treats. Time to get creative.
DeleteI don't understand US taxes at all of course, but damn, I'm so sorry you're going through this!
ReplyDeleteMe too. But, I know I can figure it out. I'm just really tired right now.
Deleteoh yeah, I used to do taxes for a living ... 25 yrs ago and had a heart attack over it. I was concerned for my tax prepares. We OWE due to not withholding enough. Meaning we either withhold more than Hubby paid when he worked at HONDA even though the bring home is lower.
ReplyDeleteIt's a messed up system, but it's what we have.
DeleteHubby and I both collect SS, but he works two small part time jobs and I work one. Two of them take no federal taxes out because the income is so low. However, when you combine it all together, we get screwed. We almost had to owe $1000, but then the accountant didn't realize that I had made a significant donation to my IRA. Then we owed just a few dollars. So whew! Narrowly escaped this year. The main issue was that I had underestimated my income for my marketplace insurance which I had for the first 8 months of 2023. I never called to update my income, so that bit me. Now that I'm off that and on Medicare, we should be okay next tax year. Fingers crossed!
ReplyDeleteI think I will be neutral and the back end of the year I will have more cash flow due to maxing 401k. It's just tight until October.
DeleteSending love. It's so tough to navigate, I don't like taxes either and mine are simple. *hug* glad you felt a little better after typing it all out.
ReplyDeleteI did let it out- frustration was real. I've got a mess but I'll figure it out.
DeleteAs I read this I realized you don't need tax tips. (Which I could give you.) You need a hug. As long as you need to vent we will be here. Sorry about the kitty. I hope he is doing better.
ReplyDeleteHe's doing better. Another huge expense to help my daughter, but he's worth it.
DeleteOh Sam, I'm sorry the kitten's had a medical emergency. I hope he keeps doing better. Hugs.
ReplyDeleteHope kitty is doing better. Sending hugs.
ReplyDeleteUnexpected tax hits are so frustrating and the first year after is a double hit because you have to pay what is owed and pay/withhold for the next year. At least that is what I am telling myself. We had a big one this year in taxes owed but it was all on us for not remembering we needed to pay more estimated taxes to cover my husband’s first full year on Social Security. You will figure it out though as you have said. Very glad to hear the kitty is doing better.
ReplyDeleteI should have thought better on the interest earnings. We've just never had that kind of money earning outside retirement plans.
Deleteupdate on Kitty please...
ReplyDeleteMaybe it's time to sell the boat. I hear that the happiest day is when you buy a boat and the 2nd happiest is when you sell it. lolz Glad the kitten pulled through. Your daughter didn't need a second emotional hit if he had not.
ReplyDeleteNot ready to sell it. It was my husband's dream to get it, last summer can hardly count as to how much use because we were all so raw and being at the cabin was challenging in general. I'll see how much use it gets this and next year, then decide.
DeleteI'm right there with you. 2023 is the first full year of being "single" after husband died. Luckily, my tax preparer warned me that this year I would owe $20,000 estimated since I would be filing single instead of married, even though my W4 was already det to single. So for 2023, I put the money in a CD to draw interest and set that amount aside to be prepared. For 2024, I added an additional $850 payment on taxes each pay period. Sure made my bring home come down. It is what it is and there is nothing that can be done about it.
ReplyDeleteI appreciate you sharing your experience. If you haven't lived it it might not hit home- I'm sure I had that guidance last year, but didn't fully grasp what that meant for 2023. As you said, nothing I can do a out it but live and plan reality.
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