Thursday, December 27, 2012

Cliff Diving

The Fiscal Cliff, that is.

In all honesty, I haven't paid ALOT of attention to it.  I am NOT a political girl, so as soon as something related (even remotely) to politics is mentioned....I zone out.  However, G-man and I were talking about work, and it forced me to think, and worry, about.

G-man said that there is a furlough plan in place at his office, just in case.  The likelihood of it being enacted before April is small (I really don't know why that is).  I don't know if this plan is for the entire office, or just his group (since someone has to be there 24 hrs a day).  But...each employee would be forced to take off 1 day per payperiod (essentially, a 10% cut).  Back in 1995, the last time he was furloughed (which pre-dates our relationship by a year), he was paid for the weeks he was off (totally different position).  This time, there is no guarantee that he will get paid.  He probably can use vacation time to make up the difference, but then he is using up time.

Then there is the whole tax withholding piece.  Since I work for a small company, there is a good chance that my withholding will be incorrect for at least January (and of course that is a 3 paycheck month).  Then the boss will have to play catchup by taking out extra once it is figured out.  Super.

For G-man, I am at a complete loss on figuring out what his check will look like.  The FSA cap changed, so more of our money will be after-tax.  He is getting a cost of living increase (1%?  2%?) unless they take that back.  AND now the change in tax amounts.  His first paycheck of the year will have overtime on it, so it will be at least the end of January or early February before we see a "normal" check.

Some of the calculators I have looked at suggest that our tax situation will change by 17%!!! 

I don't want to take out too much in taxes this year, but I am worried that when we file our 2013 taxes we will end up owing.  So now I am wondering what the answer is?  Change the withholdings again??  Put money aside for taxes (and hope we don't need it)?

The bottom line is I can't do ANYTHING about the decisions the government will make.  I am just trying to get ahead of the curve and make sure we are prepared.  Anyway I look at it, we will be living on less....

I just want to "set it and forget it."  That works best for us. If I have things auto-debited or transferred around at payday, I always have money for the needs.  I want to aggressively get rid of the credit card (the $1200 we spent on airline tickets to see my parents is really nagging me).  But I can't be TOO aggressive if that means I won't have money for utilities, food, etc.  I just want to figure out the optimal answer...and go with it.

Anyone else worry about this stuff?  I know I have several non-American you think this whole thing is crazy????


  1. This whole fiscal cliff is worrisome, and out of our hands basically. What we can do for our families is to just keep an eye out for any rising prices, lower our expenses (those that can be done), and keep an eye out for things that we need, instead of those wants that seem to be needs. The best thing is to sit tight, watch your budgeting, and make adjustments as needed.

  2. Mysti - G-man is a fed right? No COLA until April at least (freeze extended until end of March). On the one hand with the FSA limit reduced you will pay more tax - but still see more in the paycheck since less is being funneled to that. I suggest you do nothing now to the paychecks - because a lot will be changing - continue to pay down debt and set up an auto deduct that gets funneled to savings (maybe the amount of the FSA minus taxes). You will either end up growing the EF, have a chuck to throw at debt or money for taxes. In April - use the IRS calculator to estimate taxes. Then revisit.

  3. I feel your pain. Us too. I am stressing about whether to change withholdings or set money aside. We owe a little every year, but one year, we owed $7,000. I really don't want that to happen again.

    My husband wants to wait. Just wait and see. So, like SAK suggested, we will revisit in April.

  4. I'm with Jennifer. We always owe, & it's typically in the neighborhood of $10K. (Adjusting our withholdings doesn't work as it's variable bonus money). However, depending on how the tax rate changes for us, it could mean lots of different things. I'm just trimming back as much as possible, & trying to prepare for "anything".

  5. Since moving out, taxes have been a bit of a hassle any way I look at it. The first time I owed over $2000, and I'm hoping this year it gets lower than $500. Even though I have my deductions where they need to be, I'm still coming up short. As they say, prepare for the worst, but hope for the best.

  6. I think they're just going to take more out of your paychecks, the bush tax cuts will expire and Obama's payroll holiday tax will also expire. On average taxes would jump $2,400 if your income is around $50,000 to $75,000 basically less money to spend but it should not affect your taxes too much since the employers have to withhold.

    Your situation is probably different than ours, I don't do FSA or dependent care, I put most of that in to our 401k (9% me, wife 3% to 403b) to reduce tax liability and our withholdings are both set to married so we always end up with a decent refund (hoping baby adds more)... For us the only thing to worry about is less spending money if we go over the cliff :(


  7. This is where living in poverty is good as I always get money back and I am ignoring the news on this subject, in fact I am ignoring almost everything right now, is this a sign?

  8. I'm one of the non-American readers (Aussie)...people at work have been talking about this, worried about what it will mean for people and for the world economy. A furlough would not be good looks like everyone is watching and waiting at this stage :(

  9. we've always gotten a refund. I know you're not "supposed" to according to finance gurus, but I have found in our case, it is much easier to get a refund than to save up for the taxes on the side. i know that we will owe a bunch more in taxes if nothing happens and we go over the cliff, so I am hoping we will just break even.