March Expenses, and why getting a big refund is bad

We’ve been slacking around here lately, but fear not: big things are coming. Look out for future posts on whether or not you should buy forever stamps, how to remove unwanted hair from your body, and (hopefully!) a couple very exciting guest posts! Anyway, here’s all the money I made and spent in March:

Income

A long time ago, a young Joey filed his 2015 tax return, and failed to recognize that due to his low income1This was the year I joined grad school, so I only got paid for 5 months he qualified for the Earned Income Tax Credit. So, several weeks later I got a letter from the IRS with a check for $42.30 and a little message that said, “Hey, next time do this yourself.” Apparently I never cashed the check, which is good for two years, so two years later the IRS sends me a letter telling me they are sending another one. It’s probably not efficient for the government to spend this much effort trying to give away $42, but I really did appreciate it :). 50 months later, I finally cashed the check.

Anyway, this month’s income was unusually high. Got some side money from scooter charging (which is almost definitely not worth it in most cases), tutoring, and a cool $400 I won from a race last month.

The best part of this experience might have been the free hot chocolate and chocolate that came after.

 

But the biggest source of income was a more than $1k refund I got from filing my taxes. This was because of a combination of me not adjusting my witholdings early enough after I realized too much was being withheld, and then my “employer” taking two months to finally get it right. While it was pretty awesome to receive this money after filing my taxes, it would’ve been much better to receive it throughout the year so that it could have been invested. I effectively gave the government an interest-free loan! So here’s the lesson for me and all of you: try to adjust your tax withholdings so that you owe approximately nothing when you file your taxes.

Expenses

This month was characterized by a lot of random expenses that I didn’t keep track of very well. I think I got everything on to the spreadsheet, but I actually may have double counted some grocery items. Anyway, it would’ve been a very standard month (with some post-February Challenge grocery splurging) but I had to book some semi-emergency travel. As I reflected on this I realized that, lo and behold, this counts as an unexpected $500 expense, something the majority of Americans can’t handle. Fortunately, when you have a normal saving rate that’s well above 0,  you can take these surprise expenses in stride without even having to touch your smaller-than-recommended emergency fund. (Note that even if my only income this month had been my stipend, this would still be the case.) Man, money is pretty easy when you don’t just waste it all on stuff you don’t need!

Saving Rate, Chart, Conclusion

Ok, I think that’s enough linking to myself for one article. Due to my unusually high income this month, I topped the elusive 50% saving rate. Artificial though it was, this felt pretty good. So did transferring more than 2k to the Traditional IRA, saving myself over $250 in taxes this month alone! Anyway, let’s plug these numbers into my averages so I can skew all of them!

Categories  March February Rolling 8 month Average 
Saving rate  50.0% 34.0%  31.3% 
Time to Financial Independence2Based on this. Assumes a starting net worth of $0, so actual numbers are a little better than what’s shown.  16.6 years 25.2 years  27.2 years 
Monthly Expenses  $2082.59 $1724.68 $1864.10 
$ Required to be Financially Independent3Multiply the above by 300 $624,777  $517,404  $559,231 

See you next week!

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