Adjusting Your Withholding

Two weeks ago, I stated my 2009 goals, and while the target seemed out of reach if everything remained the same, I did give some ways to make up the gap and ultimately reach my goals for the year.

My options were working hard and referring people to business at work, vigorously cutting costs, adjusting my withholding, and reduce my bi-weekly contributions to my Roth 401(k) and put it in the Roth IRA, but that wouldn’t be quite as desireable.

I’ve referred a few friends to my work, and have made about $40 in the past few weeks. It’s a start, but I would still be about $600 short based on my current budget.

I looked into adjusting my withholding, expecting to decrease the my withholding by about $100 a month. I entered my information into the IRS Withholding Calculator, and much to my surprise, I have been withholding far too much. In fact, I have already paid 100% of my federal tax liability for 2009. If I continued by current withholding arrangement, I would have overpaid by about $1,200.

I have adjusted my withholdings by claiming 10 allowances, and I will be receiving approximately $1,000 more than expected over the final two months of 2009. That more than makes up the difference I was looking for, and I will now have several hundred dollars extra (to invest, save, pay off loans, etc.)

I’m very excited about this, and I encourage everyone to go to the IRS Withholding Calculator and see if you can get your money now instead of waiting until April to get your money. Why give the government a six month loan?

With such low interest rates, I would only make a few dollars by putting that money in a bank account. However, if I pay off some of the balance on my student loans, I will be getting both small boost financially as well as me all the confidence in the world to keep working hard to save!

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