Simple Budgeting: Tax Increase Budget Readiness

Last month, I wrote about Holiday Budget Planning.This month’s topic is way less fun but even more important … Tax Increase Budget Readiness. (NOTE: This is about the current facts. No politics. Keep the politics out of this discussion as this about planning for your personal budget.)

I watched the news this morning and the headlines were about how the Bush era Tax Cuts we have all enjoyed will expire next year. I didn’t really think about it much until I saw a graphic pop up about how much more a family making $40,000 will pay in taxes each month. The graphic may be right or may it be wrong. At any rate it was showing an increase in over $200/month. Yes, a month for a family in that $40,000 income. That was enough to make think twice.
Our budget is pretty tight right now. We are still at the “make-ends-met” point in our budget with one exception. I still contribute to my retirement fund every month. If worse came to worse, I could change that but we have made it a goal to not change that since it is all we have right now. So how do we make our budget work when have to pay additional taxes?

I don’t have an answer besides to start planning now. There is still a chance that the tax cuts may be extended when Congress is back in session in November but honestly, you can’t wait until then to plan. You need to plan now.

I have found a good resource this morning. It is MyTaxBurden.org. I like their site because they have a calculator that will show you what your taxes will be if ALL Bush era tax cuts expire. (Look at the check boxes at the bottom of the left column. The most important one for this effort is the top on that says “Income Tax if All Bush Taxes Expire”.) This is a good worse case planning tool. You might need to pull some paper work to run this calculator. I didn’t pull all of my paperwork yet but ran some rough numbers and it looks like our taxes will just about double. Oh my goodness. I will need to re-run this calculator with my tax/income documents to see how close I can get this but it looks we will be some budget rearranging for next year.

My challenge this month is go to the calculator (or find your own) and see what numbers you may be facing next year. Then start thinking about how you are going to make this work in your budget.

• If you have ideas on how to make your budget work next year, leave them in a comment.
• If you have challenges on how you will make your budget next year, leave them in a comment.
• If you want to bring politics into this, find another blog/forum to comment in as I will delete those comments.

I hope to next month post some more money saving ideas on how to conquer the budget challenge for next year! Do you have a budget question/idea/topic/blog post? Let me know in a comment or email to simplybudgeted at gmail.com.