Message Font: Serif | Sans-Serif
No. of Recommendations: 1
I also won't flame, since it works for you.

However, I will point out 2 items:

You say you use part of the refund to fund an IRA. So you will make your 2006 contribution "sometime" after you receive your refund from 2005 -- probably sometime in March?. You can save a month minimum by getting the money back during 2005 and being able to deposit your contribution on 1/1/06.

But -- you have a hard time saving by your own admission. It is good to know thyself, but a little prior planning prevents underperformance...
Get an automation transfer going for $333.33 every month from your checking account over to your IRA. Better yet, transfer another $500 a month over to ING savings, (or to a mutual fund account, or DRIP accounts, etc.) David Bach's Automatic Millionaire is a thought provoking book.

I'm not sure if I was clear about the savings...I have my ROTH IRA's funded, for both myself and my wife, on a monthly basis, thereby using $ cost averaging for lower my cost basis. I also have @ 75% - 80% of my annual amounts for the accounts funded by year's end. I use the "refund" to top them off.

Additionally I fully fund my 401k each year. The easiest way for my (and I would recommend this to all) is to take your base salary (I'm paid by the hour), multiple by 40 hours a week then by 52 weeks then divide the annual limit into that number and multiply by 100 - giving me the %age that I need to hit the fully funded amount - assuming I don;t work any OT. OT just kicks the funds in earlier and I end up with a small raise in my paychecks for the last month or so of the year. Kinda like a xmas club again. To start, I tell everybody I work with that doesn't do any savings is to start off with 2 or 3%, then ,each year as you get a raise, take half the raise and put it away to the 401k and the otehr half is for you. Within a few years you are close to your max and you don't miss it.

I do auto transfers for the funds needed to cover all of my property taxes (I have 2 rentals and 1 home) into ING accounts. I get the interest instead of my mortgage company. Same for fire and flood insurance. If I really wanted to squeeze it I could do that with auto, life, electrical (I'm on a balanced payment plan - another great idea - every 3 months it's adjusted), etc.

There are tons of ways to game the system, but for me, the tax refund is a forced savings. I don't miss it (other may and need the cash now), I don't miss the 401k, IRA etc funds. But, by gradually increasing the savings amounts, doing it on a regular and somewhat forced way, I live within my "means".

Print the post  


In accordance with IRS Circular 230, you cannot use the contents of any post on The Motley Fool's message boards to avoid tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.