Naked With Cash is the year-long series on Consumerism Commentary where seven readers’ households share their financial progress on a monthly basis. I’ve partnered with financial planners who will offer some guidance along the way. This month, the participants and experts are discussing, among other things, tax planning. Read this introduction to learn more about the series.
Kathleen is thirty-one years old, single, and living in Portland, Oregon. She loves her job, even if it isn’t very lucrative. With her $33,000 income last year, she’s looking to make more money from “side hustles” this year, such as her blog, Frugal Portland. To learn more about Kathleen, read her bio here. Kathleen is on Team Sara, with Certified Financial Planner Sara Stanich.
This month’s report, below, includes Kathleen’s progress over the three months leading up to the end of March 2013. Following Kathleen’s own self-analysis, normally Sara Stanich would offer thoughts from her perspective, but this month, Neal Frankle, CFP is standing in. Following Neal’s comments, budgeting expert Jacob Wade from iHeartBudgets will also provide his own insight.
Comments and analysis from Kathleen
March was a good month for me! I have less than $1,500 left on my car loan, and I have more money in savings than I have ever had before. I had a friend, who is a CPA, help me out with my taxes, which were a little more complicated this year than I can recall from past years. I hit a few incorrect buttons and the tax software told me to expect somewhere around $8,000 back. I just didn’t see how that was possible.
Turns out, it wasn’t. He fixed some of those problems, and now I’m expecting around $1,000 back. Still better than a poke in the eye! And a lot less “Hey let’s audit Kathleen” than it was with my bad math.
I don’t have many exciting things to say about taxes, sorry Luke and Sara! My next update will be a heck of a lot more exciting.
Feedback from Neal Frankle, CFP
Congratulations on your progress. This is really outstanding. Indeed, your net worth has grown by a factor of three over a year. That is really something to be proud of. Here’s an important question:
What did you do differently? To what would you ascribe your success in turning this thing around? Whatever it is, keep it up, friend.
On your tax return, I am of course very happy that you were able to get assistance and get it straightened out. I’m wondering if you feel comfortable doing it yourself and if you understand how to avoid those errors going forward? That’s important because the last thing you need is an IRS audit as you pointed out.
It sounds like you are also very excited about April. I assume that’s because the good times are continuing to roll. That’s very cool.
One suggestion that pops out at me is it would be great to see a monthly personal cash flow statement or profit and loss report. That has really helped me and my family, especially since we can compare month to month. We use You Need A Budget but you can use a spreadsheet if you prefer. It doesn’t matter so much what you use as long as you use it and refer back to the information.
The last piece is the car loan. I am of course very happy that you are just about paid off on the loan and I’d like to see if it’s possible for you to never have a car loan again. Did you buy a new car? Have you considered buying a car that is one or two years old next time? Last, is it possible for you to set up a sinking fund to replace your current car when it runs out of gas — for the last time?
Other than that, I think you are really doing wonderful and I am so fortunate to be able to chime in this month. Keep it up!
Feedback from Jacob Wade
KILL THAT DEBT! KILL THAT DEBT!
But seriously, I’m excited to see you debt free in the next month or so. Now, I know you don’t do budgets (blasphemy!), but I do have some advice for what to do once you’re debt free if you are not already doing this. Take that money you were using toward your debt, and get a month ahead on your expenses. Trust me on this. It will suck any financial stress right out of your life, and allow you to really plan your next steps with a clear mind. Plus, heck, it acts as a mini emergency fund, which is also sweet.
Glad to hear you’ve got a CPA helping you out. I’m sure the IRS wouldn’t be happy about a $7,000 tax mistake! Once you start receiving self-employment income, things can get a little hairy, and hiring a tax professional is always the best bet.
Updated June 22, 2016 and originally published April 30, 2013.