Save more, live well, give generously
The Tax Foundation just released new research that shows how much $100 is worth in each state. When accounting for living expenses, purchasing power, and taxes, the organization found that your money’s value varies greatly from state to state. In fact, if you have that money in Mississippi, it’s equal to about $115.74, when compared to the national average. Or, if you live in D.C., that only equals $84.60!
How does your state compare?
I used to love filing taxes. There was a generous reward and refund each year. As my income sources changed, so did the tax benefits. Nowadays, with the “business” of Frugaling and various self-employment taxes that result, the tax refunds have ended.
Last year’s tax filing led to a nearly $1,000 payment to federal government. That was the first time I ever owed money. I was a significant budgetary hit.
This year is shaping up to be another rough payment. I believe our tax system is flawed, but I want to do my part — my fair share. But there are various ways to ease that burden. I’m already beginning to prepare and save.
Based on everything from 2013’s taxes, there will be a steep tax for my business income. My business income — from Frugaling.org — is considered self-employment, and is taxed as such. Essentially, it is paid tax free (medicare, medicaid, and social security taxes are not withheld initially) by companies and then I must report the income to the federal government. This year, I’ve estimated my total earnings to better save for the payment.
Along with business income preparation, I’m looking at current education expenses with a critical eye. Despite being a graduate student with an assistantship (aka, “job”), there are various student fees that aren’t covered.
With tuition and fee inflation/increases, this total will soon reach nearly $5,000 per year for my doctoral education. Thankfully, the federal government subtracts this value from my income — considered a tax deduction for the adjusted gross income (AGI).
The last piece is where I’m spending increasing time: retirement accounts. I’ll be able to significantly reduce my tax burden this way.
Before this year, I had a near-dormant IRA that was underfunded forever. Unfortunately, I didn’t understand the traditional IRA contribution benefits. I deposited $1,000 into a Roth IRA, which doesn’t benefit from the contribution.
The best thing I could’ve done would be to open a traditional IRA — seek a contribution deduction and retirement savings contributions credit. Now I know! Since then, I’ve deposited about $1,000 into a traditional IRA, which will will net me $1,000 in deductions to income, and an estimated $100 in contribution credits. That will seriously reduce my tax burden and get me saving faster.
I spent the last 6 hours calculating how to reduce my tax liability (legally — come on people!). Based on my initial calculations, I’ll save about $2,000 on my final tax payment by contributing more to my traditional IRA, realizing all business deductions and expenses, and saving everything I can. That’s about $333 of savings per hour! Not too shabby.
It’s difficult to save money from the tax man. Preparation and prevention doesn’t necessarily feel as important as making more money, but without taking serious action, you won’t be saving much. There’s no sense working like a dog and not being able to take advantage of the tax code.
The climate is completely off-kilter. As humans, we’ve contributed to an atmospheric rise in climate change since the industrial revolution. It all traces back to our abundant consumption and fossil fuel use. In case there are skeptics in my audience, the evidence is clear that humans impacted climate change dramatically.
A couple months ago, the New York Times reported that,
A large section of the mighty West Antarctica ice sheet has begun falling apart and its continued melting now appears to be unstoppable, two groups of scientists reported on Monday.
Something snapped inside me, and I felt deep pain. How could we have done this to ourselves and the planet? I actually teared up, thinking about how we treat each other and this planet. It really hurt.
Shortly after that article, another was published that warned, the “Worst is yet to come.” Research found that record heat and floods were largely due to climate change:
The American scientists said the rise could be anywhere from one to four feet, and added that six feet could not be ruled out. Along much of the East Coast, the situation will be worse than the global average because the land there is sinking…
There goes New York City, Boston, parts of D.C., Miami, and more. We don’t have a contingency plan for all these people. The devastation would affect tens of millions of people. Individuals would flock to the west for shelter and a new start; at least, those who could afford it. I hesitate to think about those who might not have the economic freedom to up and leave low altitude areas.
This unpleasant, scary picture for the planet’s future is contrasted by a strong consumer culture that values growth, dominance, bulk, and abundance. When gross domestic product (GDP) estimates tumble on the national scale, economists, politicians, and Wall Street scream bloody murder. But when the temperatures are rising globally, and sea level rise is threatening entire countries, there’s silence.
We are an economy that’s feasting off of short-term gains, prolonged ignorance, and immediate gratification. Climate change skeptics are a dime-a-dozen and they’re propagating messages that are scientifically unproven, untrue, and dangerous. It’s all motivated by moneyed interests, and they’re looking for a way to keep the consumption going.
Our entire economic system is predicated on continued growth, but it will slow. Whether because of declining population growth rates, economic instability, or climate change, the economy will need a correction. It’s hard to fathom the willful, blissful ignorance of the markets, but the economy has not yet accounted for the pains of climate change. Just look at the most recent national weather tragedy, Hurricane Sandy:
An estimated 1.8 million structures and homes were destroyed or damaged, with economic losses exceeding $65 billion.
Unfortunately, the storms, floods, and wacky weather are only expected to increase. The economic consequences will be devastating for this country. Something’s gotta give.
Frugality, simple living, thriftiness — whatever you want to call it — goes hand in hand with reducing carbon dioxide emissions into the atmosphere (CO2). By consuming less and saving more, your actions can greatly help the environment.
Climate change is simple science. The more CO2 in the atmosphere, the more the earth’s temperatures will rise. The sun’s rays/heat will be trapped in our atmosphere, and keep us warmer. We needed some CO2, but now we have too much.
Congress and the greater world seem doomed to delay powerful action to reduce the effect of carbon emissions. While moneyed interests, lobbying groups, and industry experts delay necessary change, you needn’t stand still. There’s still time to take action.
Here are 7 ways you can make an individual impact on climate change and save big:
As a car owner, my budget is precariously balanced on the assumption that I’ll only be putting in about $40-50 per month in my tank. Being frugal is often described as an effortful choice, but what if the socio-political climate affected that ability? What if transportation costs became a burden we could no longer balance? What would we have to cut out? How would our lives change?
Yesterday, I attended a thought-provoking debate held by public policy center of my university. The organization tries to inform the general public about policy and health concerns that could occur. With proactive and prevention-based education, they believe that the general public may be able to better handle adverse events.
This week’s question was: What if gas were $10 per gallon?
There are various events that could influence the price we pay at the pump. While many are prevented on a daily basis, crises could occur that temporarily or permanently spike gasoline. The following are 5 catalysts that quickly come to mind:
While unlikely, these concerns can and do occur. For instance, back in 1973, we had a terrible oil crisis that sent prices up 400% and left budgets decimated. Embargos from oil-producing countries made for historic highs at the pump.
We don’t have to look that far back to see atmospheric increases. In 2011, Hawaii documented record-high gas prices nearing $5 per gallon. Even though it’s a small island, this severely impacted the economy and population.
If gas increased to $10 per gallon, we’d be in real trouble. Our economy and transportation systems would be heavily burdened by large fluctuations. Think about how much you drive for fun, errands, work, children, etc.
Spending on transportation is second only to housing expenses. Every year, Americans spend an average $17,000 on housing costs, with $9,000 going to transportation needs. If gas prices tripled to $10 per gallon, we would suddenly be looking for compromises in our budgets. From public transportation to private citizens, everyone would be impacted.
The threat of gas spikes and/or continued increases really highlights the fragility of our current consumer system. If transportation costs skyrocket, we may see significant modifications in our driving, purchasing, and vacation behaviors. A quick jaunt to the local supermarket would instead be an adventure saved up for and withheld until absolutely necessary.
People would probably opt to bike to work and run errands. Plastic bags would likely disappear, as the energy needs would be too demanding. Heating our homes would be painfully expensive in the winter.
Eventually, we would continue and the economy would recover around this new life. Cities would likely condense and become more urban, with suburb populations flocking to central areas. This would motivate people to seek alternative energy forms and mass-produce electric vehicles. Changes would most certainly occur, but sometimes for the better.
I wonder: If we pretended like it were already $10 a gallon, would we live greener, healthier, and more frugal lives? How do you think you’d change your travel habits if gas went to $10 per gallon?
