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Taxes, Returning

We have at last passed the tax deadline for another year. How did it end up for you this year? Did you end up owing more or getting more as a refund?

I have some bad news for you though, tax day will come again, roughly around April 15, 2023.

If you're situation is that you tend to owe taxes, and it seems to always surprise you, perhaps it is time to do something different this year.

I challenge you to go back through your last few tax returns (if they are available) and find out what your average tax bill was. Some years it may have been higher, some lower, but overall the average should give you a baseline to work with.

Take that number, divide it by 12 and add that amount as a budget category in your monthly budget. Consider it a sunk cost fund. You will need to pay your taxes and the money needs to be available for that purpose. How much easier would it be to build that money up over 12 months than to have to come up with it all at the end?

Again, the formula you are looking to use is:

average tax bill / 12 months = monthly amount to save per month

This way, after 12 months, you should have your average tax bill amount saved up and ready. Cash available for when you are done finding out what you may owe Uncle Sam.

If you can have the discipline to set that money aside each month and not touch it, you should find that next year's tax bill is much easier to deal with!

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