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Savings Rate December 13, 2008

Posted by A Texan In The Professional World in Personal Development.
Tags: ,

No…. I’m not going to talk about how low our national savings rate is… although I believe it’s finally rising again!

As the end of the fiscal year begins to start taking up more room in the back of my mind I’m reminded about my obligations and those of every other new professional in the work force.   A close office buddy of mine told me at the end of last quarter about when he first entered the work force.  He and I are both independent contractors and thus “technically” self employed.  This, of course, has tax ramifications.  We have to pay our quarterly estimate every three months. There’s a plus side to this of course!  It’s very helpful with preventing one from spending money that one will end up owing Uncle Sam.

Well, my buddy got in without realizing the special tax requirements of a self employed person.  To make a long story short, he ended up paying ridiculous tax penalties last year!  We’re talking about money which is very valuable to a kid right out of college.

So, how does someone new to all of this stay out of the hot water?  Well, here’s how I do it:

1) Learn (ask questions!) about all of your financial obligations!  All of them.  Ask coworkers for advice and forewarning on future expenses even!

2) Budget your stable monthly intake, and don’t make assumptions that you’ll receive any additional commission payments.

3) Don’t spend beyond what you’ve budgeted for a certain category in a given month.

4) Pay the credit card bill EVERY Friday.  This helps keep one very aware of how much is going out (and helps you keep a running tally for the month).

5) Anything beyond my regular monthly allotment, goes into savings.  Savings may only be used (in my case) for “one time” purchases such as needed clothes/shoes, fantasy sports payments, and emergency payments (i.e. car repairs).  Even Christmas gifts come out of the regular monthly budget!  It’s up to you to decide what is worth tapping the “savings account” for…  but I strongly encourage you to lay the ground rules down in the beginning.

So, what has this resulted in?  Well, it teaches one how to say “no” to both oneself and to other people.   People who often spend more than you might.  Discipline is a good thing and it will serve everyone very well for down the road.  Also, it will help you build up your financial independence…. which is always a good thing.



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