It is only the first month of the new year and my finances have already been whacked to hell. I have spent my emergency fund on my car and health bills in late November and basically had no time to rebuild it, when my furnace died in late December. I was able to finance the furnace with no interest or payments for a whole year. My wonderful parents are going to assist with paying for the furnace long before the 12 month grace period. I am in addition, in training to become a teacher in my city. We are paid through a stipend for the month in training. We received our first check for the first two days of training. WHO IN THE HELL HAS EVER BEEN TAXED 42%. I could not believe that everyone in the entire program was taxed at 42%. AND NO IT WAS NOT IN ERROR. I contacted the HR department and they stated that stipends are taxed higher, and once I become a permanent employee February 1st I would taxed my "standard" rate. I am really at a loss for words. My parents really are coming in strong for me. This turn of events means that my parents are helping me pay my mortgage, so that I can have money for other bills and living. I emailed them my budget, and how much money I had and they deposited money in my account according to the budget along with an email highlighting what to use the money for.
I JUST FEEL LIKE A PARENT MOOCHING LOSER. I am definitely grateful that they are willing to help me, but I definitely need to get my finances in order so that I can really be independent.
However 42% is a whole heck of alot.
Sunday, January 13, 2008
42 % Tax
Posted by Its No Joke, I'm So Broke at 1:39 AM
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7 Comments:
Most of my friends accepted help from their parents through their early 30s. Is this because they couldn't manage their money? no. My parents helped my sister and her husband buy their house, another friend's parents helped her go back to grad school so that she could have a more fulfilling career. When I go home to visit my parents, I'm at the point where I can treat them to dinner/lunch and sometimes buy the groceries (only if I move fast enough with my money), but I'm still paying my parents back each month for my stint at grad school.
You're not mooching and one day you will be able to pay them back. You are their child, they love you and they are able to help you so why wouldn't they. Right now, they are helping you invest in a stable, fulfilling profession and stay in the house that you have bought. It's not a permanent thing, it's not long-term. Is it the last time that this will happen? Probably not.
You will choke when you see how much you lose to taxes, Social Security and all that. I would say raise/lower your deductions, whichever it is that will give you more money monthly. You get to deduct your interest and all that from your house, plus teachers get a little bit of help, so take home more money now and it will probably be offset by deductions at tax time anyways.
Best of luck!
---- MissKate, I hear ya when it comes to taking the help from my parents. I am still trying to figure out the right deductions. Apparently this 42% is not supposed to last forever but it was such a shock to see. I want to be a great steward over my finances, so right now I am trying to lay the ground work for when I begin to earn my "real" salary.
Even if it's lower, when I started teaching, my base tax rate was 28% but then add in Social Security... You're fortunate to have the write-off of your mortgage interest. Lower the tax amount they take out of your monthly check because it will be offset at the end of the tax year. Have them with-hold the least amount possible!
Good luck! You're in far better shape than I was at your age.
Smile! at least your working, and be thankful you have your parents!
I think the 42% tax rate is because it is considered pay above and beyond your 'salary'. At my company, we get a bonus that they hit with a huge tax rate, and I'm lucky to even end up with half of it in my hands when all is said and done. Once you're done training and get your regular pay check, I'm sure you'll fall in a much lower tax bracket. I would assume you will normally fall in the 15 or 25% bracket. Even with that said a lot of money still comes out for taxes even though you can use deductions like mortgage and student loan interest to help offset it. I remember my first salary paycheck and thought I was rich until reality hit me and I had to use it for rent, utilities, and my cost of living. At least your parents are helping you get through these challenges. It's difficult to start out but once you get going, it will become easier.
Great Blog!!
I've just added it to my blog roll.
Good Luck
I'm sorry to hear about the high tax rate...
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